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AccountingIntermediate Accounting: Reporting And Analysis3rd Edition

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Chapter 5, Problem 10P
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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Comprehensive: Balance Sheet from Statement of Cash Flows Mills Company prepared the following balance sheet at the beginning of 2019:

Chapter 5, Problem 10P, Comprehensive: Balance Sheet from Statement of Cash Flows Mills Company prepared the following

Additional information related to the statement of cash flows:

  1. 1. The long-term bonds have a face value of $6,000 and were issued on December 31, 2019.
  2. 2. The building was purchased on December 30, 2019.
  3. 3. The land was sold at its original cost.
  4. 4. The common stock which was sold totaled 300 shares and had a par value of $10 per share.

Required:

Next Level Prepare a classified balance sheet for Mills as of December 31, 2019. (Hint. Review the information on the statement of cash flows and the balances in the beginning balance sheet accounts to determine the impact on the ending balance sheet accounts.)

To determine

Prepare a classified balance sheet of Company M for the year ended December 31, 2019.

Explanation

Classified balance sheet: The main elements of balance sheet assets, liabilities, and stockholders’ equity are categorized or classified further into sections, and sub-sections in a classified balance sheet. Assets are further classified as current assets, long-term investments, property, plant, and equipment (PPE), and intangible assets. Liabilities are classified into two sections current and long-term. Stockholders’ equity comprises of common stock and retained earnings. Thus, the classified balance sheet includes all the elements under different sections.

Prepare a classified balance sheet of Company M for the year ended December 31, 2019 as follows:

Company M
Balance Sheet
For Year Ended December 31, 2018
Assets:Amount ($)Amount ($)
Current Assets:  
     Cash (1)            3,300 
     Accounts receivable (net)  (2)             5,000 
     Inventory (3)4,200 
Total current assets          12,500
Property, Plant, and Equipment:  
     Land  (4)            6,800 
     Buildings and equipment (5)          82,800 
Less: Accumulated depreciation (6) (16,000) 
Total property, plant, and equipment73,600
Total Assets86,100
Liabilities:  
Current Liabilities:  
     Accounts payable  (7)             3,000
     Salaries payable (8)1,500
Total current liabilities            4,500
Long-Term Liabilities:  
     Bonds payable            6,000 
Less: Discount on bonds payable (9)(300)
Total long-term liabilities 5,700
Total Liabilities (a)          10,200 
Shareholders’ Equity:
Contributed Capital:  
     Common stock, $10 par (10)16,500 
     Additional paid-in capital (11)12,700
Total contributed capital          29,200
Retained earnings  (12) 46,700
Total Shareholders’ Equity (b) 75,900
Total Liabilities and Shareholders’ Equity (a+b) 86,100

Table (1)

Working note (1):

Compute the amount of cash:

Ending Cash=Net increase in cash+Beginning cash=$2,300+$1,000=$3,300

Working note (2):

Compute the amount of accounts receivable:

Accounts receivable=[Accounts receivable in Balancesheet+Increase in accounts receivable in cash flow statement]=$3,900+$1,100=$5,000

Working note (3):

Compute the amount of inventory:

Inventory=[Inventory in Balance sheet−Decreasein inventory in cash flow statement]=$4,700−$500=$4,200

Working note (4):

Compute the value of land:

Land=[Cost of Land

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