Question

As controller for Henderson, you are attempting to reconstruct and revise the following balance sheet prepared by a staff accountant.

Henderson Manufacturing Company Balance Sheet At December 31, 2021 ($ in 000s)
Assets
Current assets:
Cash			$	1,250
Accounts receivable				3,750
Allowance for uncollectible accounts				(600	)
Finished goods inventory				7,000
Prepaid expenses				3,400
Total current assets				14,800
Long-term assets:
Investments				3,000
Raw materials and work in process inventory				3,900
Equipment				19,500
Accumulated depreciation—equipment				(9,000	)
Franchise				?
Total assets			$	?
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable			$	7,200
Notes payable				8,000
Interest payable—note				400
Deferred revenue				2,400
Total current liabilities				18,000
Long-term liabilities:
Bonds payable				7,000
Interest payable—bonds				200
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 franchise and shareholders’ equity items were lost. However, a complete, preliminary balance sheet prepared before the records were lost showed a debt to equity ratio of 1.5. That is, total liabilities are 150% of total shareholders’ equity. Retained earnings at the beginning of the year was $3,200. Net income for 2021 was $2,300, and $1,000 in cash dividends were declared and paid to shareholders.
2. The investments represent treasury bills purchased in December 2021 that mature in January 2022. These are considered cash equivalents.
3. Interest on both the notes and the bonds is payable annually.
4. The notes payable account contains one note that is due in annual installments of $800 for each payment due.
5. Deferred revenue will be recognized equally over the next 18 months.
6. The common stock represents 500,000 shares of no par stock authorized, of which 300,000 shares are issued and outstanding.

Answer 1

Henderson :
Retained Earning Statement for the year	Amt $
Beginning balance	3,200
Add , Net Income for 2021	2,300
Less Cash Dividend Paid	(1,000)
Ending Balance Retained Earning	4,500
Liabilities , Equity & Assets Reconstructed as on Dec 31,2021
Current Liabilities
Accounts Payable	7,200
Interest Payable Notes	400
Interest Payable Bonds	200
Notes Payable -Current Portion	800
Deferred Revenue -Current Portion	1,600
Total Current Liabilities	10,200
Long Term Liabilities
Notes Payable -Non Current Portion	7,200
Deferred Revenue -Non Current Portion	800
Bonds Payable	7,000
Total Long term Liabilities	15,000
Total Liabilities	25,200
As Debt/Equity=1.5/1.,
Total Equity =25200/1.5=	16,800
Retained Earning	4,500
Common Stock (no par , 500,000 authorized, 300,000 issued )=	12,300	Balance amount
Total Stockholders' Equity	16,800
Total Liabilities & Equity =	37,500
Total Assets =	37,500
Current Assets
Cash	1,250
Cash Equivalents-Marketable securities	3,000
Accounts Receivable	3,750
Allowance for uncollectible accounts	(600)
Finished Goods Inventory	7,000
Raw Materials & WIP Inventory	3,900
Prepaid expenses	3,400
Total Current Assets	21,700
Fixed Assets
Equipment	19,500
Accumulated depreciation -Equipment	(9,000)
Net Fixed Assets	10,500
Intangible Asset
Franchise	5,300	Balancing Amount
Total Assets	37,500