
Concept explainers
Prepare a

Answer to Problem 9P
Prepare a balance sheet of R Company as on December 31, 2016
R Company | ||||
Balance sheet | ||||
December 31, 2016 | ||||
Particulars | Amount ($) | Amount ($) | Amount ($) | Amount ($) |
Asset | ||||
Current assets: | ||||
Cash | $1,200 | |||
4,000 | ||||
Inventories (working note 2) | 10,890 | |||
Prepaid items (working note 3) | 1,420 | |||
Total current assets | $17,510 | |||
Property, plant and equipment: | ||||
Land (working note 4) | $13,600 | |||
Building (working note 5) | $103,000 | |||
Equipment (working note 6) | 18,100 | $121,100 | ||
Less: | (32,520) | 88,580 | ||
Total property, plant, and equipment | 102,180 | |||
Patents (net) (working note 8) | 5,500 | |||
Total assets | $125,190 | |||
Liabilities | ||||
Current liabilities: | ||||
Accounts payable (working note 9) | $5,100 | |||
Income tax payable (working note 10) | 4,290 | |||
Miscellaneous payables (working note 11) | 1,400 | |||
Total current liabilities | $10,790 | |||
Long term liabilities: | ||||
10% Bonds payable | $15,000 | |||
Less: Discount on bonds payable (working note 12) | (900) | $14,100 | ||
Mortgage payable | 20,000 | 34,100 | ||
Total long term liabilities | $44,890 | |||
Shareholder’s equity: | ||||
$21,000 | ||||
Additional paid in capital on preferred stock (working note 14) | 2,300 | $23,300 | ||
Common stock, $10 par (working note 15) | $17,500 | |||
Additional paid in capital on common stock (working note 16) | 14,300 | 31,800 | ||
25,200 | ||||
Total shareholder’s equity | 80,300 | |||
Total liabilities and shareholder’s equity | $125,190 |
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
Working note 1:
Calculate the closing balance of accounts receivable.
Working note 2:
Calculate the closing balance of inventories.
Working note 3:
Calculate the closing balance prepaid items.
Working note 4:
Calculate the net value of land.
Working note 5:
Calculate the net value of buildings.
Working note 6:
Calculate the closing balance of equipment.
Working note 7:
Calculate the value of accumulated depreciation.
Working note 8:
Calculate the net value of patent.
Working note 9:
Calculate the closing balance of accounts payable.
Working note 10:
Calculate the income taxes payable.
Working note 11:
Calculate the Miscellaneous payable.
Working note 12:
Calculate the discount on bonds payable.
Working note 13:
Calculate the preferred stock.
Calculate the closing balance of preferred stock.
Working note 14:
Calculate Additional paid in capital on preferred stock
Working note 15:
Calculate the Common stock.
Working note 16:
Calculate Additional paid in capital on common stock.
Working notes 17:
Calculate retained earnings.
Therefore, total assets and liabilities of R Company is $125,190.
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