Question

Comprehensive Accounting Cycle Review 11-1

Blue Spruce Corp.’s balance sheet at December 31, 2016, is presented below.

BLUE SPRUCE CORP. Balance Sheet December 31, 2016
Cash		$25,000			Accounts payable		$25,500
Accounts receivable		46,000			Common stock ($10 par)		85,000
Allowance for doubtful accounts		(1,900	)		Retained earnings		119,067
Supplies		4,800
Land		40,500
Buildings		137,000
Accumulated depreciation—buildings		(21,833	)
		$229,567					$229,567

During 2017, the following transactions occurred.

1.		On January 1, 2017, Blue issued 1,500 shares of $40 par, 8% preferred stock for $61,500.
2.		On January 1, 2017, Blue also issued 830 shares of the $10 par value common stock for $24,000.
3.		Blue performed services for $340,000 on account.
4.		On April 1, 2017, Blue collected fees of $35,000 in advance for services to be performed from April 1, 2017, to March 31, 2018.
5.		Blue collected $284,000 from customers on account.
6.		Blue bought $34,500 of supplies on account.
7.		Blue paid $31,000 on accounts payable.
8.		Blue reacquired 470 shares of its common stock on June 1, 2017, for $27 per share.
9.		Paid other operating expenses of $187,000.
10.		On December 31, 2017, Blue declared the annual preferred stock dividend and a $1.00 per share dividend on the outstanding common stock, all payable on January 15, 2018.
11.		An account receivable of $1,800 which originated in 2016 is written off as uncollectible.

Adjustment data:

1.		A count of supplies indicates that $5,600 of supplies remain unused at year-end.
2.		Recorded revenue from item 4 above.
3.		The allowance for doubtful accounts should have a balance of $3,700 at year end.
4.		Depreciation is recorded on the building on a straight-line basis based on a 30-year life and a salvage value of $6,000.
5.		The income tax rate is 30%. (Hint: Prepare the income statement up to income before taxes and multiply by 30% to compute the amount.)

1) Prepare a classified balance sheet as of December 31, 2017. (List Current Assets in order of liquidity. List Property, Plant and Equipment in order of Land, Buildings and Equipment.)

BLUE SPRUCE CORP. Balance Sheet At December 31, 2017 Assets Current Assets Liabilities and Stockholders' Equity

Answer 1

BLUE SPRUCE CORP.
Balance Sheet
For the year ended Dec 31,2017
Assets
Current assets:
Cash	198,810
Accounts receivable	100,200
Allowance for doubtful accoutns	-3,700
Supplies	5,600
Total current assets		300,910
Property,plant, and equipment:
Land	40,500
Buildings	137,000
Accumulated depreciation-buildings (21,833+4,367)	-26,200
Property,plant, and equipment-net		151,300
Total assets		452,210
Liabiabilities and stockholder's equity
Current liabilities:
Accounts payable	29,000
Dividends payable-preferred	4,800
Dividends payable-common	9,330
Income tax payable	43,900
Total liabilities		87,030
Stockholder's equity:
Common stock	93,300
Preferred stock	60,000
Paid-in capital i		153,300
Additional paid in capital:
Paid in excess of par-common	15,700
Paid in excess of par-preferred	1,500
Additional paid in capital ii		17,200
Total paid in capital i+ii		170,500
Retained earnings		207,370
Balance		377,870
(less): Treasury stock		-12,690
Total stockholder's equity		365,180
Total liabilities and stockholder's equity		452,210

Calculations:

T-accounts:

Cash
Beg.	25,000	Accounts payable	31,000
Preferred stock	61,500	Treasury stock (470 x $27)	12,690
Common stock	24,000	Operating expenses	187,000
Unearned revenue	35,000
Accounts receivable	284,000
End.	198,810
Accounts receivable
Beg.	46,000	Cash	284,000
Sales revenue	340,000	Allowance for doubtful accounts	1,800
End.	100,200
Allowance for doubtful accounts
Accounts receivable (Written - off)	1,800	Beg.	1,900
		Bad debt expense (Balance figure)	3,600
		End.	3,700
Accounts payable
Cash	31,000	Beg.	25,500
		Supplies	34,500
		End.	29,000
Supplies
Beg.	4,800	Supplies expense (Balance figure)	33,700
Accounts payable	34,500
End.	5,600

Income statement:

Income statement
Sales revenue (340,000+35,000)		375,000
Less: Expenses
Depreciation expenses (137,000-6,000)/30	4,367
Bad debt expense	3,600
Supplies expense	33,700
Other Operating expenses	187,000
Total Expenses		228,667
Income before income tax		146,333
Income tax expense (149,333 x 30%)		43,900
Net income		102,433

Statement of retained earnings:

Statement of retained earnings
Retained earnings, Beginning		119,067
Net income		102,433
Balance		221,500
Dividends
Preferred (1,500x$40)x8%	4,800
Common (9,330 x $1)	9,330	-14,130
Retained earnings, Ending		207,370

Trial Balance:

Account title	Debit	Credit
Cash	198,810
Accounts receivable	100,200
Allowance for doubtful accoutns		3,700
Supplies	5,600
Land	40,500
Buildings	137,000
Accumulated depreciation-buildings (21,833+4,367)		26,200
Accounts payable		29,000
Dividends payable-preferred		4,800
Dividends payable-common		9,330
Income tax payable		43,900
Common stock (85,000+ (830 x $10))		93,300
Preferred stock (1,500 x $40)		60,000
Paid in excess of par-common (24,000-(830x$10))		15,700
Paid in excess of par-preferred		1,500
Retained earnings		207,370
Treasury stock	12,690
Total	494,800	494,800