Question

Harry’s Clothing, Inc. used the following headings on the company’s December 31, 2018 balance sheet:

(A) Current assets (B) Long-term investments (C) Property and equipment (D) Intangible assets (E) Other assets (F) Current liabilities (G) Long-term debt (H) Shareholders’ equity

Required: For each of the following items, indicate its normal balance sheet classification category. Use (NA) for items that would not appear on the face of the balance sheet, but would be discussed in the notes to the financial statements.

_____ 1. Accounts receivable

_____ 2. Accrued interest on notes payable (2019 maturity)

_____ 3. Accumulated depreciation

_____ 4. Goodwill

_____ 5. Preferred stock

_____ 6. Common stock

_____ 7. Customer deposits on products to be shipped in a few months

_____ 8. Depreciation methods and estimated lives of equipment

_____ 9. Prepaid insurance

_____ 10. Assets (surplus production equipment) held for sale

Answer 1

NA applicable for followings:

Accrued interest on note payables(Maturity 2019) because it is accrued interest of 2018 which is payable in 2019.

Accumulated Depreciation because depreciation calculations are done as Notes to accounts.

Goodwill because impairment test is done every year.

Customers deposits on products to be shift in a few months because deposits are made at advance.

Depreciation methods and estimated lives of equipments because depreciation calculations done on notes to accounts.

Assets (Surplus production equipment) held for sale as it can create some gain to the company that had to be shown in notes.