PROBLEM 5 5 SARGENT CORPORATION Balance Sheet Assets Current

Problem 5 5 sargent corporation balance sheet assets

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PROBLEM 5-5
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SARGENT CORPORATION Balance Sheet December 31, 2014 Assets Current assets Cash .............................................................................. $150,000 Equity investments (Trading) .................................... 80,000 Accounts receivable ..................................................... $ 170,000 Less: Allowance for doubtful accounts ............................................... 10,000 160,000 Inventory (lower-of-FIFO- cost-or-market) ........................................................ 180,000 Total current assets ............................................... $ 570,000 Long-term investments Equity investments (available-for-sale) (at fair value) ........................... 270,000 Bond sinking fund ....................................................... 250,000 Cash surrender value of life insurance ................................................................... 40,000 Land held for future use ............................................. 270,000 830,000 Property, plant, and equipment Land ............................................................................. 500,000 Buildings ...................................................................... 1,040,000 Less: Accum. depreciation— buildings .............................................. 360,000 680,000 Equipment ................................................................... 450,000 Less: Accum. depreciation— equipment ............................................ 180,000 270,000 1,450,000 Intangible assets Franchise ...................................................................... 165,000 Goodwill ....................................................................... 100,000 265,000 Total assets ............................................................. $3,115,000
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PROBLEM 5-5 (Continued) Liabilities and Stockholders’ Equity Current liabilities Accounts payable .......................................................... $ 140,000 Notes payable ................................................................ 80,000 Income taxes payable ................................................... 40,000 Unearned rent revenue ................................................. 5,000 Total current liabilities ............................................ $ 265,000 Long-term liabilities Notes payable ................................................................ 120,000 7% bonds payable, due 2022 ...................................... $1,000,000 Less: Discount on bonds payable ............................... 40,000 960,000 1,080,000 Total liabilities .......................................................... 1,345,000 Stockholders’ equity Capital stock Preferred stock, no par value; 200,000 shares authorized, 70,000 issued and outstanding ................................. 450,000 Common stock, $1 par value; 400,000 shares authorized, 100,000 issued and outstanding ............................... 100,000 Paid-in capital in excess of par— common stock [100,000 X ($10.00 – $1.00)] ..................................................... 900,000 1,450,000 Retained earnings ......................................................... 320,000 Total stockholders’ equity ....................................... 1,770,000 Total liabilities and stockholders’ equity .............................................. $3,115,000
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CA 5-2 1. Unclaimed payroll checks should be shown as a current liability if these are claims by employees. 2. Debt investments (trading) should be reported at fair value, not cost. 3. Bad Debt Reserve is an improper terminology; Allowance for Doubtful Accounts is considered more appropriate. The amount of estimated uncollectibles should be disclosed. 4. Next-in, First-out (NIFO) is not an acceptable inventory valuation method. 5. Heading “Tangible assets” should be changed to “Property, Plant and Equipment”; also label for corresponding $630,000 should be changed to “net property, plant, and equipment.” 6. Land should not be depreciated. 7. Buildings and equipment and their related accumulated depreciation balances should be separately disclosed. 8. The valuation basis for stocks should be disclosed (fair value or equity) and the description should be Equity investment (Available-for-Sale) or Equity investment in X Company. 9. Treasury stock is not an asset and should be shown in the stockholders’ equity section as a deduction. 10. Discount on bonds payable is not an asset and should be shown as a deduction from bonds payable. 11. Sinking fund should be reported in the long-term investments section.
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  • Spring '13
  • Akitson,Rubble,Larson
  • Balance Sheet, ........., Generally Accepted Accounting Principles

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