CASE ANALYSIS Case 1: Gardner Corporation For December 31, 2019, the balance sheet of the Gardner Corporation is as follows: Current Assets Liabilities $ 15,000 $ 20,000 Accounts payable Notes payable. Bonds payable. Cash ....... Accounts receivable 22,500 30,000 Inventory. 37,500 75,000 Prepaid expenses 18,000 Fixed Assets Stockholders' Equity Plant and equipment (gross). $375,000 Common stock $112,500 ....... Paid-in capital 37,500 Less: Accumulated depreciation.. Net plant and assets . Total assets .. 75,000 Retained earnings. 118,000 300,000 Total liabilities and $393,000 stockholders' equity . $393,000 Sales for the year 2020 were $330,000, with cost of goods sold being 60 percent of sales. Selling and administrative expense was $33,000. Depreciation expense was 10 percent of plant and equipment (gross) at the beginning of the year. Interest expense for the notes payable was 10 percent, while interest on the bonds payable was 12 percent. These were based on December 31, 2019, balances. The tax rate averaged 20 percent. Two thousand dollars in preferred stock dividends were paid and $4,100 in dividends were paid to common stockholders. There were 10,000 shares of common stock outstanding. During the year 2020, the cash balance and prepaid expenses balance were unchanged. Accounts receivable and inventory increased by 20 percent. A new machine was purchased on December 31, 2020, at a cost of $60,000. Accounts payable increased by 30 percent. At year-end, December 31, 2020, notes payable increased by $10,000 and bonds payable decreased by $15,000. The common stock and paid-in capital in excess of par accounts did not change. a. Prepare an income statement for the year 2020. b. Prepare a statement of retained earnings for the year 2020. c. Prepare a balance sheet as of December 31, 2020.
CASE ANALYSIS Case 1: Gardner Corporation For December 31, 2019, the balance sheet of the Gardner Corporation is as follows: Current Assets Liabilities $ 15,000 $ 20,000 Accounts payable Notes payable. Bonds payable. Cash ....... Accounts receivable 22,500 30,000 Inventory. 37,500 75,000 Prepaid expenses 18,000 Fixed Assets Stockholders' Equity Plant and equipment (gross). $375,000 Common stock $112,500 ....... Paid-in capital 37,500 Less: Accumulated depreciation.. Net plant and assets . Total assets .. 75,000 Retained earnings. 118,000 300,000 Total liabilities and $393,000 stockholders' equity . $393,000 Sales for the year 2020 were $330,000, with cost of goods sold being 60 percent of sales. Selling and administrative expense was $33,000. Depreciation expense was 10 percent of plant and equipment (gross) at the beginning of the year. Interest expense for the notes payable was 10 percent, while interest on the bonds payable was 12 percent. These were based on December 31, 2019, balances. The tax rate averaged 20 percent. Two thousand dollars in preferred stock dividends were paid and $4,100 in dividends were paid to common stockholders. There were 10,000 shares of common stock outstanding. During the year 2020, the cash balance and prepaid expenses balance were unchanged. Accounts receivable and inventory increased by 20 percent. A new machine was purchased on December 31, 2020, at a cost of $60,000. Accounts payable increased by 30 percent. At year-end, December 31, 2020, notes payable increased by $10,000 and bonds payable decreased by $15,000. The common stock and paid-in capital in excess of par accounts did not change. a. Prepare an income statement for the year 2020. b. Prepare a statement of retained earnings for the year 2020. c. Prepare a balance sheet as of December 31, 2020.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:CASE ANALYSIS
Case 1: Gardner Corporation
For December 31, 2019, the balance sheet of the Gardner Corporation is as follows:
Current Assets
Liabilities
Cash
$ 15,000
Accounts payable
$ 20,000
Accounts receivable
22,500
Notes payable
30,000
Inventory.
37,500
Bonds payable..
75,000
Prepaid expenses
18,000
Fixed Assets
Stockholders' Equity
Plant and equipment (gross).......
$375,000
Common stock
$112,500
Paid-in capital
37,500
Retained earnings.
Less: Accumulated depreciation..
Net plant and assets....
Total assets...
75,000
118,000
300,000
Total liabilities and
$393,000
stockholders' equity.....
$393,000
Sales for the year 2020 were $330,000, with cost of goods sold being 60 percent of
sales. Selling and administrative expense was $33,000. Depreciation expense was 10 percent
of plant and equipment (gross) at the beginning of the year. Interest expense for the notes
payable was 10 percent, while interest on the bonds payable was 12 percent. These were
based on December 31, 2019, balances. The tax rate averaged 20 percent. Two thousand
dollars in preferred stock dividends were paid and $4,100 in dividends were paid to common
stockholders. There were 10,000 shares of common stock outstanding. During the year 2020,
the cash balance and prepaid expenses balance were unchanged. Accounts receivable and
inventory increased by 20 percent. A new machine was purchased on December 31, 2020, at a
cost of $60,000. Accounts payable increased by 30 percent. At year-end, December 31, 2020,
notes payable increased by $10,000 and bonds payable decreased by $15,000. The common
stock and paid-in capital in excess of par accounts did not change.
a. Prepare an income statement for the year 2020.
b. Prepare a statement of retained earnings for the year 2020.
c. Prepare a balance sheet as of December 31, 2020.
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