Question

5.4 (LO 3, 4, Preparation Corrected statement UI Financial Position) Bruno Corp. has decided to expand its 589 operations. The bookkeeper recently completed the following statement of financial position in order to obtain additional funds for expansion: Bruno Corp. Statement of Financial Position For the Year Ended December 31, 2020 Current assets Cash (net of bank overdraft of $30,000) $260,000 Accounts receivable (net) 340,000 Inventory at the lower of cost and net realizable value 401,000 FV-NI investments (at cost-fair value $120,000) 140,000 Property, plant, and equipment Buildings (net) 570,000 Equipment (net) 160,000 Land held for future use 175,000 Intangible assets Goodwill $ 80,000 Investment in bonds to collect cash flows, at amortized 90,000 cost Prepaid expenses 12,000 Current liabilities Accounts payable 195,000 Notes payable (due next year) 125,000 Pension obligation 82,000 Rent payable 49,000 Long-term liabilities Bonds payable 553,000 Shareholders' equity Common shares, unlimited authorized, 290,000 issued 290,000 Contributed surplus 180,000 at 9 Ch 4 select proble...pdf R 2R API

Answer 1

solution: - Page 1 *from the data the bookkeepen recently completed the . following statement. a) Balance sheet in the books of 'B' corporation.

Page 2 Assets Amount $ I Liabilities Amount $ Current Assets | current liabilities cash | 290,000 Accounts Payable 195,000 Accounts receivable |(357,000- 17,000) 340,000 Bank over draft 30,000 Inventory 401,000 Notes Payable 125,000 FV-NI investment (fair value) 120,000 Rent payable 49,000 prepaid Ex penses 12,000 Total of current assets a) 1163000 Total of current liabilities (@ 399,000 Long-term investments Ilong-term Liabilities Land 175,000 Bonds Payable 553,000 Investment 90,000 Pension obligation 82,000 Total of long-term investmento 6 265,000 Total of long-term liabilitielb) 635,000 Long-term assets share helder's funds. Building (730,000 -160.000) 570,000 common stock 290,000 Equipment (265,000 - 105,000 160,000 contributed Surplus 180,000 Total of long-term assets () 730,000 Retained earnings (Bal. fig) 734,000 Intangible assets Total of shareholder's fund (c) 1,204,000 Goodwill (d) 80,000 Total (a+b+c+d) 2,238,000 Total (a+b+c) 12, B8,000

page-3 b) The classification of bank overdraft has been done under current liability because it can not be offset against the Positive cash balance. - The working capital under both the cases will remain unchanged. - However, this classification will have an impact on the current satio in the following way: I current assets :. Current ratio - Current Liabilities Earlier, when bank over draft was set off against the carsh balance, the current ratio was calculated as follows. an

Page 4 >> current asset - 1163-30 - $1,133 -> current liabilities - 399-30 = $369 current ratio – 3.07 Now, as the bank overdraft has been classified liability, the new current ratio is 291(1163/399). 1. The bank overdraft was given such classification because it fatty Onder a temporary over draft position. It is an overdraft with one of the several banks accounts 'B' corp. have with various banks. - X -