E5-12 (Preparation of a Balance Sheet) Presented below is the trial balance of John
Nalezny Corporation at December 31, 2007. Debits Credits Cash $ 197,000 Sales $
8,100,000 Trading Securities (at cost, $145,000) 153,000 Cost of Goods Sold 4,800,000
Long-term Investments in Bonds 299,000 Long-term Investments in Stocks 277,000
Short-term Notes Payable 90,000 Accounts Payable 455,000 Selling Expenses 2,000,000
Investment Revenue 63,000 Land 260,000 Buildings 1,040,000 Dividends Payable
136,000 Accrued Liabilities 96,000 Accounts Receivable 435,000 Accumulated
Depreciation—Buildings 152,000 Allowance for Doubtful Accounts 25,000
Administrative Expenses 900,000 Interest Expense 211,000 Inventories 597,000
Extraordinary Gain 80,000 Long-term Notes Payable 900,000 Equipment 600,000 Bonds
Payable 1,000,000 Accumulated Depreciation—Equipment 60,000 Franchise 160,000
Common Stock ($5 par) 1,000,000 Treasury Stock 191,000 Patent 195,000 Retained
Earnings 78,000 Additional Paid-in Capital 80,000 Totals $12,315,000 $12,315,000
Instructions Prepare a balance sheet at December 31, 2007, for John Nalezny
Corporation. Ignore income taxes.
John Nalezny Corporation
Balance Sheet
December 31, 2007
Assets
Current assets
Cash ..............................................................................
Trading securities........................................................
Accounts receivable ....................................................
Less: Allowance for doubtful
accounts.............................................................
Inventories ...................................................................
Total current assets ..............................................
$197,000
153,000
$435,000
(25,000)
410,000
597,000
1,357,000
Long-term investments
Investments in bonds ..................................................
Investments in stocks ..................................................
Total long-term investments ..............................
Property, plant, and equipment
Land .............................................................................
Buildings ......................................................................
299,000
277,000
576,000
260,000
1,040,000
Less: Accum. depreciation ...................................
Equipment ..................................................................
Less: Accum. depreciation ...................................
Total property, plant, and
(152,000)
600,000
(60,000)
888,000
540,000
equipment ..........................................................
1,688,000
Intangible assets
Franchise ....................................................................................
Patent ...........................................................................
160,000
195,000
Total intangible assets...........................................
Total assets............................................................
355,000
$3,976,000
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable ...................................................
Short-term notes payable ......................................
Dividends payable ..................................................
$ 455,000
90,000
136,000
Accrued liabilities...................................................
Total current liabilities ..................................
96,000
$ 777,000
Long-term debt
Long-term notes payable .......................................
Bonds payable.........................................................
Total long-term liabilities .................................
Total liabilities ..................................................
Stockholder’s equity
Paid-in capital
Common stock ($5 par) ...................................
Additional paid-in capital................................
Retained earnings*.................................................
900,000
1,000,000
1,900,000
2,677,000
$1,000,000
80,000
1,080,000
410,000
Total paid-in capital and
retained earnings.........................................
1,490,000
Less: Treasury stock ..............................................
(191,000)
Total stockholders’ equity .............................
1,299,000
Total liabilities and
stockholders’ equity ....................................
$3,976,000
*Computation of Retained Earnings:
Sales
$8,100,000
Investment revenue
63,000
Extraordinary gain
80,000
Cost of goods sold
(4,800,000)
Selling expenses
(2,000,000)
Administrative expenses
(900,000)
Interest expense
(211,000)
Net income
Beginning retained earnings
Net income
Ending retained earnings
E5-5 (Preparation of a Corrected Balance Sheet) Uhura Company has decided to expand
its operations. The bookkeeper recently completed the balance sheet presented below in
order to obtain additional funds for expansion. UHURA COMPANY BALANCE SHEET
FOR THE YEAR ENDED 2007 Current assets Cash $230,000 Accounts receivable (net)
340,000 Inventories at lower of average cost or market 401,000 Trading securities—at
cost (fair value $120,000) 140,000 Property, plant, and equipment Building (net) 5
70,000 Office equipment (net) 160,000 Land held for future use 175,000 Intangible assets
Goodwill 80,000 Cash surrender value of life insurance 90,000 Prepaid expenses 12,000
Current liabilities Accounts payable 135,000 Notes payable (due next year) 125,000
Pension obligation 82,000 Rent payable 49,000 Premium on bonds payable 53,000 Longterm liabilities Bonds payable 500,000 Stockholders’ equity Common stock, $1.00 par,
authorized 400,000 shares, issued 290,000 290,000 Additional paid-in capital 160,000
Retained earnings ? Instructions Prepare a revised balance sheet given the available
information. Assume that the accumulated depreciation balance for the buildings is
$160,000 and for the office equipment, $105,000. The allowance for doubtful accounts
has a balance of $17,000. The pension obligation is considered a long-term liability.
$ 332,000
$ 78,000
332,000
$410,000
Uhura Company
Balance Sheet
December 31, 2007
Assets
Current assets
Cash ...............................................................................
$230,000
Trading securities—at fair value ................................
120,000
Accounts receivable .....................................................
$357,000
Less: Allowance for doubtful
accounts ................................................................
17,000
340,000
Inventories, at lower of average
cost or market ............................................................
401,000
Prepaid expenses ..........................................................
12,000
Total current assets ................................................
$1,103,000
Long-term investments
Land held for future use ..............................................
175,000
Cash surrender value of life
insurance ....................................................................
90,000
265,000
Property, plant, and equipment
Building .........................................................................
$730,000
Less: Accum. depr.—building ..............................
160,000
Office equipment ..........................................................
265,000
570,000
Less: Accum. depr.—office
equipment ............................................................
105,000
160,000
730,000
Intangible assets
Goodwill ........................................................................
80,000
Total assets.............................................................
$2,178,000
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable .........................................................
$ 135,000
Notes payable (due next year) .....................................
125,000
Rent payable .................................................................
49,000
Total current liabilities ..........................................
$309,000
Long-term liabilities
Bonds payable...............................................................
$500,000
Add: Premium on bonds payable ...............................
53,000
Pension obligation ........................................................
$553,000
82,000
Total liabilities ........................................................
635,000
944,000
Stockholders’ equity
Common stock, $1 par, authorized
400,000 shares, issued 290,000
shares ..........................................................................
290,000
Additional paid-in capital ...........................................
160,000
Retained earnings.........................................................
450,000
784,000*
Total stockholders’ equity .....................................
1,234,000
Total liabilities and stockholders’ equity .....................................................
*$2,178,000 – $944,000 – $450,000
P5–3 (Balance Sheet Adjustment and Preparation) The adjusted trial balance of Side
Kicks Company and other related information for the year 2007 are presented on the next
page SIDE KICKS COMPANY ADJUSTED TRIAL BALANCE DECEMBER 31, 2007
Debits Credits Cash $ 41,000 Accounts Receivable 1 63,500 Allowance for Doubtful
$2,178,000
Accounts $ 8,700 Prepaid Insurance 5,900 Inventory 308,500 Long-term Investments
339,000 Land 85,000 Construction Work in Progress 124,000 Patents 36,000 Equipment
400,000 Accumulated Depreciation of Equipment 140,000 Unamortized Discount on
Bonds Payable 20,000 Accounts Payable 148,000 Accrued Expenses 49,200 Notes
Payable 94,000 Bonds Payable 400,000 Common Stock 500,000 Premium on Common
Stock 45,000 Retained Earnings 138,000 $1,522,900 $1,522,900 Additional information:
1. The LIFO method of inventory value is used. 2. The cost and fair value of the longterm investments that consist of stocks and bonds is the same. 3. The amount of the
Construction Work in Progress account represents the costs expended to date on a
building in the process of construction. (The company rents factory space at the present
time.) The land on which the building is being constructed cost $85,000, as shown in the
trial balance. 4. The patents were purchased by the company at a cost of $40,000 and are
being amortized on a straight-line basis. 5. Of the unamortized discount on bonds
payable, $2,000 will be amortized in 2008. 6. The notes payable represent bank loans that
are secured by long-term investments carried at $120,000. These bank loans are due in
2008. 7. The bonds payable bear interest at 8% payable every December 31, and are due
January 1, 2018. 8. 600,000 shares of common stock of a par value of $1 were
authorized, of which 500,000 shares were issued and outstanding. Instructions Prepare a
balance sheet as of December 31, 2007, so that all important information is fully
disclosed
Side Kicks Company
Balance Sheet
December 31, 2007
Assets
Current assets
Cash ...............................................................................
Accounts receivable .....................................................
Less: Allowance for doubtful
accounts................................................................
Inventory—at LIFO cost .............................................
Prepaid insurance ........................................................
$ 41,000
$163,500
8,700
154,800
308,500
5,900
Total current assets ................................................
$ 510,200
Long-term investments
Investments in stocks and bonds,
of which investments of $120,000
have been pledged as security for
notes payable—at fair value.....................................
339,000
Property, plant, and equipment
Cost of uncompleted plant facilities
Land ........................................................................
Building in process of
construction .........................................................
Equipment ....................................................................
Less: Accum. depreciation ....................................
85,000
124,000
400,000
140,000
209,000
260,000
469,000
Intangible assets
Patents—at cost less amortization ..............................
Total assets..............................................................
36,000
$1,354,200
Liabilities and Stockholders’ Equity
Current liabilities
Notes payable, secured by
investments of $120,000 ...........................................
Accounts payable ......................................................
Accrued expenses ......................................................
$ 94,000
148,000
49,200
Total current liabilities .......................................
$ 291,200
Long-term liabilities
8% bonds payable, due
January 1, 2018 ......................................................
Less: Unamortized discount on
bonds payable ........................................................
Total liabilities .....................................................
Stockholders’ equity
Common stock
Authorized 600,000 shares of $1
par value; issued and
outstanding, 500,000 shares ...............................
Premium on common stock ......................................
Retained earnings......................................................
400,000
20,000
$500,000
45,000
545,000
138,000
380,000
671,200
683,000
Total liabilities and
stockholders’ equity .........................................
$1,354,200