Chapter 4, Problem 8E

To determine

Fill in the blanks labeled from (a) through (l).

Answer to Problem 8E

The balance sheet of D Company is prepared below:

D Company
Balance Sheet
December 31
	2016	2017
Current assets	26,900	25,000
Long-term investments	19,200	22,200
Property, plant and equipment (net)	85,700	92,800
Intangible assets	10,400	9,200
Total assets	$142,200	$149,200
Current  liabilities	14,500	12,300
Long-term liabilities	35,800	34,900
Total liabilities	50,300	47,200
Common stock, $5 par	20,000	20,000
Additional paid-in capital	15,000	15,000
Total contributed capital	35,000	35,000
Retained earnings	50,000	60,000
Accumulated other comprehensive income	6,900	7,000
Total shareholders' equity	91,900	102,000
Total liabilities and shareholders' equity	$142,200	$149,200

Table (1)

Explanation of Solution

Balance sheet: This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and stockholders (stockholders’ equity) over those resources. The resources of the company are assets which include money contributed by stockholders and creditors. Hence, the main elements of the balance sheet are assets, liabilities, and stockholders’ equity.

Calculate the amount of current assets (a) for 2016:

$\begin{array}{c}\text{Current assets}=\left(\begin{array}{l}\text{Total assets }–\text{ Property, plant, and equipment }\left(\text{net}\right)\\ -\text{Intangible assets}-\text{Long-term investments}\end{array}\right)\\ =\$142,200-\$85,700-\$10,400-\$19,200\\ =\$26,900\end{array}$

Hence, the amount of current assets for 2016 is $26,900.

Calculate the amount of common stock (e) for 2016:

$\begin{array}{c}\text{Common stock }\left(\text{2016}\right)\text{ = Common stock }\left(\text{2020}\right)\\ =\$20,000\end{array}$

Hence, the amount of common stock for 2016 is $20,000.

Note: As the company did not issue any common stock during 2017, the common stock of 2016 is equal to common stock of 2017.

Calculate the amount of total contributed capital (c) for 2016:

$\begin{array}{c}\text{Total contributed capital = Common stock + Additional paid in capital}\\ \text{= \$20,000 +}\text{\$15,000}\\ \text{=}\text{\$35,000}\end{array}$

Hence, the amount of total contributed capital for 2016 is $35,000.

Calculate the amount of total stockholders’ equity (f) for 2016:

$\begin{array}{c}\text{Total stockholders’ equity = }\left(\begin{array}{l}\text{Total contributed capital + Retained earnings }\\ \text{+ Accumulated other comprehensive income}\end{array}\right)\\ =\$35,000+\$50,000+\$6,900\\ =\$91,900\end{array}$

Hence, the amount of total stockholders’ equity for 2016 is $91,900.

Compute the amount of total liabilities (d) for 2016:

$\begin{array}{c}\text{Total liabilities = Total assets}–\text{Total stockholders’ equity}\\ \text{= \$142,200}–\$91,900\\ =\$50,300\end{array}$

Hence, the amount of total liabilities for 2016 is $50,300.

Calculate the amount of long-term liabilities (b) for 2016:

$\begin{array}{c}\text{Long-term liabilities }=\text{Total liabilities}–\text{Current liabilities}\\ \text{= \$50,300}–\text{\$14,500}\\ \text{=}\text{\$35,800}\end{array}$

Hence, the amount of long-term liabilities for 2016 is $35,800.

Calculate the amount of additional paid-in capital (k) for 2017:

$\begin{array}{c}\text{Additional paid in capital }\left(\text{2017}\right)\text{ = Additional paid in capital}\left(\text{2016}\right)\\ =\$15,000\end{array}$

Hence, the amount of additional paid in capital for 2017 is $15,000.

Note: As the company did not issue any common stock during 2017, the additional paid in capital of 2016 is equal to additional paid in capital of 2017.

Calculate the amount of total contributed capital (g) for 2017:

$\begin{array}{c}\text{Total contributed capital = Common stock + Additional paid in capital}\\ \text{= \$20,000 +}\text{\$15,000}\\ \text{=}\text{\$35,000}\end{array}$

Hence, the amount of total contributed capital for 2017 is $35,000.

Calculate the amount of total stockholders’ equity (l) for 2017:

$\begin{array}{c}\text{Total stockholders’ equity = }\left(\begin{array}{l}\text{Total contributed capital + Retained earnings }\\ \text{+ Accumulated other comprehensive income}\end{array}\right)\\ =\$35,000+\$60,000+\$7,000\\ =\$102,000\end{array}$

Hence, the amount of total stockholders’ equity for 2017 is $102,000.

Compute the amount of total liabilities (i) for 2017:

$\begin{array}{c}\text{Total liabilities = Current liabilities}\text{+}\text{Long-term liabilities}\\ \text{= \$12,300}+\$34,900\\ =\$47,200\end{array}$

Hence, the amount of total liabilities for 2017 is $47,200.

Compute the amount of total assets (j) for 2017:

$\begin{array}{c}\text{Total assets = Total liabilities}\text{+}\text{Total stockholders' equity}\\ \text{= \$47,200}–\$102,000\\ =\$149,200\end{array}$

Hence, the amount of total assets for 2017 is $149,200.

Calculate the amount of long-term investments (h) for 2017:

$\begin{array}{c}\text{Long-term investments}=\left(\begin{array}{l}\text{Total assets }–\text{ Property, plant, and equipment }\left(\text{net}\right)\\ -\text{Intangible assets}-\text{Current assets}\end{array}\right)\\ =\$149,200-\$92,800-\$9,200-\$25,000\\ =\$22,200\end{array}$

Hence, the amount of long-term investments for 2017 is $22,200.