Question

The following is the ending balances of accounts at December 31, 2018 for the Valley Pump Corporation. Account Title Debits Credits Cash 42,000 Accounts receivable 90,000 Inventories 115,000 Interest payable 27,000 Marketable securities 78,000 Land 154,000 Buildings 385,000 Accumulated depreciation—buildings 117,000 Equipment 109,000 Accumulated depreciation—equipment 42,000 Copyright (net of amortization) 29,000 Prepaid expenses (next 12 months) 49,000 Accounts payable 82,000 Deferred revenues (next 12 months) 37,000 Notes payable 335,000 Allowance for uncollectible accounts 7,000 Common stock 370,000 Retained earnings 34,000 Totals 1,051,000 1,051,000 Additional information: The $154,000 balance in the land account consists of $117,000 for the cost of land where the plant and office buildings are located. The remaining $37,000 represents the cost of land being held for speculation. The $78,000 in the marketable securities account represents an investment in the common stock of another corporation. Valley intends to sell one-half of the stock within the next year. The notes payable account consists of a $134,000 note due in six months and a $201,000 note due in three annual installments of $67,000 each, with the first payment due in August of 2019.

Answer 1

Valley Pump Corporation

Classified Balance Sheet –

Classified Balance Sheet of Valley Pump Corporation as at December 31, 2018

Assets

Current Assets:

Cash

$42,000

Marketable Securities

$39,000

Accounts Receivable, net of allowance for uncollectible accounts of $7,000

$83,000

Inventories

$115,000

Prepaid Expenses

$49,000

Total Current Assets

$328,000

Investments:

Marketable Securities

$39,000

Land

$37,000

Total Investments

$76,000

Property, Plant and Equipment:

Land

$117,000

Building

$385,000

Equipment

$109,000

Less: Accumulated Depreciation

($159,000)

Net Property, Plant and Equipment

$452,000

Intangible Assets:

Copyright

$29,000

Total Assets

$885,000

Liabilities and Shareholders' Equity

Current Liabilities:

Accounts Payable

$82,000

Interest Payable

$27,000

Unearned Revenues

$37,000

Note Payable

$134,000

Current maturities of long-term debt

$67,000

Total Current Liabilities

$347,000

Long-term Liabilities:

Note Payable

$134,000

Shareholders' Equity

Common Stock

$370,000

Retained Earnings

$34,000

Total Shareholders' Equity

$404,000

Total Liabilities and Shareholders' Equity

$885,000

Notes:

1. Accounts receivable net of uncollectibles = $90,000 - $7,000 = $83,000

2. Half of the marketable securities is expected to be sold in a year’s time, so $78,000 x ½ = $39,000 is a current asset.

3. Of the total Land, $37,000 is held for speculation, hence the same is shown under Investments.

4. The $134,000 of the notes payable amount is due in next six months, hence the same is shown under current liabilities.

5. The first installment of three payments $67,000 of long-term notes payable would mature in August 2019, hence the same is shown as Current Maturities of long-term debt. The balance two installment amounts of 67,000 x 2 = 134,000 is shown as Notes Payable.