
ACC421 Week 3 E5-5 E5-12 E5-15 E24-2 E24-4
E5-5 Bruno Company has decided to expand its operations. The bookkeeper recently completed the balance sheet presented below in order to obtain additional funds for expansion.
BRUNO COMPANY | ||||
BALANCE SHEET | ||||
31-Dec-12 | ||||
Current assets | ||||
Cash | 260,000 | |||
Accounts receivable (net) | 340,000 | |||
Inventories at lower of average cost or market | 401,000 | |||
Trading securities' at cost (fair value | 120,000 | 140,000 | ||
Property, plant, and equipment | ||||
Building (net) | 570,000 | |||
Office equipment (net) | 160,000 | |||
Land held for future use | 175,000 | |||
Intangible assets | ||||
Goodwill | 80,000 | |||
Cash surrender value of life insurance | 90,000 | |||
Prepaid expenses | 12,000 | |||
Current liabilities | ||||
Accounts payable | 135,000 | |||
Notes payable (due next year) | 125,000 | |||
Pension obligation | 82,000 | |||
Rent payable | 49,000 | |||
Premium on bonds payable | 53,000 | |||
Long-term liabilities | ||||
Bonds payable | 500,000 | |||
Stockholders' equity | ||||
Common stock, $1.00 par, authorized | ||||
400,000 shares, issued 290,000 | 290,000 | |||
Additional paid-in capital | 180,000 | |||
Retained earnings | ? |
Instructions
Prepare a revised balance sheet given the available information. Assume that the accumulated depreciation balance for the buildings is $160,000 and for the office equipment, $105,000. The allowance for doubtful accounts has a balance of $17,000. The pension obligation is considered a long-term liability.
Exercise 5-12 Presented below is the trial balance of Vivaldi Corporation at December 31, 2012.
Debit | Credit | |||
Cash | 197,000 | |||
Sales | 7,900,000 | |||
Trading Securities (at cost, $145,000) | 153,000 | |||
Cost of Goods Sold | 4,800,000 | |||
Long-term Investments in Bonds | 299,000 | |||
Long-term Investments in Stocks | 277,000 | |||
Short-term Notes Payable | 90,000 | |||
Accounts Payable | 455,000 | |||
Selling Expenses | 2,000,000 | |||
Investment Revenue | 63,000 | |||
Land | 260,000 | |||
Buildings | 1,040,000 | |||
Dividends Payable | 136,000 | |||
Accrued Liabilities | 96,000 | |||
Accounts Receivable | 435,000 | |||
Accumulated DepreciationÑBuildings | 352,000 | |||
Allowance for Doubtful Accounts | 25,000 | |||
Administrative Expenses | 900,000 | |||
Interest Expense | 211,000 | |||
Inventories | 597,000 | |||
Extraordinary Gain | 80,000 | |||
Long-term Notes Payable | 900,000 | |||
Equipment | 600,000 | |||
Bonds Payable | 1,000,000 | |||
Accumulated Depreciation's Equipment | 60,000 | |||
Franchise | 160,000 | |||
Common Stock ($5 par) | 1,000,000 | |||
Treasury Stock | 191,000 | |||
Patent | 195,000 | |||
Retained Earnings | 78,000 | |||
Paid-in Capital in Excess of Par Totals | 80,000 | |||
12,315,000 | 12,315,000 |
Calculate ending retained earnings and prepare a balance sheet at December 31, 2012, for Vivaldi Corporation. Ignore income taxes.
E5-15 (Preparation of a Statement of Cash Flows) Presented below is a condensed version of the comparative balance sheets for Sondergaard Corporation for the last two years at December 31.
2012 | 2,011 | |||
Cash | 157,000 | 78,000 | ||
Accounts receivable | 180,000 | 185,000 | ||
Investments | 52,000 | 74,000 | ||
Equipment | 298,000 | 240,000 | ||
Less: Accumulated depreciation | (106,000) | (89,000) | ||
Current liabilities | 134,000 | 151,000 | ||
Capital stock | 160,000 | 160,000 | ||
Retained earnings | 287,000 | 177,000 |
Additional information:
Investments were sold at a loss (not extraordinary) of $7,000; no equipment was sold; cash dividends paid were $50,000; and net income was $160,000.
Instructions
(a) Prepare a statement of cash flows for 2012 for Sondergaard Corporation.
(b) Determine Sondergaard Corporation’s free cash flow.
______ 1. Settlement of federal tax case at a cost considerably in excess of the amount expected at
year-end.
______ 2. Introduction of a new product line.
______ 3. Loss of assembly plant due to fire.
______ 4. Sale of a significant portion of the company’s assets.
______ 5. Retirement of the company president.
______ 6. Issuance of a significant number of shares of common stock.
______ 7. Loss of a significant customer.
______ 8. Prolonged employee strike.
______ 9. Material loss on a year-end receivable because of a customer’s bankruptcy.
______ 10. Hiring of a new president.
______ 11. Settlement of prior year’s litigation against the company.
______ 12. Merger with another company of comparable size.
presented the following information.
Plunkett Co. | Herring Co. | |||
Assets Cash | 120,000 | 320,000 | ||
Receivables | 220,000 | 302,000 | ||
Inventories | 570,000 | 518,000 | ||
Total current assets | 910,000 | 1,140,000 | ||
Other assets | 500,000 | 612,000 | ||
Total assets | 1,410,000 | 1,752,000 | ||
Liabilities and Stockholders' Equity | ||||
Current liabilities | 300,000 | 350,000 | ||
Long-term liabilities | 400,000 | 500,000 | ||
Capital stock and retained earnings | 710,000 | 902,000 | ||
Total liabilities and stockholders' equity | 1,410,000 | 1,752,000 | ||
Annual sales | 930,000 | 1,500,000 | ||
Rate of gross profit on sales | 30% | 40% |
Each of these companies has requested a loan of $50,000 for 6 months with no collateral offered. In as much as your bank has reached its quota for loans of this type, only one of these requests is to be granted.
Instructions
Which of the two companies, as judged by the information given above, would you recommend as the
better risk and why? Assume that the ending account balances are representative of the entire year.
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