Question

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			$	3,250
Accounts receivable				7,500
Allowance for uncollectible accounts				(2,400	)
Finished goods inventory				8,000
Prepaid expenses				3,200
Total current assets				19,550
Long-term assets:
Investments				5,000
Raw materials and work in process inventory				4,250
Equipment				29,000
Accumulated depreciation				(6,200	)
Patent (net)				?
Total assets			$	?
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable			$	7,200
Notes payable				8,000
Interest payable (on notes)				2,100
Deferred revenue				7,000
Total current liabilities				24,300
Long-term liabilities:
Bonds payable				7,500
Interest payable (on bonds)				1,200
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 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 $8,000. Net income for 2021 was $2,550 and $600 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 $2,000 each.
5. Deferred revenue will be recognized as revenue equally over the next two fiscal years.
6. The common stock represents 700,000 shares of no par stock authorized, 450,000 shares issued and outstanding.
   

Answer 1

Please refer the following image for the solution: