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, 2018 ($ 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—equipment (6,200 ) Patent ? Total assets $ ? Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 7,200 Note payable 8,000 Interest payable—note 2,100 Deferred revenue 7,000 Total current liabilities 24,300 Long-term liabilities: Bonds payable 7,500 Interest payable—bonds 1,200 Shareholders’ equity: Common stock $ ? Retained earnings ? ? Total liabilities and shareholders’ equity ? Additional information ($ in 000s): 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 2018 was $2,550 and $600 in cash dividends were declared and paid to shareholders. Management intends to sell the investments in the next six months. Interest on both the note and the bonds is payable annually. The note payable is due in annual installments of $2,000 each. Deferred revenue will be recognized as revenue equally over the next two fiscal years. The common stock represents 700,000 shares of no par stock authorized, 450,000 shares issued and outstanding.

Answer 1

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Working-1	Equity
	Total Current Liabilities	24300
	add: Bonds Payable	7500
	add: Interest Payable	1200
	Total Liabilities	33000
	Debt to Equity Ratio	1.2
	Debt/Equity=	1.2
	33000/Equity=	1.2
	Equity=	33000/1.2
	Equity=	27500
Working-2	Ending Retained Earning
	Beginning	8000
	add: Net Income	2550
	Less: Dividend	-600
	Ending Retained Earning	9950
Working-3	Common Stock
	Total Equity-Retained Earning
	27500-9950	17550
Working-4	Total Liabilities and Shareholder Equity
	33000+27500	60500
	And hence , total assets also	60500
Working-5	Balancing figure on asset side is patent

Current Assets:
Cash		3250
Accounts receivable, net		5100
Finished Goods Inventory		8000
Prepaid Expense		3200
Investment		5000
Raw Material and WIP inventory		4250
Total Current Assets			28800
Non Current Assets:
Fixed Assets:
Equipment	29000
Less:Accumulated Depreciation	-6200	22800
Patent (Balancing Figure)		8900
Total Non Current Assets			31700
Total Assets			60500
Liabilities
Curernt Liabilities
Accounts Payable		7200
Note Payable		8000
Interest Payable-Note		2100
Interest Payable-Bond		1200
Deferred Revenue		7000
Total Current Liabilities			25500
Non Curernt Liabilities
Bonds Payable		7500
Deferred Revenue
Note Payable
Total Non Current Liabilities			7500
Shareholder Equity
Common Stock		17550
Retained Earning		9950
Total Shareholder Equity			27500
Total Liabilities and Shareholder equity			60500