37. Berton Company reported assets totaling $870,000 as of December 31, 2016. Th

Question

37.             Berton Company reported assets totaling $870,000 as of December 31, 2016. The following information relates to those assets: 8 points

                       

(a)

Breakstone Labs, a rival company, recently offered to give a $100,000 signing bonus to the head of Berton's fabrication department if she would leave Berton and join Breakstone. She declined. Berton has consequently recorded a long-term asset, "Employees Under Contract," for $100,000.

(b)

Berton purchased a patent from a small research firm for $75,000. Subsequent research has shown that the patented technology doesn't work as well as originally thought and the technology actually has no economic use. Berton reports the patent at its amortized cost of $60,000.

(c)

An independent appraiser recently set Berton's market value at $500,000. This exceeded the book value of equity by $120,000. Accordingly, Berton recorded Goodwill totaling $120,000.

(d)

When Berton started business three years ago, it was required to deposit $5,000 with the local electric utility. The deposit is refundable if Berton cancels its electric service. Berton earns no interest on the deposit. The deposit is recorded as an "Other Long-Term Asset."

After considering the items above, what should be the total of Berton's reported assets?

                  Organize your answer as follows: Put NA if no adjusting entry is required.

                                                                   $870,000

                                                a. + or -

                                                b. + or –

                                                c. + or -

d. + or -

                       Adjusted Total Assets are       $_____________

              

          38.   Provo Water Products had sales during 2016 of $895,000. Provo's gross profit percentage is 55 percent. Purchases of inventory during 2016 totaled $466,250 and a physical count of inventory on hand at the end of the year totaled $189,500. Selling expenses are 18 percent of sales, and general and administrative expenses are equal to 80 percent of selling expenses. Provo's income tax rate is 30 percent and the company has 60,000 shares of common stock outstanding.

Prepare an income statement, including earnings per share data, for the year ended December 31, 2016. 30 points

Provo Water Products

Income Statement

For the Year Ended December 31, 2016

Sales .......................................

Cost of goods sold:

  Beginning inventory .......................

$126,000

  Purchases .................................

466,250

   Goods available for sale .................

     

  Less ending inventory .....................

189,500

   Cost of goods sold .......................

Gross margin 55% of sales....................

Expenses:

  Selling expenses ....18% of sales..........

  General & Admin. expenses 80% of selling expenses

Operating income ............................

Income tax expense 30% of operating income....

Net income ..................................

Earnings per common share

($     /60,000 shares) ..................

(a)

Breakstone Labs, a rival company, recently offered to give a $100,000 signing bonus to the head of Berton's fabrication department if she would leave Berton and join Breakstone. She declined. Berton has consequently recorded a long-term asset, "Employees Under Contract," for $100,000.

(b)

Berton purchased a patent from a small research firm for $75,000. Subsequent research has shown that the patented technology doesn't work as well as originally thought and the technology actually has no economic use. Berton reports the patent at its amortized cost of $60,000.

(c)

An independent appraiser recently set Berton's market value at $500,000. This exceeded the book value of equity by $120,000. Accordingly, Berton recorded Goodwill totaling $120,000.

(d)

When Berton started business three years ago, it was required to deposit $5,000 with the local electric utility. The deposit is refundable if Berton cancels its electric service. Berton earns no interest on the deposit. The deposit is recorded as an "Other Long-Term Asset."

Explanation / Answer

37. Total of Berton's reported assets

38.  

Particulars Reported Assets Beginning $870,000 (a) Employee under contract ($100,000) (b) Obsolete patent ($60,000) ( c ) Unpurchased goodwill ($120,000) (d) No adjustement $0 Adjusted Total Assets $590,000

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