Question

Please help!!

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			$	1,750
Accounts receivable				4,500
Allowance for uncollectible accounts				(900	)
Finished goods inventory				6,500
Prepaid expenses				1,700
Total current assets				13,550
Long-term assets:
Investments				3,500
Raw materials and work in process inventory				2,750
Equipment				20,000
Accumulated depreciation				(4,700	)

Patent (net)				?
Total assets			$	?

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable			$	5,700
Notes payable				5,000
Interest payable (on notes)				600
Deferred revenue				4,000
Total current liabilities				15,300

Long-term liabilities:
Bonds payable				6,000
Interest payable (on bonds)				700

Shareholders’ equity:
Common stock	$	?
Retained earnings		?		?
Total liabilities and shareholders’ equity				?

MORE INFORMATION NEEDED:

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 1.1. That is, total liabilities are 110% of total shareholders’ equity. Retained earnings at the beginning of the year was $5,000. Net income for 2021 was $1,800 and $700 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 $1,250 each.
5. Deferred revenue will be recognized as revenue equally over the next two fiscal years.
6. The common stock represents 600,000 shares of no par stock authorized, 300,000 shares issued and outstanding.

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

Answer 1

Sanderson Manufacturing Company
Balance Sheet
At December 31, 2011
($ in 000s, except share data)
Assets
Current assets:
Cash		$   1,750.00
Short-term investments		$   3,500.00
Accounts receivable, net of $900 allowance for uncollectible accounts .		$   3,600.00
Inventories:
Raw materials and work in process	$   2,750.00
Finished goods	$   6,500.00	$   9,250.00
Prepaid expenses		$   1,700.00
Total current assets		$ 19,800.00
Property, plant, and equipment:
Equipment	$ 20,000.00
Less: Accumulated depreciation	$ (4,700.00)
Net property, plant, and equipment		$ 15,300.00
Intangible assets:
Patent (42000 - sum of all other assets )		$   6,900.00
Total assets		$ 42,000.00
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable		$   5,700.00
Interest payable (600 + 700)		$   1,300.00
Unearned revenue = 4000/2		$   2,000.00
Current maturities of long-term debt		$   1,250.00
Total current liabilities		$ 10,250.00
Long-term liabilities:
Unearned revenue (4000/2)	2,000
Note payable (5000 -1250)	3,750
Bonds payable	6,000	$ 11,750.00
Total Liabilities		$ 22,000.00
Shareholders’ equity:
Common stock, no par, 600,000 shares authorized, 300,000 shares issued and outstanding
250,000 shares issued and outstanding	13,900
Retained earnings (5000 + 1800 -700)	6,100
Total shareholders’ equity (22000/1.1)		$ 20,000.00
Total liabilities and shareholders’ equity		$ 42,000.00