
• 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 |
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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