Question

As controller for Henderson, you are attempting to reconstruct and revise the following balance sheet prepared by a staff accountant. $ 2,250 4,750 (700) 6,900 4,400 17,600 Henderson Manufacturing Company Balance Sheet At December 31, 2021 ($ in 2005) Assets Current assets: Cash Accounts receivable Allowance for uncollectible accounts Finished goods inventory Prepaid expenses Total current assets Long-term assets: Investments Raw materials and work in process inventory Equipment Accumulated depreciation-equipment Franchise Total assets Liabilities and Shareholders' Equity Current liabilities: Accounts payable Notes payable Interest payable=note Deferred revenue Total current liabilities Long-term liabilities: Bonds payable Interest payable-bonds Shareholders' equity: Common stock Retained earnings Total liabilities and shareholders' equity 4,000 4,900 24,500 (10,000) $ ? $ 8,200 12,000 600 3,300 24,100 11,000 600 $ ? ? ? |

Answer 1

Henderson Manufacturing ompany
Balance Sheet
At December 31, 2021
($ in 000s)
Assets
Current assets
Cash and cash equivalents	6,250
Accounts receivable, net of $700 allowance for uncollectible accounts	4,050	10,300
Inventory:
Raw materials and work in process	4,900
Finished goods	6,900	11,800
Prepaid expenses		4,400
Total current assets		26,500
Property, plant, and equipment:
Equipment	24,500
Less: Accumulated depreciation	10,000	14,500
Net property, plant, and equipment
Intangibles:
Franchise		18,500
Total assets		59,500
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	8,200
Notes payable	1,200
Interest payable (on notes)	600
Interest payable (on bonds)	600
Deferred revenue	1,650
Total current liabilities		12,250
Long term liabilities:
Notes payable	10,800
Bonds payable	11,000
Deferred revenue	1,650	23,450
Total liabilities
Shareholders' equity:
Authorized Share Capital 500,000 shares of no par stock
Common stock ( 300,000 shares issued and outstanding)	17,600
Retained earnings	6,200
Total shareholders' equity		23,800
Total liabilities and shareholders' equity		59,500

Working Notes:

1.Computation of Retained Earnings

Balance at the beginning of the year	4,200
Add: Net income for the year	3,300
Less: Dividends declared and paid	(1,300)
Balance at the end of the year	6,200

2.Compuation of Common Stock

Total liabilities as per the updated balance sheet	35,700
Debt to equity ratio	1:50
Total shareholders' equity ( 35,700/1.50)	23,800
Less: Retained earnings	(6,200)
Common stock	17,600

3.Computation of franchise

Total assets = Total liabilities and shareholders' equity	59,500
Total assets without franchise	41,000
Franchise	18,500

Notes:

1.Raw materials and work in process inventory shall be classified under current assets.

2.Investments which are to sold within a period of one year or less shall be classified as current assets.

3.Long term investments are such investments which a company intends to hold for more than one year.

4.Notes payable shall be classified as under

Current liabilities - notes payble due in 12 months	1,200
Long terms liabilities - notes payable due after 12 months	10,800
Total Notes payable	12,000

5.Deferred revenue shall be classified as under

Current liabilities - deferred revenue to be recognized as revenue in next 12 months	1,650
Long terms liabilities - deferred revenue to be recognized as revenue in next 12 months	1,650
Total deferred revenue	3,300