 Hello and welcome to this session, this is Professor Farhad in which we would look at how to prepare a classified balance sheet. So we are giving a trial balance and we are giving additional information about the trial balance and our job today is to prepare not any balance sheet, a classified balance sheet. Therefore, if you are giving additional information, you have to read the information carefully to find out what information is needed to classify the accounts on the balance sheet. Starting with number one, we are giving the investment and the equity securities account include an investment in common stock of another corporation for 30,000 which management intend to hold for at least three years. So this is the investment account right here, we have 110 and we are told 30,000 management is intend to hold for three years, it means 30,000 is considered long term, therefore the remainder 80,000 is short term. So this is the first piece of information because although investment and equity securities, we don't know whether it's short term or long term by reading the information we were able to figure this one out. Number two, we are giving information about the land account and here's the land account we have 90,000 in the land account. It says, the land account includes land which cost 25,000 that the company has not used and is currently listed for sale. It means we have 90,000 worth of land of this amount, 25 is considered an investment and the remainder which is 65 is property, plant and equipment. So 90,000 is the total, that's fine. We are told that 25,000 it's not used, it's held for sale. Once it's held for sale, the land becomes an investment, therefore 25,000 will be listed under the investment and 65,000 will be part of property, plant and equipment. Number three, the cash account includes 15,000, includes 15,000 restricted in a fund that pays bonds payable that mature in 2024 and 23,000 restricted in a three month treasury bill. So now we have to look at the cash account which is 45,000. We are told 15 is restricted for a long term bonds payable. Well, it means of the 45, 15 will have to be considered an investment because it's restricted, we invested this. The remainder 23 is restricted in a three month treasury bill, well that's cash. It means the remainder is cash. So therefore 15 is investment and the remainder 30,000 is cash. Let's look at number four. The notes payable accounts consist of the following. So we have notes payable and we have 130,000 and notes payable. Remember notes payable, some of it is short term, some of it is long term. So we have to figure it out. 30,000 is due in six months. Well of this amount we know 30,000 is short term, right there. 50,000 is due in the next six years. Well we know 50,000 is long term. And 50,000 note due in five annual instalment 10,000 with the next instalment due on February 15, 2022 which is our balance sheet here. Well the remainder of 50,000, the remainder of 50,000 we're going to have to make 10, 5, 10,000 payment. What does, what happened to the last 50,000? The last 50,000, 10,000 of it is short term and the remainder is long term because one of them is due the next and then coming in the upcoming year which is 2022. So all in all we have 30,000 short term, 10,000 short term, we have in total 40,000 short term. It means the remainders are 50 plus 40, the remainder 90 is long term note. So we took care of number four. Number five, the 60,000 dollar balance in a count receivable is net of the allowance for in collectible of eight. Well we have 60,000 here but what's going to happen is we're going to have to show it at 68,000 then subtract 8,000 of allowance. And the common stock represent 100,000, this is the common stock right here, represent 100,000 shares of no par value common stock issued an outstanding the corporation has half a million shares authorized simply put we have to disclose this information on the balance sheet. Now we're going to go ahead and put this classified balance sheet together. Before we put the classified balance sheet together I have a public announcement about my company farhatlectures.com. Farhat accounting lectures is a supplemental educational tool that's going to help you with your CPA exam preparation as well as your accounting courses. My CPA material is aligned with your CPA review course such as Becker, Roger, Wiley, Gleam, Miles. My accounting courses are aligned with your accounting courses broken down by chapter and topics. My resources consist of lectures, multiple choice questions, true-false questions as well as exercises. Go ahead start your free trial today no obligation no credit card required. Starting with the asset side and starting actually with the titles of the statement the name of the company Adam corporation the name of the statement and the date. Then we're going to start with assets remember for assets and specifically we're going to break them into current assets. Under current assets we're going to have cash and we're only going to have 30,000 of cash why 30,000 the trial balance showed 45 remember 15 is restricted as an investment and the remainder is cash so this is the cash. Investment insecurities if you remember we had 110 on the classified balance on the trial balance we're going to break it into 80,000 is considered current asset because it's going to be sold in the next 12 month and 30,000 is under investment. The account receivable is a current asset we're going to list it at gross minus the allowance and that's going to give us net of 60,000 there was nothing to inventory it was 200,000 nothing to prepaid 90,000 all in all we add up all the current assets and they will add up to 349,000 under investments we had the investment and equity securities 15 we had the land remember the account of the land land part of it was investment part of it was property plant and equipment because the total was 90 therefore 30 plus 25 plus the restricted cash we have investment of 70,000 then we have prop a section called the property plant and equipment so total investment is 70 total and total property plant and equipment we have the land we have the building we have the equipment minus the accumulated depreciation for the building the accumulated depreciation for the equipment so when we net all property plant and equipment they net out to be 435 which is the cost minus the depreciation and we have intangible asset of 10 now we are ready to add up all the assets which notice here we have current assets we have investments we have property plant and equipment and we have patent this is a classified balance sheet and the total asset is 894,000 for Adam corporation now we're gonna look at the liability section of the balance sheet under the liabilities we have accounts payable of 75,000 interest payable of 20,000 and this is coming from the trial balance on the slide before and if you remember we had under current liabilities under current debt we have 30,000 was notes payable current and another 10,000 notes payable current maturities of long-term debt remember we had this 50,000 dollar loan where it we're gonna pay 10,000 five five 10,000 one of the 10,000 is current and the remainder a short term now this is our current liabilities we add them up to 135 notes payable we have long-term notes 90,000 which we computed in the previous slide and we have bonds payable bonds payable is long-term 240 we add up the notes payable and that's gonna give us 330 the liabilities are broken down into two section current and long-term now we have the stockholders equity we have common stock of 300,000 nothing to do except to disclose how many shares are authorized we can disclose this in the notes and we have retained earnings which is how much the company earned and kept over the years and the common stock 300,000 is how much the investors invested in the company overall total stockholders equity or shareholders equity is 429 now we add up the liabilities which are 465 plus the total equity will give us liabilities and total equity equal to the assets of 894,000 and this is how you prepare a classified balance sheet at the end of this recording I would like to remind you to visit farhatlectures.com to work MCQs through false and additional exercises that's gonna help you whether you are an accounting student or a CPA candidate invest in yourself good luck study hard