Question

(Preparation of Corrected Statement of Financial Position) Bruno Corp. has decided to expand its operations. The bookkeeper recently completed the following statement of financial position in order to obtain additional funds for expansion:

Bruno Corp. Statement of Financial Position For the Year Ended December 31, 2020
Current assets
Cash (net of bank overdraft of $30,000)	$260,000
Accounts receivable (net)	340,000
Inventory at the lower of cost and net realizable value	401,000
FV-NI investments (at cost—fair value $120,000)	140,000
Property, plant, and equipment
Buildings (net)	570,000
Equipment (net)	160,000
Land held for future use	175,000
Intangible assets
Goodwill	$ 80,000
Investment in bonds to collect cash flows, at amortized cost	90,000
Prepaid expenses	12,000
Current liabilities
Accounts payable	195,000
Notes payable (due next year)	125,000
Pension obligation	82,000
Rent payable	49,000
Long-term liabilities
Bonds payable	553,000
Shareholders' equity
Common shares, unlimited authorized, 290,000 issued	290,000
Contributed surplus	180,000
Retained earnings	?

Instructions

a. Prepare a revised statement of financial position using the available information. Assume that the bank overdraft relates to a bank account held at a different bank from the account with the cash balance. Assume that the accumulated depreciation balance for the buildings is $160,000 and that the accumulated depreciation balance for the equipment is $105,000. The allowance for doubtful accounts has a balance of $17,000. The pension obligation is considered a long-term liability.

HOW TO CALCULATE RETAINED EARNINGS?

Answer 1

SOLUTION:

Bruno Corp.

RevisedStatement of Financial Position
For the Year Ended December 31, 2020

Assets	Amount ($)	Liabilities	Amount ($)
Current Assets		Current Liabilities
Cash (260000+30000)	290000	Accounts Payable	195000
Accounts Receivable (357000-17000)	340000	Bank Overdraft	30000
Inventory	401000	Notes Payable	125000
FV-NI Investments (Fair Value)	120000	Rent Payable	49000
Prepaid Expenses	12000
Total of Current Assets (A)	1163000	Total of Current Liabilities (A)	399000
Long Term Investments		Long Term Liabilities
Land	175000	Bonds Payable	553000
Investments	90000	Pension Obligation	82000
Total of Long Term Investments (B)	265000	Total of Long Term Liabilities (B)	635000
Long Term Assets		Shareholder's Funds
Building (730000-160000)	570000	Common Stock	290000
Equipment (265000-105000)	160000	Contributed surplus	180000
Total of Long Term Assets ( C )	730000	Retainded Earnings (Balancing Figure)	734000
		Total of Shareholder's Funds ( C )	1204000
Intangible Assets
Goodwill (D)	80000
Total (A+B+C+D)	2238000	Total (A+B+C)	2238000

Retainded Earnings = Total Asset -Current liabilities - Long term liabilities - common stock - Contributed Earnings

= 2238000 - 399000 - 635000 - 290000 - 180000

= $ 734000