Question

Cone Corporation is in the process of preparing its December 31, 2021, balance sheet. There are some questions as to the proper classification of the following items: $50,000 in cash restricted in a savings account to pay bonds payable. The bonds mature in 2025. Prepaid rent of $24,000, covering the period January 1, 2022, through December 31, 2023. Notes payable of $200,000. The notes are payable in annual installments of $20,000 each, with the first installment payable on March 1, 2022. Accrued interest payable of $12,000 related to the notes payable. Investment in equity securities of other corporations, $80,000. Cone intends to sell one-half of the securities in 2022.

Required:
Prepare a partial classified balance sheet to show how each of the above items should be reported.

Answer 1

Cone Corporation

Proper Classification of Items in the Balance Sheet:

CONE CORPORATION

Partial Classified Balance Sheet as of December 31, 2021:

Assets

Current assets:

Prepaid Rent $8,000

Short-term investments $40,000

Long-term assets:

Restricted cash for bonds $50,000

Prepaid Rent $16,000

Long-term investment $40,000

Current liabilities:

Notes payable $20,000

Accrued interest payable $12,000

Long-term liabilities:

Notes payable $180,000

Step-by-step explanation:

a) Data and Analysis:

Long-term assets:

Restricted cash for bonds payable $50,000

Prepaid Rent $16,000

Long-term investment $40,000

Bonds payable maturity date = 2025

Prepaid Rent for 3 years:

Current assets:

Prepaid Rent $8,000

Short-term investments $40,000

Current liabilities:

Notes payable $20,000

Accrued interest payable $12,000

Long-term liabilities:

Notes payable $180,000