Question

The following incomplete balance sheet for the Sanderson Manufacturing Company was prepared by the companys controller. As a
Patent (net) Total assets Liabilities and Shareholders Equity Current liabilities: Accounts payable Notes payable Interest p
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Answer #1
SANDERSON MANUFACTURING COMPANY
Balance Sheet
At December 31,2021
( $ in 000s)
Assets
Current assets :
Cash $1,950
Accounts receivable        4,900
Allowance for uncollectible accounts       (1,100)
Finished goods inventory        6,700
Raw material and work in process inventory        2,950
Prepaid expenses        1,900
Investments        3,700
Total current assets      21,000
Long terms assets :
Equipment $22,000
Accumulated depreciation       (4,900)
Patents (net)        6,000
Total long terms assets      23,100
Total assets $44,100
Liability and shareholders' equity
Current liabilities :
Accounts payable $5,900
Notes payable        1,350
Interest payable (on notes)          800
Interest payable (on bonds)          400
Deferred revenue        2,200
Total current liabilities      10,650
Long term liabilities :
Notes payable $4,050
Bonds payable        6,200
Deferred revenue        2,200
Total long term liabilities      12,450
Total liabilities      23,100
Shareholders' equity
Authorized Share Capital
600,000 shares of no par stock
Issued Share Capital
Common stock ( 320,000 shares issued and outstanding) $14,300
Retained earnings        6,700
Total shareholders' equity      21,000
Total liabilities and shareholders' equity $44,100
Working Notes
Computation of Retained Earnings
Balance at the beginning of the year $5,400
Add: Net income for the year        1,900
Less: Dividends declared and paid         (600)
Balance at the end of the year        6,700
Compuation of Common Stock
Total liabilities as per the updated balance sheet $23,100
Debt to equity ratio         1.10
Total shareholders' equity ( 23100/1.10) $21,000
Less: Retained earnings       (6,700)
Common stock      14,300
Computation of Patents
Total assets = Total liabilities and shareholders' equity $44,100
Total assets without patents      38,100
Patents        6,000
Note-
(i) Raw materials and work in process inventory shall be classified under
current assets.
(ii) Investments which are to sold within a period of one year or less shall be
classified as current assets.Long term investments are such investments
which a company intends to hold for more than one year.
(iii) Notes payable shall be classified as under
Current liabilities - notes payble due in 12 months $1,350
Long terms liabilities - notes payable due after 12
months
       4,050
Total Notes payable        5,400
(iv) Deferred revenue shall be classified as under
Current liabilities - deferred revenue to be recognized
as revenue in next 12 months
$2,200
Long terms liabilities - deferred revenue to be recognized as revenue in next 12 months        2,200
Total deferred revenue        4,400
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