Question

Problem 3-8 (Algo) Balance sheet; errors; missing amounts [LO3-2, 3-3]

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			$	1,550
Accounts receivable				4,100
Allowance for uncollectible accounts				(700	)
Finished goods inventory				6,300
Prepaid expenses				1,500
Total current assets				12,750
Long-term assets:
Investments				3,300
Raw materials and work in process inventory				2,550
Equipment				18,000
Accumulated depreciation				(4,500	)
Patent (net)				?
Total assets			$	?
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable			$	5,500
Notes payable				4,600
Interest payable (on notes)				400
Deferred revenue				3,600
Total current liabilities				14,100
Long-term liabilities:
Bonds payable				5,800
Interest payable (on bonds)				500
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 1.2. That is, total liabilities are 120% of total shareholders’ equity. Retained earnings at the beginning of the year was $4,600. Net income for 2021 was $1,600 and $800 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 $1,150 each.
5. Deferred revenue will be recognized as revenue equally over the next two fiscal years.
6. The common stock represents 300,000 shares of no par stock authorized, 280,000 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