Question

Sarasota Corp. has decided to expand its operations. The bookkeeper recently completed the following statement of financial position in order to obtain additional funds for expansion:

SARASOTA CORP. Statement of Financial Position For the Year Ended December 31, 2020
Current assets
	Cash (net of bank overdraft of $50,000)		$	350,000
	Accounts receivable (net)			397,000
	Inventory at the lower of cost and net realizable value			461,000
	FV-NI investments (at cost—fair value $140,000)			220,000
Property, plant, and equipment
	Buildings (net)			770,000
	Equipment (net)			250,000
	Land held for future use			335,000
Intangible assets
	Goodwill			89,000
	Investment in bonds to collect cash flows, at amortized cost			91,000
	Prepaid expenses			19,000
Current liabilities
	Accounts payable			235,000
	Notes payable (due next year)			245,000
	Pension obligation			93,000
	Rent payable			57,000
Long-term liabilities
	Bonds payable			583,000
Shareholders’ equity
	Common shares, unlimited authorized, 420,000 issued			420,000
	Contributed surplus			380,000
	Retained earnings			?

(a)

Prepare a revised statement of financial position using the available information. Assume that the bank overdraft relates to a bank account held at a different bank from the account with the cash balance. Assume that the accumulated depreciation balance for the buildings is $270,000 and that the accumulated depreciation balance for the equipment is $225,000. The allowance for doubtful accounts has a balance of $22,000. The pension obligation is considered a long-term liability. (List Current Assets in order of liquidity. List Property, Plant and Equipment in order of Land, Buildings and Equipment.)

Answer 1

SARASOTA CORP.
Balance Sheet
December 31, 2020
Assets
Current Assets
Cash		400,000
Trading securities—at fair value		140,000
Accounts Receivable	397,000
Less: Allowance for doubtful accounts	22,000	375,000
Inventories, at lower of average cost or market		461,000
Prepaid Expense		19,000
Total Current Assets			1,395,000
Long-term Investments
Land held for future use		335,000
Investment in bonds to collect cash flows, at amortized cost		91,000	426,000
Property, Plant and Equipment
Building	1,040,000
Less: Accum. depr.—building	270,000	770,000
Office Equipment	475,000
Less: Accum. depr.—office equipment	225,000	250,000	1,020,000
Intangible Assets
Goodwill			89,000
Total Assets			2,930,000
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable		235,000
Notes Payable (due next year)		245,000
Bank Overdraft		50,000
Rent Payable		57,000
Total Current Liabilities			587,000
Long-term Liabilities
Bonds payable		583,000
Pension obligation		93,000	676,000
Total Liabilities			1,263,000
Stockholders' Equity
Common stock, $1 par, authorized
unlimited shares, issued 420,000 shares		420,000
Additional paid-in capital		380,000
Retained Earnings		867,000
Total Stockholders' Equity			1,667,000
Total Liabilities and Stockholders' Equity			2,930,000