Question

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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Answer 1

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