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The following balance sheet for the Hubbard Corporation was prepared by the company: HUBBARD CORPORATION Balance...

The following balance sheet for the Hubbard Corporation was prepared by the company:

HUBBARD CORPORATION
Balance Sheet
At December 31, 2021
Assets
Buildings $ 752,000
Land 256,000
Cash 62,000
Accounts receivable (net) 124,000
Inventory 244,000
Machinery 282,000
Patent (net) 102,000
Investment in equity securities 64,000
Total assets $ 1,886,000
Liabilities and Shareholders' Equity
Accounts payable $ 217,000
Accumulated depreciation 257,000
Notes payable 504,000
Appreciation of inventory 82,000
Common stock (authorized and issued
102,000 shares of no par stock)		 408,000
Retained earnings 418,000
Total liabilities and shareholders' equity $ 1,886,000


Additional information:

  1. The buildings, land, and machinery are all stated at cost except for a parcel of land that the company is holding for future sale. The land originally cost $52,000 but, due to a significant increase in market value, is listed at $124,000. The increase in the land account was credited to retained earnings.
  2. The investment in equity securities account consists of stocks of other corporations and are recorded at cost, $22,000 of which will be sold in the coming year. The remainder will be held indefinitely.
  3. Notes payable are all long term. However, a $120,000 note requires an installment payment of $30,000 due in the coming year.
  4. Inventory is recorded at current resale value. The original cost of the inventory is $162,000.


Required:
Prepare a corrected classified balance sheet for the Hubbard Corporation at December 31, 2021. (Amounts to be deducted should be indicated by a minus sign.)
  

Solutions

Expert Solution

In a classified balance sheet, the assets, liabilities and shareholders' Equity are recorded systematically based on its classification. Assets are classified into Current assets, investments, Property, Plant and equipment and Intangible Assets. Liabilities are classified into Current liabilities and long term liabilities.

● Land costing $52,000 held for future sale is treated as investment.

● Land held as Property = Total value of land in Balance sheet - Market value of Land held for future sale = $256,000 - $124,000 = $132,000

● Retained Earnings = Value in Balance sheet - Increase in market value credited to Retained Earnings = $418,000 - ($124,000 - $52,000) = $346,000

● Investment in equity securities $22,000 which will be sold in coming year is treated as Current assets. Balance $42,000 ($64,000 - $22,000) will be shown as investments.

● The note payable instalment $30,000, which is due in the coming year is recorded as Current maturities of long-term debt under the current liabilities. Balance of note payable $474,000 ($504,000 - $30,000) is recorded as long term liabilities.

● Cost of inventory is recorded at original cost $162,000.

ekkarill92 answered 2 years ago
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