Concept explainers
Prepare a corrected classified balance sheet as of December 31, 2016.
Explanation of Solution
Balance sheet: This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and stockholders (stockholders’ equity) over those resources. The resources of the company are assets which include money contributed by stockholders and creditors. Hence, the main elements of the balance sheet are assets, liabilities, and
Prepare a corrected classified balance sheet of Company Z:
Company Z | |||
Balance Sheet | |||
December 31,2016 | |||
Current Assets: | Amount ($) | Amount ($) | Amount ($) |
Cash (1) | 109,000 | ||
Accounts receivable (net) (2) | 317,700 | ||
Inventories | 560,000 | ||
Total current assets | 986,700 | ||
Long-Term Investment, at fair value (3) | 51,300 | ||
Property, Plant, and Equipment (at cost): | |||
Land (4) | 200,000 | ||
Building | 1,750,000 | ||
Machinery and equipment | 1,964,000 | ||
Total | 3,714,000 | ||
Less: | (420,000) | 3,294,000 | |
Total property, plant, and equipment | 3,494,000 | ||
Intangible Asset: | |||
37,000 | |||
Other Assets: | |||
Cash restricted for building purposes [ Refer working note (1) ] | 100,000 | ||
Officer’s note receivable [ Refer working note (2) ] | 30,000 | ||
Land held for future building site [ Refer working note (4) ] | 250,000 | 380,000 | |
Total Assets | 4,949,000 | ||
Liabilities | |||
Current Liabilities: | |||
Accounts payable (5) | 119,800 | ||
Current instalments of long-term debt[ Refer working notes (6) & (7) ] | 200,000 | ||
Lawsuit liability | 80,000 | ||
Income taxes payable (8) | 21,200 | ||
5,000 | |||
Total current liabilities | 426,000 | ||
Long-Term Debt: | |||
Mortgage payable (6) | 800,000 | ||
Notes payable (7) | 400,000 | ||
Deferred tax liability | 23,000 | ||
Total long-term debt | 1,223,000 | ||
Total Liabilities | 1,649,000 | ||
Shareholders’ Equity: | |||
Contributed Capital: | |||
Common stock, authorized 100,000 shares of $50 par value; issued 40,000 shares; outstanding 39,800 shares (9) | 2,000,000 | ||
Additional paid-in capital [ Refer working note (9) ] | 231,000 | ||
Total paid-in capital | 2,231,000 | ||
1,075,400 | |||
Total | 3,306,400 | ||
Less: Cost of | (6,400) | ||
Total Shareholders’ Equity | 3,300,000 | ||
Total Liabilities and Shareholders’ Equity | 4,949,000 |
Table (1)
Therefore, the total of assets and total liabilities and shareholders’ equity equals to $4,949,000.
Working notes:
(1) Calculate corrected amount of cash balance:
Cash, per unaudited balance sheet | $225,000 |
Less: Unrecorded checks in payment of accounts payable | ($14,000) |
NSF check not recorded | ($2,000) |
Cash restricted for building purposes (reported in other assets) | ($100,000) |
Corrected balance | 109,000 |
Table (2)
(2) Calculate the corrected amount of accounts receivable:
Accounts receivable (net), per unaudited balance sheet | $345,700 |
Add charge-back for NSF check [refer working note (1)] | $2,000 |
Less: Officer’s note receivable (reported in other assets) | ($30,000) |
Corrected balance | $317,700 |
Table (3)
(3) Calculate the corrected amount of investments:
Investments, per unaudited balance sheet | $57,700 |
Less: Long-term investment [reported separately as an asset] | ($51,300) |
Treasury stock [reported in shareholders’ equity] | ($6,400) |
Corrected balance | $0 |
Table (4)
(4) Calculate the corrected amount of land:
Land, per unaudited balance sheet | $450,000 |
Less: Land acquired for future building site (reported in other assets) | ($250,000) |
Corrected balance | $200,000 |
Table (5)
(5) Calculate the corrected amount of accounts payable:
Accounts payable, per unaudited balance sheet | $133,800 |
Less: Unrecorded payments [refer working note (1)] | ($14,000) |
Corrected balance | $119,800 |
Table (6)
(6) Calculate the corrected amount of mortgage payable:
Mortgage payable, per unaudited balance sheet | $900,000 |
Less: Current portion | (100,000) |
Refinanced as long-term mortgage payable | $800,000 |
Table (7)
(7) Calculate the corrected amount of long-term note payable:
Notes payable, per unaudited balance sheet | $500,000 |
Less: Current portion | ($100,000) |
Long-term note payable | $400,000 |
Table (8)
(8) Calculate the corrected amount of income taxes payable:
Income taxes payable, per unaudited balance sheet | $61,200 |
Less: Prepaid income taxes | ($40,000) |
Corrected balance | $21,200 |
Table (9)
(9) Calculate the corrected amount of common stock:
Common stock, per unaudited balance sheet | $2,231,000 |
Less: Additional paid-in capital in excess of par value | ($231,000) |
Corrected balance | $2,000,000 |
Table (10)
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Chapter 4 Solutions
EBK INTERMEDIATE ACCOUNTING: REPORTING
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