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: $70,000 in cash restricted in a savings account to pay bonds payable. The bonds mature in 2025. Prepaid rent of $44,000, covering the period January 1, 2022, through December 31, 2023. Notes payable of $240,000. The notes are payable in annual installments of $40,000 each, with the first installment payable on March 1, 2022. Accrued interest payable of $32,000 related to the notes payable. Investment in equity securities of other corporations, $120,000. Cone intends to sell one-half of the securities in 2022. Required: Prepare the asset and liability sections of a classified balance sheet to show how each of the above items should be reported.

Answer 1

The cash restricted for future bond payment would be listed as noncurrent assets; prepaid rent needs to be split between current and noncurrent assets; notes payable are divided into current and noncurrent liabilities based on the payment schedule; accrued interest payable is a current liability; and the investment in equity securities is split between current and noncurrent assets.

Step-by-step explanation:

When preparing a classified balance sheet for Cone Corporation as of December 31, 2021, the following items would be presented in the asset and liability sections:

Cash restricted to pay bonds payable: Since the timeline for the use of this cash is beyond the next business year (2025), this sum of $70,000 should be reported as Noncurrent assets under the subsection Restricted Cash.Prepaid rent of $44,000 covering two years should be split between Current assets for the portion expiring within the next year, and Noncurrent assets for the remaining portion.The Notes payable totaling $240,000 should be classified as both Current liabilities ($40,000 due within one year) and Noncurrent liabilities (the remaining $200,000 due after one year).Accrued interest payable of $32,000 should be reported under Current liabilities, as this is a short-term obligation.Investment in equity securities worth $120,000 with the intention to sell half in 2022 indicates that $60,000 should be classified under Current assets as Marketable securities, while the remaining $60,000 should remain under Noncurrent assets.

Each classification on the balance sheet aligns with the item's nature and the time frame within which the company anticipates realizing the asset or settling the liability.

Answer 2

The Partial Classified Balance Sheet of Cone Corporation for as December 31, 2021 is shown in the explanations.

Step-by-step explanation:

The Question is to prepare the Assets and teh Liability Sections of a Classifed Balance Sheet for Cone Corporation

Cone Corporation

Balance Sheet (Classified)

As at December 31, 2021

ASSETS Amount (S)

Current Assets:

Marketable Securities 60,000

Prepaid Rent 22,000

Investments

Bond Sinking Fund 70,000

Marketable Securities 60,000

Other Assets:

Prepaid Rent 22,000

LIABILITIES AND EQUITY

Current Liabilities

Interest Payable 32,000

Current Maturities of Long-Term Debt 40,000

Long Term Liabilities

Notes payable 200,000

Notes:

1) The Prepaid rent only reports half as current assets (usable within the next one year), the next half of $22,000 becomes other assets

2) The The Notes payable is in stallments, and the instalment due in 2022 is $40,000, hence the balanc e(240,000- 40,000) 200,000 will go into notes payable remaining amount