Question

The following incomplete balance sheet for the Sanderson Manufacturing Company was prepared by the company’s controller. As accounting manager for Sanderson, you are attempting to reconstruct and revise the balance sheet.

SANDERSON MANUFACTURING COMPANY
Balance Sheet
At December 31, 2021
($ in 000s)
Assets
Current assets:
Cash			$	2,450
Accounts receivable				5,900
Allowance for uncollectible accounts				(1,600	)
Finished goods inventory				7,200
Prepaid expenses				2,400
Total current assets				16,350
Long-term assets:
Investments				4,200
Raw materials and work in process inventory				3,450
Equipment				24,000
Accumulated depreciation				(5,400	)
Patent (net)				?
Total assets			$	?
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable			$	6,400
Notes payable				6,400
Interest payable (on notes)				1,300
Deferred revenue				5,400
Total current liabilities				19,500
Long-term liabilities:
Bonds payable				6,700
Interest payable (on bonds)				200
Shareholders’ equity:
Common stock	$	?
Retained earnings		?		?
Total liabilities and shareholders’ equity				?

Additional information ($ in 000s):

1. Certain records that included the account balances for the patent and shareholders’ equity items were lost. However, the controller told you that a complete, preliminary balance sheet prepared before the records were lost showed a debt to equity ratio of 1.1. That is, total liabilities are 110% of total shareholders’ equity. Retained earnings at the beginning of the year was $6,400. Net income for 2021 was $2,150 and $450 in cash dividends were declared and paid to shareholders.
2. Management intends to sell the investments in the next six months.
3. Interest on both the notes and the bonds is payable annually.
4. The notes payable are due in annual installments of $1,600 each.
5. Deferred revenue will be recognized as revenue equally over the next two fiscal years.
6. The common stock represents 600,000 shares of no par stock authorized, 370,000 shares issued and outstanding.

Required:
Prepare a complete, corrected, classified balance sheet. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

Answer-:

SANDERSON MANUFACTURING COMPANY
Balance Sheet
At December 31,2021
( $ in 000s)
Assets
Current assets :
Cash	2450
Accounts receivable	5900
Allowance for uncollectible accounts	(1600)
Finished goods inventory	7200
Raw material and work in process inventory	3450
Prepaid expenses	2400
Total current assets	19800
Long terms assets :
Equipment	24000
Investments	4200
Accumulated depreciation	(5400)
Patents (net) (wn3)	7800
Total long terms assets	30600
Total assets	50400
Liability and shareholders' equity
Current liabilities :
Accounts payable	6400
Notes payable	6400
Interest payable (on notes)	1300
Interest payable (on bonds)	200
Deferred revenue	5400
Total current liabilities	19700
Long term liabilities :
Bonds payable	6700
Total long term liabilities	6700
Total liabilities	26400
Shareholders' equity
Authorized Share Capital
600,000 shares of no par stock
Issued Share Capital
Common stock ( 370,000 shares issued and outstanding) (wn2)	15900
Retained earnings (wn1)	8100
Total shareholders' equity	24000
Total liabilities and shareholders' equity	50400

Note-:

(i) Raw materials and work in process inventory shall be classified under
current assets.
(ii) Investments which are to sold within a period of one year or less shall be
classified as current assets.Long term investments are such investments
which a company intends to hold for more than one year.

Thankyou.......