Bruno Company has decided to expand its operations…

Question:

Bruno Company has decided to expand its operations. The bookkeeper recently completed the balance sheet presented below in order to obtain additional funds for expansion
BRUNO COMPANY

Statement of Financial Position
December 31, 2010

Current assets
Cash $260,000
Accounts receivable (net) 340,000
Inventories at lower-of-average-cost-or-net realizable value 401,000
Trading securities-at cost (fair value $120,000) 140,000
Property, plant, and equipment
Building (net) 570,000
Office equipment (net) 160,000
Land held for future use 175,000
Intangible assets
Goodwill 80,000
Other identifiable assets 90,000
Prepaid expenses 12,000
Current liabilities
Accounts payable 135,000
Notes payable (due next year) 125,000
Pension obligation 82,000
Rent payable 49,000
Premium on bonds payable 53,000
Non-current liabilities
Bonds payable 500,000
Equity
Share capital-ordinary, $1.00 par, authorized
400,000 shares, issued 290,000 290,000
Share premium-ordinary 180,000
Retained earnings ?

Prepare a revised statement of the financial position given the available information. Assume that the accumulated depreciation balance for the buildings is $160,000 and for the office equipment, $105,000. The allowance for doubtful accounts has a balance of $17,000. The pension obligation is considered a non-current liability. (List current assets in reverse order of liquidity. List multiple entries for Property, plant, and equipment, Intangible assets Non-current liabilities and Current liabilities from largest to smallest amounts, e.g. 10, 5, 3. Enter all amounts as positive amounts and subtract where necessary.)

Answer:

E5-12 (Preparation of a Balance Sheet) Presented below is the trial balance of John Nalezny Corporation at December 31, 2007. Debits Credits Cash $ 197,000 Sales $ 8,100,000 Trading Securities (at cost, $145,000) 153,000 Cost of Goods Sold 4,800,000 Long-term Investments in Bonds 299,000 Long-term Investments in Stocks 277,000 Short-term Notes Payable 90,000 Accounts Payable 455,000 Selling Expenses 2,000,000 Investment Revenue 63,000 Land 260,000 Buildings 1,040,000 Dividends Payable 136,000 Accrued Liabilities 96,000 Accounts Receivable 435,000 Accumulated Depreciation—Buildings 152,000 Allowance for Doubtful Accounts 25,000 Administrative Expenses 900,000 Interest Expense 211,000 Inventories 597,000 Extraordinary Gain 80,000 Long-term Notes Payable 900,000 Equipment 600,000 Bonds Payable 1,000,000 Accumulated Depreciation—Equipment 60,000 Franchise 160,000 Common Stock ($5 par) 1,000,000 Treasury Stock 191,000 Patent 195,000 Retained Earnings 78,000 Additional Paid-in Capital 80,000 Totals $12,315,000 $12,315,000 Instructions Prepare a balance sheet at December 31, 2007, for John Nalezny Corporation. Ignore income taxes.

John Nalezny Corporation
Balance Sheet
December 31, 2007
Assets
Current assets
Cash $197,000
Trading securities 153,000
Accounts receivable $435,000
Less: Allowance for doubtful
accounts
(25,000)
410,000
Inventories 597,000
Total current assets 1,357,000

Long-term investments
Investments in bonds 299,000
Investments in stocks 277,000
Total long-term investments 576,000

Property, plant, and equipment
Land 260,000
Buildings 1,040,000
Less: Accum. depreciation (152,000) 888,000
Equipment 600,000
Less: Accum. depreciation (60,000) 540,000
Total property, plant, and
equipment
1,688,000

Intangible assets
Franchise 160,000
Patent 195,000
Total intangible assets 355,000
Total assets $3,976,000

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable $ 455,000
Short-term notes payable 90,000
Dividends payable 136,000
Accrued liabilities 96,000
Total current liabilities $ 777,000

Long-term debt
Long-term notes payable 900,000
Bonds payable 1,000,000
Total long-term liabilities 1,900,000
Total liabilities 2,677,000

Stockholder’s equity
Paid-in capital
Common stock ($5 par) $1,000,000
Additional paid-in capital 80,000 1,080,000
Retained earnings* 410,000
Total paid-in capital and
retained earnings

1,490,000
Less: Treasury stock (191,000)
Total stockholders’ equity 1,299,000
Total liabilities and
stockholders’ equity

$3,976,000

*Computation of Retained Earnings:
Sales $8,100,000
Investment revenue 63,000
Extraordinary gain 80,000
Cost of goods sold (4,800,000)
Selling expenses (2,000,000)
Administrative expenses (900,000)
Interest expense (211,000)
Net income $ 332,000

Beginning retained earnings $ 78,000
Net income 332,000
Ending retained earnings $410,000

E5-5 (Preparation of a Corrected Balance Sheet) Uhura Company has decided to expand its operations. The bookkeeper recently completed the balance sheet presented below in order to obtain additional funds for expansion. UHURA COMPANY BALANCE SHEET FOR THE YEAR ENDED 2007 Current assets Cash $230,000 Accounts receivable (net) 340,000 Inventories at lower of average cost or market 401,000 Trading securities—at cost (fair value $120,000) 140,000 Property, plant, and equipment Building (net) 5 70,000 Office equipment (net) 160,000 Land held for future use 175,000 Intangible assets Goodwill 80,000 Cash surrender value of life insurance 90,000 Prepaid expenses 12,000 Current liabilities Accounts payable 135,000 Notes payable (due next year) 125,000 Pension obligation 82,000 Rent payable 49,000 Premium on bonds payable 53,000 Long-term liabilities Bonds payable 500,000 Stockholders’ equity Common stock, $1.00 par, authorized 400,000 shares, issued 290,000 290,000 Additional paid-in capital 160,000 Retained earnings ? Instructions Prepare a revised balance sheet given the available information. Assume that the accumulated depreciation balance for the buildings is $160,000 and for the office equipment, $105,000. The allowance for doubtful accounts has a balance of $17,000. The pension obligation is considered a long-term liability.

Uhura Company
Balance Sheet
December 31, 2007
Assets
Current assets
Cash $230,000
Trading securities—at fair value 120,000
Accounts receivable $357,000
Less: Allowance for doubtful
accounts
17,000
340,000

Inventories, at lower of average
cost or market
401,000

Prepaid expenses 12,000
Total current assets $1,103,000

Long-term investments
Land held for future use 175,000
Cash surrender value of life
insurance
90,000
265,000

Property, plant, and equipment
Building $730,000
Less: Accum. depr.—building 160,000 570,000
Office equipment 265,000
Less: Accum. depr.—office
equipment
105,000
160,000
730,000

Intangible assets
Goodwill 80,000
Total assets $2,178,000

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable $ 135,000
Notes payable (due next year) 125,000
Rent payable 49,000
Total current liabilities $309,000

Long-term liabilities
Bonds payable $500,000
Add: Premium on bonds payable 53,000 $553,000
Pension obligation 82,000 635,000
Total liabilities 944,000

Stockholders’ equity
Common stock, $1 par, authorized
400,000 shares, issued 290,000
shares

290,000
Additional paid-in capital 160,000 450,000
Retained earnings 784,000*
Total stockholders’ equity 1,234,000
Total liabilities and stock-
holders’ equity
$2,178,000

*$2,178,000 – $944,000 – $450,000

P5–3 (Balance Sheet Adjustment and Preparation) The adjusted trial balance of Side Kicks Company and other related information for the year 2007 are presented on the next page SIDE KICKS COMPANY ADJUSTED TRIAL BALANCE DECEMBER 31, 2007 Debits Credits Cash $ 41,000 Accounts Receivable 1 63,500 Allowance for Doubtful Accounts $ 8,700 Prepaid Insurance 5,900 Inventory 308,500 Long-term Investments 339,000 Land 85,000 Construction Work in Progress 124,000 Patents 36,000 Equipment 400,000 Accumulated Depreciation of Equipment 140,000 Unamortized Discount on Bonds Payable 20,000 Accounts Payable 148,000 Accrued Expenses 49,200 Notes Payable 94,000 Bonds Payable 400,000 Common Stock 500,000 Premium on Common Stock 45,000 Retained Earnings 138,000 $1,522,900 $1,522,900 Additional information: 1. The LIFO method of inventory value is used. 2. The cost and fair value of the long-term investments that consist of stocks and bonds are the same. 3. The amount of the Construction Work in Progress account represents the costs expended to date on a building in the process of construction. (The company rents factory space at the present time.) The land on which the building is being constructed costs $85,000, as shown in the trial balance. 4. The patents were purchased by the company at a cost of $40,000 and are being amortized on a straight-line basis. 5. Of the unamortized discount on bonds payable, $2,000 will be amortized in 2008. 6. The notes payable represent bank loans that are secured by long-term investments carried at $120,000. These bank loans are due in 2008. 7. The bonds payable bear interest at 8% payable every December 31, and are due January 1, 2018. 8. 600,000 shares of common stock of a par value of $1 were authorized, of which 500,000 shares were issued and outstanding. Instructions Prepare a balance sheet as of December 31, 2007, so that all-important information is fully disclosed

Side Kicks Company
Balance Sheet
December 31, 2007
Assets
Current assets
Cash $ 41,000
Accounts receivable $163,500
Less: Allowance for doubtful
accounts
8,700
154,800
Inventory—at LIFO cost 308,500
Prepaid insurance 5,900
Total current assets $ 510,200

Long-term investments
Investments in stocks and bonds,
of which investments of $120,000
have been pledged as security for
notes payable—at fair value

339,000

Property, plant, and equipment
Cost of uncompleted plant facilities
Land 85,000
Building in process of
construction
124,000
209,000
Equipment 400,000
Less: Accum. depreciation 140,000 260,000 469,000

Intangible assets
Patents—at cost less amortization 36,000
Total assets $1,354,200
Liabilities and Stockholders’ Equity
Current liabilities
Notes payable, secured by
investments of $120,000
$ 94,000
Accounts payable 148,000
Accrued expenses 49,200
Total current liabilities $ 291,200

Long-term liabilities
8% bonds payable, due
January 1, 2018
400,000
Less: Unamortized discount on
bonds payable
20,000
380,000
Total liabilities 671,200

Stockholders’ equity
Common stock
Authorized 600,000 shares of $1
par value; issued and
outstanding, 500,000 shares

$500,000
Premium on common stock 45,000 545,000
Retained earnings 138,000 683,000
Total liabilities and
stockholders’ equity
$1,354,200