Question

In: Accounting

(TCO D) The following balance sheet was prepared by the bookkeeper for Stripes Company as of...

(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).

Solutions

Expert Solution

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


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