Question

Problem 3-8 (Algo) Balance sheet; errors; missing amounts [LO3-2, 3-3]

The following incomplete balance sheet for the Sanderson Manufacturing Company was prepared by the company’s controller. As accounting manager for Sanderson, you are attempting to reconstruct and revise the balance sheet.

Current Assets
Cash	$2,150
A/R	5,300
Allowance for Uncollectile accounts	(1,300)
Finished goods inventory	6,900
Prepaid expenses	2,100
total current assets	15,150
Long--term assets:
Investments	3,900
Raw materials and work-in-process inv	3,150
Equipment	18,000
Accum. Depreciation	(5,100)
Patent (net)	?
Total Assets	?
Liabilities and shareholds equity
current liabilities
A/p	6,100
N/P	5,800
interest payable (on notes)	1,000
Deferred revenue	4,800
total current liailities	17,700
Long-term lia.
Bonds payable	6,400
Interest payable (on bonds)	400
Shareholders equity
Common stock	?
Retained earnings	?
Total Lia. and SH. EQ.

Additional information ($ in 000s):

1. Certain records that included the account balances for the patent and shareholders’ equity items were lost. However, the controller told you that a complete, preliminary balance sheet prepared before the records were lost showed a debt to equity ratio of 1.4. That is, total liabilities are 140% of total shareholders’ equity. Retained earnings at the beginning of the year was $5,800. Net income for 2021 was $2,000 and $400 in cash dividends were declared and paid to shareholders.
2. Management intends to sell the investments in the next six months.
3. Interest on both the notes and the bonds is payable annually.
4. The notes payable are due in annual installments of $1,450 each.
5. Deferred revenue will be recognized as revenue equally over the next two fiscal years.
6. The common stock represents 400,000 shares of no par stock authorized, 340,000 shares issued and outstanding.
   
7. What to prepare a compete and corrected, classified balance sheet.

PLEASE EXPLAIN HOW YOU FIND THE NUMBERS FOR PARTS WITH "?" .

Answer 1

SANDERSON MANUFACTURING COMPANY Balance sheet ($ in 2005) Assets Current assets cash 2150 Accounts relevable 5300 Allowance for uncollectible quounts (1300) Finished goods inventory 6900 Raw material and wip irently 3150 Prepaid enpenses 2100 Investments 3900 Total werreed assets 22 200 Long terms assets Equipment Acumulated depreciation Patents (net) Total long terms assets Total assets 18000 (51oo) 6900 19800 42000

Liabilities eshareholders' equila current liabilities Auounts payable 6100 Noter payable 1450 4 Big 1000 Interest payable (on notes) Interest payable (on bonds) Deferred revenue Total urrent liabilities 400 2400 11350 Longlivm liabiletes Notes payable Bonds payable 4350 6400 2400 Deferred revenue Total long term liabilities Total liabilities 13150 24500

Shareholders' Equity Authorized share capital 400000 shanes of no par stock Issued shane cepilál Common stack 10100 Retained earingan 7400 To tal shareholders' equilty 171500 Total liabletes and Shareholders equites $ 42000

Notes working © Computation & Retained earnings Balance at beginning year 5800 Add: Net income 2000 Less : Divident declared (400) and paid Balance at the end & the year 7400 33 computation common stock Total liability as per the 241500 updated balane sheet Debt to equiliz ratio 1.4 Total shareholders equity 17 Sod Less: Retained eamings (7400 Commen Stock 10100

3 Computatim & Patent Total assets 42000 Total assets without patent (35100) Patents 6900 Notes: + Raw materials and work in process inuenting classified under arment assets. 1 Investments which ane sold within a period a one year or less shall be classified as current assets.

* Notes payable shall be classified as under: ument liabilities Long Term Liabilities 1450 4350 5800 Total notes payable. → Deferred revenue shall be classified as under: current litebilities 2400 Long term liabilities 2400 Total 4800