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Balance sheet classification and calculated retained earnings

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The following trial balance of Rosen Corp. at December 31, 2004 has been properly adjusted except for the income tax expense adjustment.

Rosen Corp.
Trial Balance
December 31, 2004
Dr. Cr.
Cash $ 875,000
Accounts receivable (net) 2,695,000
Inventory 2,085,000
Property, plant, and equipment (net) 7,366,000
Accounts payable and accrued liabilities $ 1,501,000
Income taxes payable 654,000
Deferred income tax liability 85,000
Common stock 2,350,000
Additional paid-in capital 3,680,000
Retained earnings, 1/1/04 3,650,000
Net sales and other revenues 13,360,000
Costs and expenses 11,080,000
Income tax expenses 1,179,000
___________ _____________
$25,280,000 $25, 280,000

Other financial data for the year ended December 31, 2004:

? Included in accounts receivable is $800,000 due from a customer and payable in quarterly installments of $100,000. The last payment is due December 29, 2006.
? The balance in the Deferred Income Tax Liability account pertains to a temporary difference that arose in a prior year, of which $30,000 is classified as current.
? During the year, estimated tax payments of $325,000 were charged to income tax expense. The current and future tax rate on all types of income is 30%.

In Rosen's December 31, 2004 balance sheet,

The current assets total is
a. $6,455,000.
b. $5,655,000.
c. $5,555,000.
d. $5,255,000.

The current liabilities total is
a. $1,860,000.
b. $1,915,000.
c. $2,185,000.
d. $2,240,000.

The final retained earnings balance is
a. $4,751,000.
b. $4,836,000.
c. $5,076,000.
d. $5,174,000.

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Solution Preview

Current assets would be defined as those amounts expected to convert to cash within one year. It would be an unusual situation to have an open account receivable which extends beyond one year. Normally, in such a situation, the account receivable would be converted to a note receivable (to offset the time value of money lost) and the expected payment schedule would provide ...

Solution Summary

The solution defines current and non-current classifications for the balance sheet, and then provides solutions with explanations for the calculation of the totals for current assets, current liabilities and retained earnings.

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Need some help with question and the reason behind it.

#1. What is the overall objective of financial reporting information?
a. To be useful in decision-making
b. To provide information that helps shareholders assess management's performance
c. To provide information about a company's financial performance
d. To provide information about a company's assets, liabilities, and owners' equity.

#2. Which one of the following equation property represents the balance sheet?
a. Assets - Liabilities - owner's equity
b. Assets - Liabilities = owner's equity
c. Assets - owner's equity = Liabilities
d. Assets = Liabilities + owner's equity

#3. If a company increases an asset, which of the following is required to maintain balance in the balance sheet equation?
a. Decrease owner's equity
b. Decrease a liability
c. Increase a liability
d. Increase an expense

#4. Which of the following would not be presented on a balance sheet?
a. Cash
b. Depreciation expense
c. Accounts payable
d. Retained earnings

#5. Which of the following would be presented on a balance sheet?
a. Revenue
b. Expense
c. Gains
d. Retained earnings

#6. What result is calculated by subtracting expense and losses from revenue and gains?
a. Net income or lost
b. Gross profit
c. Operating income
d. Retained earnings

#7. Which of the following is the result of an increase in revenue?
a. Increase a net loss
b. Decrease a net loss
c. Decrease net income
d. Decrease retained earnings

#8. How would you categorize the payments in the statement of cash flows when purchasing the debt instruments of other companies?
a. As investing activities
b. As financing activities
c. As operating activities
d. As equity activities

#9. In a statement of cash flows, how would you categorize the cash inflows from proceed from issuing equity instruments?
a. As brokerage activities
b. As operating Activities
c. As financing activities

#10. How are cash inflows from the sales of property, plant, and equipment categorized in the statement of cash flows?
a. As liquidating activities
b. As investing activities
c. As operating activities
d. As financing activities.

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