The following incomplete balance sheet for the Sanderson Manufacturing Company w

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.

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 1.3. That is, total liabilities are 130% of total shareholders’ equity. Retained earnings at the beginning of the year was $6,200. Net income for 2018 was $2,100 and $500 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 $1,550 each.

Deferred revenue will be recognized as revenue equally over the next two fiscal years.

The common stock represents 500,000 shares of no par stock authorized, 360,000 shares issued and outstanding.

Required:
Prepare a complete, corrected, classified balance sheet. (Amounts to be deducted should be indicated by a minus sign.)
  

SANDERSON MANUFACTURING COMPANY Balance Sheet At December 31, 2018 ($ in 000s) Assets Current assets: Cash $ 2,350 Accounts receivable 5,700 Allowance for uncollectible accounts (1,500 ) Finished goods inventory 7,100 Prepaid expenses 2,300 Total current assets 15,950 Long-term assets: Investments 4,100 Raw materials and work in process inventory 3,350 Equipment 20,000 Accumulated depreciation—equipment (5,300 ) Patent ? Total assets $ ? Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 6,300 Note payable 6,200 Interest payable—note 1,200 Deferred revenue 5,200 Total current liabilities 18,900 Long-term liabilities: Bonds payable 6,600 Interest payable—bonds 500 Shareholders’ equity: Common stock $ ? Retained earnings ? ? Total liabilities and shareholders’ equity ?

Explanation / Answer

Assets Current assets: Cash 2,350 Accounts receivable 5,700 Allowance for uncollectible accounts -1500 Finished goods inventory 7,100 Prepaid expenses 2,300 Investment 4100 Total current assets 20,050 Long-term assets: Raw materials and work in process inventory 3,350 Equipment 20,000 Accumulated depreciation—equipment -5300 Patent 7900 (46000-38100) Total assets 46,000 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable 6,300 Notes payable 1,550 Interest payable—note 1,200 Interest payable—bonds 500 Deferred revenue 2,600 Total current liabilities 12,150 Long-term liabilities: Bonds payable 6,600 Notes payable 4650 (6200-1550) Deferred revenue 2600 (5200/2) Shareholders’ equity: Common stock 12200 Retained earnings 7800 20000 Total liabilities and shareholders’ equity 46,000 Total liabilities 26000 (18900+6600+500) Stockholders equity 20000 (26000/1.3) Retained earnings Beginning 6200 net income 2100 Dividend -500 Ending 7800

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