Question 5
Question
P5-5 (L03) GROUPWORK (Balance Sheet Adjustment and Preparation) Presented below is the balance sheet of Sargent Corporation for the current year, 2017.
SARGENT CORPORATION | |||
Balance Sheet | |||
December 31, 2017 | |||
Current assets | \(485,000 | Current liabilities | \)380,000 |
Investment | 640,000 | Long-term liabilities | 1,000,000 |
Property, Plant, and Equipment | 1,720,000 | Stockholder’s equity | 1,770,000 |
Intangible assets | 305,000 |
|
|
| \(3,150,000 |
| \)3,150,000 |
The following information is presented.
1. The current assets section includes cash \(150,000, accounts receivable \)170,000 less \(10,000 for allowance for doubtful accounts, inventories \)180,000, and unearned rent revenue \(5,000. Inventory is stated on the lower-of-FIFO-cost-or-net realizable value.
2. The investments section includes the cash surrender value of a life insurance contract \)40,000; investments in common stock, short-term \(80,000 and long-term \)270,000; and bond sinking fund \(250,000. The cost and fair value of investments in common stock are the same.
3. Property, plant, and equipment includes buildings \)1,040,000 less accumulated depreciation \(360,000, equipment \)450,000 less accumulated depreciation \(180,000, land \)500,000, and land held for future use \(270,000.
4. Intangible assets include a franchise \)165,000, goodwill \(100,000, and discount on bonds payable \)40,000.
5. Current liabilities include accounts payable \(140,000, notes payable—short-term \)80,000 and long-term \(120,000, and income taxes payable \)40,000.
6. Long-term liabilities are composed solely of 7% bonds payable due 2025.
7. Stockholders’ equity has preferred stock, no par value, authorized 200,000 shares, issued 70,000 shares for \(450,000; and common stock, \)1.00 par value, authorized 400,000 shares, issued 100,000 shares at an average price of \(10. In addition, the corporation has retained earnings of \)320,000.
Instructions
Prepare a balance sheet in good form, adjusting the amounts in each balance sheet classification as affected by the information given above.
Step-by-Step Solution
VerifiedThe balance sheet of the company totals $3,115,000.
The maximum number of shares by which a company can issue shares and raise finance for the business is known as authorized shares.
| SARGENT CORPORATION | ||
| Balance Sheet | ||
| December 31, 2017 | ||
Assets |
|
|
Current Assets |
|
|
Cash |
| $150,000 |
Accounts receivables | $170,000 |
|
Less: Allowance for doubtful accounts | (10,000) | 160,000 |
Inventories |
| 180,000 |
|
|
|
Short-term investment in common stock |
| 80,000 |
|
|
|
Long-term investment |
|
|
Cash surrender value of life insurance |
| 40,000 |
Land held for future use |
| 270,000 |
Long-term investment in common stock |
| 270,000 |
Bond sinking funds |
| 250,000 |
|
|
|
Property, Plant, and equipment |
|
|
Building | 1,040,000 |
|
Less: Accumulated depreciation | (360,000) | 680,000 |
|
|
|
Equipment | 450,000 |
|
Less: Accumulated depreciation | (180,000) | 270,000 |
|
|
|
Land |
| 500,000 |
|
|
|
Intangible assets |
|
|
Franchise |
| 165,000 |
Goodwill |
| 100,000 |
Total assets |
| 3,115,000 |
|
|
|
Liabilities |
|
|
Current liabilities |
|
|
Account payable |
| 140,000 |
Note payable (short term) |
| 80,000 |
Income tax payable |
| 40,000 |
Unearned rent revenue |
| 5,000 |
|
|
|
Non-current liabilities |
|
|
Note payable (long term) |
| 120,000 |
Bond payable | 1,000,000 |
|
Less: Discount on bond payable | (40,000) | 960,000 |
Total liabilities |
| 1,345,000 |
|
|
|
Equity |
|
|
Preferred stock |
| 450,000 |
Common stock | 100,000 |
|
Add: Paid-in-capital in excess of par | 900,000 | 1,000,000 |
|
|
|
|
|
|
Reserves and surplus |
|
|
Retained earnings |
| 320,000 |
Total liabilities and equity |
| $3,115,000 |