• LO3–2, LO3–3
The following balance sheet for the Hubbard Corporation was prepared by the company:
HUBBARD CORPORATION
Balance Sheet
At December 31, 20 18
Assets
Buildings | $ 750,000 |
Land | 250,000 |
Cash | 60,000 |
120,000 | |
Inventories | 240,000 |
Machinery | 280,000 |
Patent (net) | 100,000 |
Investment in marketable equity securities | 60,000 |
Total assets | $1,860,000 |
Liabilities and Shareholders’ Equity
Accounts payable | $ 215,000 |
Accumulated |
255,000 |
Notes payable | 500,000 |
Appreciation of inventories | 80,000 |
Common stock, authorized and issued 100,000 shares of no par stock | 430,000 |
380,000 | |
Total liabilities and shareholders’ equity | $1,860,000 |
Additional Information:
1. The buildings, land, and machinery are all stated at cost except for a parcel of land that the company is holding for future sale. The land originally cost $50,000 but, due to a significant increase in market value, is listed at $120,000. The increase in the land account was credited to retained earnings.
2. Marketable equity securities consist of stocks of other corporations and are recorded at cost, $20,000 of which will be sold in the coming year. The remainder will be held indefinitely.
3. Notes payable are all long-term. However, a $100,000 note requires an installment payment of $25,000 due in the coming year.
4. Inventories are recorded at current resale value. The original cost of the inventories is $160,000.
Required:
Prepare a corrected classified balance sheet for the Hubbard Corporation at December 31, 2018.
Balance sheet:
Balance sheet is the snapshot which shows the financial position of the company on a particular date. It provides the users of the financial statement to make effective decision.
The components of balance sheet are assets, liabilities and shareholders’ equity.
To Prepare: The balance sheet with given additional information and rectify its errors.
Explanation of Solution
Prepare a corrected balance sheet for Corporation H at December 31, 2018 as follows:
Corporation H | ||
Balance Sheet | ||
December 31, 2018 | ||
Assets |
||
Current assets: | Amount ($) | Amount ($) |
Cash | 60,000 | |
Marketable securities (net) (f) | 20,000 | |
Accounts receivable | 120,000 | |
Inventories (g) | 160,000 | |
Total current assets | 360,000 | |
Investments: | ||
Marketable securities (a) | 40,000 | |
Land held for sale (b) | 50,000 | |
Total investments | 90,000 | |
Property, plant and equipment: | ||
Land (c) | 130,000 | |
Buildings | 750,000 | |
Machinery | 280,000 | |
Less: Accumulated depreciation | (255,000) | |
Net property, plant and equipment | 905,000 | |
Intangible assets: | ||
Patent (net) | 100,000 | |
Total assets | 1,455,000 | |
Liabilities and shareholders’ Equity |
||
Current liabilities: | ||
Accounts payable | 215,000 | |
Current maturities of long-term debt (h) | 25,000 | |
Total current liabilities | 240,000 | |
Long-term liabilities: | ||
Notes payable (d) | 475,000 | |
Shareholders’ equity: | ||
Common stock | 430,000 | |
Retained earnings (e) | 310,000 | |
Total shareholders’ equity | 740,000 | |
Total liabilities and shareholders’ equity | 1,455,000 |
Table (1)
Working notes:
1.
Calculate the amount of marketable securities of Corporation H:
2.
Calculate the amount of land held for sale of Corporation H:
3.
Calculate the amount of land of Corporation H:
Or,
4.
Calculate the amount of notes payable of Corporation H:
5.
Calculate the amount of retained earnings of Corporation H:
Notes:
- The amount of marketable equity securities is $20,000 is to be sold in the coming year is shown in the current asset side of the balance sheet. (f)
- The original cost of inventories is $160,000 is shown in the current asset side of the balance sheet. (g)
- Notes payable is a long-term liability and the note is payable in installment of amount $25,000 which is classified under current maturities of long-term debt. (h)
Therefore, total assets as well as total liabilities and shareholder’s equity of Corporation H as on December 31, 2018 is $ 1,455,000.
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Chapter 3 Solutions
SPICELAND GEN CMB LL INTRM ACCTG; CNCT
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O'Brien industries Inc. recorded equity earnings for its share of Jolly Roger co. net income. 31. Accrued three months of interest on the Nightline bonds. 31. Adjusted the available-for-sale investment portfolio to fair value, using the following fair value per-share amounts: Available-for-Sale Investments Fair Value Bernard Co. stock 15,40 per share Chadwick Co. stock 46,00 per share Gozar Inc. stock 32,00 per share Nightline Co. bonds 98 per 100 of face amount Dec. 31. Closed the OBrien Industries Inc. net income of 146,230. O'Brien Industries Inc. paid no dividends during the year. Instructions Determine the missing letters in the unclassified balance sheet. Provide appropriate supporting calculations.arrow_forward
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