Question

Problem - 4 (Balance Sheet Adjustment and Preparation) Presented below is the balance sheet of Sargent Corporation for the current year, 2014. Current assets Investments Property, plant, and equipment Intangible assets SARGENT CORPORATION BALANCE SHEET DECEMBER 31, 2014 $ 485,000 Current liabilities 640,000 Long-term liabilities 1,720,000 Stockholders' equity 305,000 $3,150,000 $ 380,000 1,000,000 1,770,000 $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 uneared rent revenue $5,000. Inventoy is stated on the lower-of-FIFO-cost-or- market. 2. The investments section includes the cash surrender value of a life insurance contract $40,000; investments in common stock, short-term (trading) $80,000 and long-term (available-for-sale) $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 2022. 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.

Answer 1

Answer

Amount Sargent Corporation Balance Sheet December 31, 2014 Particular Amount Amount Current Assets Cash S 150,000 Trading Investments (Fair Value) $ 80,000 Accounts Receivable $ 170,000 Less Allowance for Doubtful Accounts $ -10,000 $ 160,000 Inventory, at lower of cost (with the use of FIFO or NRV) $ 180,000 Total Current Assets $ 570,000 Long Term Investments Investments in Common Stock (fair value) Bond Sinking Fund Cash Surrender Value of Life Insurance Land held for Future Use Total Long Term Investments $ 270,000 $ 250,000 $ 40,000 $ 270,000 $830,000 Property, Plant and Equipment Land Buildings Less Accumulated Depreciation Building Equipment Less Accumulated Depreciation Equipment Total Property, Plant and Equipment $ 500,000 $ 1,040,000 $ -360,000 $ 680,000 $ 450,000 $ -180,000 $ 270,000 $ 1,450,000 Intangible Assets Franchises Goodwill Total Intangible Assets Total Assets $ $ 165,000 100,000 $ 265,000 $ 3,115,000

Liabilities and Stockholder's Equity Current Liabilities Accounts Payable Notes Payable Taxes Payable Unearned Revenue Total Current Liabilities $ 140,000 $ 80,000 40,000 $ 5,000 $ 265,000 120,000 Long Term Liabilities Notes Payable 7% Bonds Payable Less Discount on Bonds Payable Total Long Term Liabilities Total Liabilities $ $ 1,000,000 $ -40,000 $ 960,000 $ 1,080,000 $ 1,345,000 Stockholder's Equity Capital Stock Preferred Stock, No Par Value 200000 Shares Authorized 70000 Issued and Outstanding $ 450,000 Common Stock, $1 Par Value 400000 Share Authorized 100000 Issued and Outstanding $ 100,000 Paid in Capital in Excess of Par on Common Stock (10-1) $ 900,000 Total Paid in Capital Retained Earnings Total Stockholder's Equity Total Liabilities and Stockholder's Equity $ 1,450,000 $ 320,000 $ 1,770,000 $ 3,115,000

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