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Balance Sheet Adjustment and Preparation) Presented below is the balance sheet of Sargent Corporation for the...

Balance Sheet Adjustment and Preparation) Presented below is the balance sheet of Sargent Corporation for the current year, 2020.

Sargent Corporation

Balance Sheet

December 31, 2020

Current assets

485,000  $

Current liabilities

380,000  $

Investments

640,000

Long-term liabilities

1,000,000

Property, plant, and equipment

1,720,000

Stockholders' equity

1,770,000 

Intangible assets

305,000   

$3,150,000

$3,150,000

The following information is presented.

  • 1.The current assets section includes cash $150,000, accounts receivable $170,000 less $10,000 for allowance for doubtful accounts, inventories $180,000, and unearned rent revenue $5,000. Inventory is stated on the lower-of-FIFO-cost-or-net realizable value.
  • 2.The investments section includes the cash surrender value of a life insurance contract $40,000; investments in common stock, short-term $80,000 and long-term $270,000; and bond sinking fund $250,000. The cost and fair value of investments in common stock are the same.
  • 3.Property, plant, and equipment includes buildings $1,040,000 less accumulated depreciation $360,000, equipment $450,000 less accumulated depreciation $180,000, land $500,000, and land held for future use $270,000.
  • 4.Intangible assets include a franchise $165,000, goodwill $100,000, and discount on bonds payable $40,000.
  • 5.Current liabilities include accounts payable $140,000, notes payable—short-term $80,000 and long-term $120,000, and income taxes payable $40,000.
  • 6.Long-term liabilities are composed solely of 7% bonds payable due 2028.
  • 7.Stockholders' equity has preferred stock, no par value, authorized 200,000 shares, issued 70,000 shares for $450,000; and common stock, $1.00 par value, authorized 400,000 shares, issued 100,000 shares at an average price of $10. In addition, the corporation has retained earnings of $320,000.

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Expert Solution

Statement of Financial Position as on 31-12-2020
Asset Dr Liability Cr
Current Asset Current Liability
Cash     1,50,000 Notes Payable Short term                 80,000
Accounts receivable     1,70,000 Accounts Payable             1,40,000
Less:Allowance for doubtful debts        10,000 Income Tax Payable                 40,000
    1,60,000 Unearned Revenue                   5,000
Inventory     1,80,000
Short term Investment        80,000        2,65,000
Other Current Assets        40,000 Loan
       6,10,000 7% Bonds Payable           10,00,000
Less:Discount on Bonds Payable                 40,000
Investment             9,60,000
Bond Sinking Fund     2,50,000 Notes Payable Long term             1,20,000      10,80,000
Long Term Investment     2,70,000
       5,20,000
Total Liability      13,45,000
Fixed Asset
Land     5,00,000
Land Held for future use     2,70,000 Equity
Building 10,40,000 Common Stock           10,00,000
Less:Accumulated Depreciation     3,60,000 (100,000 shares @ $10)
    6,80,000 Preferred Stock             4,50,000
(70,000 shares issued)
Equipment     4,50,000 Retained Earning             3,20,000
Less:Accumulated Depreciation     1,80,000
    2,70,000      17,70,000
     17,20,000
Intangible Asset
Franchise     1,65,000
Goodwill     1,00,000
       2,65,000
Total Asset      31,15,000 Total Equity and Liability      31,15,000

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