the following incomplete balance sheet is for sanderson man. company was prepare
ID: 2420924 • Letter: T
Question
the following incomplete balance sheet is for sanderson man. company was prepared by the companys controller as accounting manager for sanderson you are attempting to reconstructtruct and revise the balance sheet.
sanderson balance sheet
at dec 31, 2016
($in000s)
assets
currents asssets:
cash 1250
a/r 3,500
allowance for uncollectable accounts (400)
finished goods inventory 6,000
prepaid expenses 1,200
total curent assets 11,550
non current assets:
investments 3,000
raw materials and work in progress inventory 2250
equiment 15,000
accumulated depreciation on equipment (4,200)
patent ?
total assets ?
liabilites and shareholders equity
current liabilites:
A/P 5,200
Note payable 4,000
Intereest payable 100
deffered revenue 3,000
total current liabilites 12,300
Long-term liabilites:
Bonds payable 5,500
Interest payable-bonds 200
shareholders equity:
common stock $?
retained earnings ?- ?
total liabilties and shareholders equity ?
1. certain records that included the account balance for the patent and shareholders equity items were lost however the controller told you that a complete, preliminary balance sheet prepared befoere the records were lost showed a debt to equity ratio 1.2 that is total liabilites are 120% of total shareholders equity retained earnings at the begining of the year was 4,000 net income for 2016 was 1,560 and 560 in cash dividends were deducted and paid to shareholdrers.
2. managment intends to sell the investments in the next 6 months
3. interest on both the note and bonds is payable anually.
4 the note payable is due in annual installments of 1,000 each
5. deffered revenue will be recognized as revenue equally over the next 2 fiscal years.
6. the common stock represents 400,000 shares of no par stock athorized, 250,000 shares issued and oustanding.
Required:
Prepare a complete, corrected, classified balance sheet.
Explanation / Answer
Debt to Equity Ratio = Total Liabilities / Shareholder's Equity = 1:2 Total Liabilities = Total Current Liabilities + Total Long Term Liabilities Total Liabilities = $12300 + $5700 = $18000 Therefore, Debt to Equity Ratio = 1.2 = Total Liabilities /shareholder's equity Shareholder's Equity = Total Liabilities/1.20 Shareholder's Equity = $18000/1.20 = $15000 Retained Earnings Balance at the Begining 4,000 Net Income 1,560 Less: Cash Dividend paid 560 Net Income 1,000 Balance at the End 5,000 Sanderson Man. Company Corrected Balance Sheet at Dec. 31, 2016 Particulars Amount Assets Currents Assets Cash 1,250 Accounts Receivables 3,500 Allowance for Uncollectible Accounts (400) 3,100 Finished Goods Inventory 6,000 Prepaid Expenses 1,200 Investments 3,000 Raw Materials & WIP inventory 2,250 Total Current Assets 16,800 Tangible Assets Equipment 15,000 Less: Accumulated Dep. (4,200) 10,800 Total Tangible Assets 10,800 Intangible Assets Patents (Balancing Figure) 5,400 Total Intangible Assets 5,400 Total Assets 33,000 Liabilities and Shareholder's Equity Current Liabilities A/P 5200 Note Payable 4000 Interest payable 100 Deferred Revenue 1500 Interest payable - bonds 200 Total Current Liabilities 11,000 Long Term liabilities Bonds Payable 5500 Deferred Revenue 1,500 Total Long Term liabilities 7,000 Total Liabilities 18,000 Shareholder Equity Autorised Share Capital 16,000 (400000 Shares @40 per share ) Issued Share Capital 10,000 (250000 shares @ $40 per Share) Retained Earnings 5,000 (As per Schedule) Total Shareholder Equity 15,000 Total Liabilities & Shareholder's Equity 33,000
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