Zeus Manufacturing Corporation Balance Sheet for the Year Ended December 31, 2019 Adapted Assets Cash Accounts receivable (nat Inventories Prepaid income taes Investments lond Liabiliies and Shareholders' Equity Accounts payable Martgage payable Notes payable Lowsuit liabilty Income taxes payoble Deferred tax liobility Accumulated depreciation Total Liabilities Common stock, $50 par; 40,000 shares issued $ 225,000 $ 133,800 345,700 560,000 40,000 57,700 450,000 1,750,000 1,964,000 37,000 900,000 500,000 80,000 61,200 28,000 420,000 $2,123,000 $2.231,000 Building Machinery and equipment Goodwill Total Assets $5.429,400 Retained earnings Total Shareholders' Equity Total Liabilties and Shareholders' Equity 1,075.400 $3,306,400 $5,429,400 Your company has been engaged to perform an audit, during which you discover the following information: 1. Checks totaling $14,000 in payment of accounts payable were mailed on December 31, 2019, but were not recorded until 2020. Late in December 2019, the bank returned a customer's S2,000 check marked "NSF," but no cntry was made. Cash includes S100,000 restricted for buikding purposes. 2. Included in accounts receivable is a S30,000 note due on December 31, 2022, from Zeus's president. 3. During 2019, Zeus purchased 500 shares of common stock of a major corparation that supplies Zeus with raw materials. Total cost of this stock was 51,300, and fair value on December 31, 2019, was $51,300, Zeus plans to hold these shares indefinitely. 4. Treasury stock was recorded at cost when Zeus purchased 200 of its own shares for $32 per share in May 2019. This amount is included in investments. 5. On December 31, 2019, Zeus borowed $500,000 from a hank in exchange for a 10% note payable, maturing December 31, 2024. Equal principal payments are due December 31 of cach year beginning in 2020. This note is collateralized by a S250,000 tract of land acquired as a potential future building site, which is included in land. 6. The mortgage payable requires $50,000 principal payments, plus interest, at the end of cach month. Pay- ments were made on January 31 and February 28, 2020. The balance of this mortgage was due June 30, 2020. On March 1, 2020, prior to issuance of the audited financial statements, Zeus consummated a non- cancelable agreement with the lender to refinance this mortgage. The new terms require $100,000 annual (omtiwwd) Chapler 4 The Balance Shoet and te Stoemert of Sharwholden' Equity principal payments, plus interest, on February 28 of cach year, beginning in 2021. The final payment is due February 28, 2028. 7. The lawsuit liability will be paid in 2020. 8. Of the total deferred tax liability, $5,000 is considered a currentr liability. 9. The current income tax expense reported in Zeus's 2019 income statement was $61,200. 10. The company was authorized to issue 100,000 shares of $50 pur value common stock.

Zeus Manufacturing Corporation Balance Sheet for the Year Ended December 31, 2019 Adapted Assets Cash Accounts receivable (nat Inventories Prepaid income taes Investments lond Liabiliies and Shareholders' Equity Accounts payable Martgage payable Notes payable Lowsuit liabilty Income taxes payoble Deferred tax liobility Accumulated depreciation Total Liabilities Common stock, $50 par; 40,000 shares issued $ 225,000 $ 133,800 345,700 560,000 40,000 57,700 450,000 1,750,000 1,964,000 37,000 900,000 500,000 80,000 61,200 28,000 420,000 $2,123,000 $2.231,000 Building Machinery and equipment Goodwill Total Assets $5.429,400 Retained earnings Total Shareholders' Equity Total Liabilties and Shareholders' Equity 1,075.400 $3,306,400 $5,429,400 Your company has been engaged to perform an audit, during which you discover the following information: 1. Checks totaling $14,000 in payment of accounts payable were mailed on December 31, 2019, but were not recorded until 2020. Late in December 2019, the bank returned a customer's S2,000 check marked "NSF," but no cntry was made. Cash includes S100,000 restricted for buikding purposes. 2. Included in accounts receivable is a S30,000 note due on December 31, 2022, from Zeus's president. 3. During 2019, Zeus purchased 500 shares of common stock of a major corparation that supplies Zeus with raw materials. Total cost of this stock was 51,300, and fair value on December 31, 2019, was $51,300, Zeus plans to hold these shares indefinitely. 4. Treasury stock was recorded at cost when Zeus purchased 200 of its own shares for $32 per share in May 2019. This amount is included in investments. 5. On December 31, 2019, Zeus borowed $500,000 from a hank in exchange for a 10% note payable, maturing December 31, 2024. Equal principal payments are due December 31 of cach year beginning in 2020. This note is collateralized by a S250,000 tract of land acquired as a potential future building site, which is included in land. 6. The mortgage payable requires $50,000 principal payments, plus interest, at the end of cach month. Pay- ments were made on January 31 and February 28, 2020. The balance of this mortgage was due June 30, 2020. On March 1, 2020, prior to issuance of the audited financial statements, Zeus consummated a non- cancelable agreement with the lender to refinance this mortgage. The new terms require $100,000 annual (omtiwwd) Chapler 4 The Balance Shoet and te Stoemert of Sharwholden' Equity principal payments, plus interest, on February 28 of cach year, beginning in 2021. The final payment is due February 28, 2028. 7. The lawsuit liability will be paid in 2020. 8. Of the total deferred tax liability, $5,000 is considered a currentr liability. 9. The current income tax expense reported in Zeus's 2019 income statement was $61,200. 10. The company was authorized to issue 100,000 shares of $50 pur value common stock.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 103.1C: Leverage Cook Corporation issued financial statements at December 31, 2019, that include the...

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