Prepare Classified Financial Statements Practice Test

A for-profit entity, Meridian Services Co., is preparing an income statement for the year ended December 31, Year 1. The unadjusted trial balance includes: Service revenue $1,200,000; Cost of services $720,000; Selling and administrative expense $260,000; Interest expense $40,000; Gain on sale of equipment $12,000; Unrealized holding gain on trading securities $9,000; Foreign currency transaction loss $6,000 related to a euro-denominated accounts payable settled during Year 1. Management presented the foreign currency transaction loss as a component of other comprehensive income. Which adjustment is needed to correct the income statement?

A for-profit entity, Larkspur Co., is preparing a classified balance sheet as of December 31, Year 1. The year-end trial balance includes: Accounts receivable $420,000; Allowance for credit losses (credit) $6,000; Notes receivable—customer, due March 31, Year 2 $120,000; Notes receivable—employee, due June 30, Year 4 $80,000; Inventory $310,000; Prepaid insurance $24,000; Cash $95,000; Accounts payable $260,000; Accrued payroll $58,000; Note payable—bank, due February 15, Year 2 $150,000; Bonds payable, due Year 8 $500,000; Common stock $200,000; Retained earnings $75,000. An adjusting entry is required to reclassify the employee note receivable as noncurrent. What is the correct classification of the Notes receivable—customer, due March 31, Year 2 on the classified balance sheet?