In: Accounting
(TCO D) The following balance sheet was prepared by the bookkeeper for Stripes Company as of December 31, 201X Stripes Company Balance Sheet as of December 31, 201X is as follows.
Cash |
$ 80,000 |
Accounts payable |
$ 75,000 |
Accounts receivable (net) |
52,200 |
Long-term liabilities |
100,000 |
Inventories |
57,000 |
Stockholders' equity |
218,500 |
Investments |
76,300 |
||
Equipment (net) |
96,000 |
||
Patents |
|||
$393,500 |
$393,500 |
The following additional information is provided.
(1) Cash includes the cash surrender value of a life insurance
policy $12,000 and a bank overdraft of $2,500 has been
deducted.
(2) The net accounts receivable balance includes
(a) accounts receivable debit balances $58,000;
(b) accounts receivable $2,000; and
(c) allowance for doubtful accounts $3,800.
(3) Inventories do not include goods costing $3,000 shipped out on
consignment. Receivables of $3,000 were recorded on these
goods.
(4) Investments include investments in common stock, trading
$13,000, available-for-sale $48,300, and franchises $15,000.
(5) Equipment costing $5,000 with accumulated depreciation $4,000
is no longer used and is held for sale. Accumulated depreciation on
the other equipment is $40,000.
Instructions:
Prepare a balance sheet in good form (stockholders' equity details
can be omitted).
Solution:
As the given balance sheet is not matching and amount of Patents is missing, so first it will be calculated:
= Total of assets – Cash-Accounts receivable (net) - Inventories-Investments-Equipment (net)
= $ 393,500 - 80,000- 52,200-57,000-76,300-96,000
= $ 32,000
STRIPES COMPANY |
|||
BALANCE SHEET |
|||
AS OF DECEMBER 31, 201X |
|||
ASSETS |
AMOUNT ($) |
LIABILITIES & STOCKHOLDERS’ EQUITY |
AMOUNT ($) |
Current Assets |
Current liabilities |
||
Cash (WN 1) |
70,500 |
Accounts payable (WN 6) |
77,000 |
Trading securities |
13,000 |
Bank overdraft |
2,500 |
Accounts receivable (WN 2)$ 55,000 Less: Allowance for doubtful accounts : $ 3,800 |
51,200 |
||
Inventories (WN 3) |
60,000 |
||
Equipment held for sale (WN 4) |
1,000 |
||
Total Current Assets |
195,700 |
Total current liabilities |
79,500 |
Investments |
Long-term liabilities |
100,000 |
|
Available-for-sale securities |
48,300 |
||
Cash surrender value (life insurance policy) |
12,000 |
||
Total Investments |
60,300 |
Total Liabilities |
179,500 |
Property, plant, and equipment |
Stockholders’ equity |
218,500 |
|
Equipment (WN 5) : $ 135,000 |
|||
Less: Accumulated depreciation : $ 40,000 |
95,000 |
||
Intangible assets |
|||
Patents |
32,000 |
||
Franchises |
15,000 |
||
Total intangible assets |
47,000 |
||
TOTAL ASSETS |
398,000 |
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY |
398,000 |
Working notes (WN):
1. Cash correct amount
= Given cash balance - Cash surrender value of a life insurance policy + Bank overdraft deducted
= $ 80,000 - $12,000 + $2,500
=$ 70,500
2. Accounts receivable correct amount
=Accounts receivable debit balances - Receivables of goods shipped out on consignment wrongly included
=$58,000 - $3,000
= $ 55,000
3. Inventories correct amount
= Given inventories balance - Goods shipped out on consignment wrongly included in Receivables
= $ 57,000 + $ 3,000
= $ 60,000
4. Equipment held for sale
= Cost - Accumulated depreciation
= $ 5,000 - $ 4,000
= $ 1,000
It can alternatively be shown as another asset.
5. Equipment correct amount
= Given equipment balance (net) + Accumulated depreciation – Cost of equipment no longer used and held for sale + Accumulated depreciation of equipment no longer used and held for sale)
= $ 96,000 + $ 40,000 – $ 5,000 + $ 4,000
= $ 135,000
6. Accounts payable
= Given accounts payable balance + Accounts receivable—credit balances
= $ 75,000 + $ 2,000
= $ 77,000