The following trial balance of Reese Corp. at December 31, 2014has been properly adjusted except for the income tax expenseadjustment.
Reese Corp.
Trial Balance
December 31, 2014
Dr. Cr.
Cash $ 775,000
Accounts receivable (net)2,695,000
Inventory 2,085,000
Property, plant, and equipment (net)7,566,000
Accounts payable and accruedliabilities $ 1,701,000
Income taxes payable 654,000
Deferred income tax liability85,000
Common stock 2,350,000
Additional paid-in capital3,680,000
Retained earnings, 1/1/143,450,000
Net sales and other revenues13,560,000
Costs and expenses 11,180,000
Income tax expenses1,179,000
$25,480,000 $25,480,000
Other financial data for the yearended December 31, 2014:
Included in accounts receivable is $1,200,000 due from acustomer and payable in quarterly installments of $150,000. Thelast payment is due December 29, 2016.
The balance in the Deferred Income Tax Liability accountpertains to a temporary difference that arose in a prior year, ofwhich $20,000 is classified as a current liability.
During the year, estimated tax payments of $525,000 were chargedto income tax expense. The current and future tax rate on all typesof income is 30%
The final retained earnings balance is
a. $4,651,000.
b. $4,736,000.
c. $5,176,000.
d. $5,105,000.
The following trial balance of Reese Corp. at December 31, 2014has been properly adjusted except for the income tax expenseadjustment.
Reese Corp.
Trial Balance
December 31, 2014
Dr. Cr.
Cash $ 775,000
Accounts receivable (net)2,695,000
Inventory 2,085,000
Property, plant, and equipment (net)7,566,000
Accounts payable and accruedliabilities $ 1,701,000
Income taxes payable 654,000
Deferred income tax liability85,000
Common stock 2,350,000
Additional paid-in capital3,680,000
Retained earnings, 1/1/143,450,000
Net sales and other revenues13,560,000
Costs and expenses 11,180,000
Income tax expenses1,179,000
$25,480,000 $25,480,000
Other financial data for the yearended December 31, 2014:
Included in accounts receivable is $1,200,000 due from acustomer and payable in quarterly installments of $150,000. Thelast payment is due December 29, 2016.
The balance in the Deferred Income Tax Liability accountpertains to a temporary difference that arose in a prior year, ofwhich $20,000 is classified as a current liability.
During the year, estimated tax payments of $525,000 were chargedto income tax expense. The current and future tax rate on all typesof income is 30%
The final retained earnings balance is
a. $4,651,000.
b. $4,736,000.
c. $5,176,000.
d. $5,105,000.
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Related questions
Complex Balance Sheet
Presented below is the unaudited balance sheet as of December31, 2016, prepared by Zeus Manufacturing Corporationâsbookkeeper.
Zeus Manufacturing Corporation Balance Sheet for the Year Ended December 31, 2016 | ||||
Assets | Liabilities and Shareholders' Equity | |||
Cash | $225,000 | Accounts payable | $133,800 | |
Accounts receivable (net) | 345,700 | Mortgage payable | 900,000 | |
Inventories | 560,000 | Notes payable | 500,000 | |
Prepaid income taxes | 40,000 | Lawsuit liability | 80,000 | |
Investments | 57,700 | Income taxes payable | 61,200 | |
Land | 450,000 | Deferred tax liability | 28,000 | |
Building | 1,750,000 | Accumulated depreciation | 420,000 | |
Machinery and equipment | 1,964,000 | Total Liabilities | $2,123,000 | |
Goodwill | 37,000 | Common stock, $50 par; 40,000 shares issued | $2,231,000 | |
Total Assets | $5,429,400 | Retained earnings | 1,075,400 | |
Total Shareholders' Equity | $3,306,400 | |||
Total Liabilities and Shareholders' Equity | $5,429,400 |
Your company has been engaged to perform an audit, during whichyou discover the following information:
Checks totaling $14,000 in payment of accounts payable weremailed on December 31, 2016, but were not recorded until 2017. Latein December 2016, the bank returned a customerâs $2,000 checkmarked "NSF," but no entry was made. Cash includes $100,000restricted for building purposes.
Included in accounts receivable is a $30,000 note due onDecember 31, 2019, from Zeusâs president.
During 2016, Zeus purchased 500 shares of common stock of amajor corporation that supplies Zeus with raw materials. Total costof this stock was $51,300, and fair value on December 31, 2016, was$47,000. The decline in fair value is considered temporary. Zeusplans to hold these shares indefinitely.
Treasury stock was recorded at cost when Zeus purchased 200 ofits own shares for $32 per share in May 2016. This amount isincluded in investments.
On December 31, 2016, Zeus borrowed $500,000 from a bank inexchange for a 10% note payable, maturing December 31, 2021. Equalprincipal payments are due December 31 of each year beginning in2017. This note is collateralized by a $250,000 tract of landacquired as a potential future building site, which is included inland.
The mortgage payable requires $50,000 principal payments, plusinterest, at the end of each month. Payments were made on January31 and February 28, 2017. The balance of this mortgage was due June30, 2017. On March 1, 2017, prior to issuance of the auditedfinancial statements, Zeus consummated a noncancelable agreementwith the lender to refinance this mortgage. The new terms require$100,000 annual principal payments, plus interest, on February 28of each year, beginning in 2018. The final payment is due February28, 2025.
The lawsuit liability will be paid in 2017.
Of the total deferred tax liability, $5,000 is considered acurrent liability.
The current income tax expense reported in Zeusâs 2016 incomestatement was $61,200.
The company was authorized to issue 100,000 shares of $50 parvalue common stock.
Required:
Prepare a corrected classified balance sheet as of December 31,2016.
Zeus Manufacturing Corporation Balance Sheet December 31, 2016 | |||
Assets | |||
Current Assets: | |||
Cash | $ | ||
Accounts receivable (net) | |||
Inventories | |||
Total current assets | $ | ||
Long-Term investment, at fair value | |||
Property, Plant, and Equipment (at cost): | |||
Land | $ | ||
Building | $ | ||
Machinery and equipment | |||
Total | |||
Less: Accumulated depreciation | |||
Total property, plant, and equipment | |||
Intangible Asset: | |||
Goodwill | |||
Other Assets: | |||
Cash restricted for building purposes | $ | ||
Officer's note receivable | |||
Land held for future building site | |||
Total Assets | $ | ||
Liabilities | |||
Current Liabilities: | |||
Accounts payable | $ | ||
Current installments of long-term debt | |||
Lawsuit liability | |||
Income taxes payable | |||
Deferred tax liability | |||
Total current liabilities | $ | ||
Long-Term Debt: | |||
Mortgage payable | $ | ||
Notes payable | |||
Deferred tax liability | |||
Total long-term debt | |||
Total Liabilities | $ | ||
Shareholders' Equity | |||
Contributed Capital: | |||
Common stock, $50 par value | $ | ||
Additional paid-in capital | |||
Total paid-in capital | $ | ||
Retained earnings | |||
Accumulated Other Comprehensive Loss: | |||
Unrealized decrease in value of long-term investment | |||
Total | $ | ||
Less: Cost of treasury stock | |||
Total Shareholders' Equity | |||
Total Liabilities and Shareholders' Equity | $ |
Statement of Cash Flows Using a Work SheetâIndirect Method (Appendix)
Peoria Corp. just completed another successful year, as indicated by the following income statement:
For the Year Ended December 31, 2017 | |
Sales revenue | $1,250,000 |
Cost of goods sold | 700,000 |
Gross profit | $550,000 |
Operating expenses | 150,000 |
Income before interest and taxes | $400,000 |
Interest expense | 25,000 |
Income before taxes | $375,000 |
Income tax expense | 150,000 |
Net income | $225,000 |
Presented here are comparative balance sheets:
December 31 | |||
2017 | 2016 | ||
Cash | $52,000 | $90,000 | |
Accounts receivable | 180,000 | 130,000 | |
Inventory | 230,000 | 200,000 | |
Prepayments | 15,000 | 25,000 | |
Total current assets | $477,000 | $445,000 | |
Land | $750,000 | $600,000 | |
Plant and equipment | 700,000 | 500,000 | |
Accumulated depreciation | (250,000) | (200,000) | |
Total long-term assets | $1,200,000 | $900,000 | |
Total assets | $1,677,000 | $1,345,000 | |
Accounts payable | $130,000 | $148,000 | |
Other accrued liabilities | 68,000 | 63,000 | |
Income taxes payable | 90,000 | 110,000 | |
Total current liabilities | $288,000 | $321,000 | |
Long-term bank loan payable | $350,000 | $300,000 | |
Common stock | $550,000 | $400,000 | |
Retained earnings | 489,000 | 324,000 | |
Total stockholders' equity | $1,039,000 | $724,000 | |
Total liabilities and stockholders' equity | $1,677,000 | $1,345,000 |
Other information is as follows:
Dividends of $60,000 were declared and paid during the year.
Operating expenses include $50,000 of depreciation.
Land and plant and equipment were acquired for cash, and additional stock was issued for cash. Cash also was received from additional bank loans.
The president has asked you some questions about the year's results. She is very impressed with the profit margin of 18% (net income divided by sales revenue). She is bothered, however, by the decline in the company's cash balance during the year. One of the conditions of the existing bank loan is that the company maintain a minimum cash balance of $50,000.
Required:
1. Using the format in the chapter's appendix, prepare a statement of cash flows work sheet. If an amount box does not require an entry, leave it blank. Use the minus sign to indicate cash payments, cash outflows, or decreases in cash.
Balances | Cash Inflows (Outflows) | |||||
Accounts | 12/31/17 | 12/31/16 | Changes | Operating | Investing | Financing |
Cash | $ | $ | $ | $ | $ | $ |
Accounts Receivable | ||||||
Inventory | ||||||
Prepayments | ||||||
Land | ||||||
Plant and Equipment | ||||||
Accumulated Depreciation | ||||||
Accounts Payable | ||||||
Other Accrued Liabilities | ||||||
Income Taxes Payable | ||||||
Long-Term Bank Loan Payable | ||||||
Common Stock | ||||||
Retained Earnings | ||||||
Net Income | ||||||
Totals | $ | $ | $ | $ | $ | $ |
Net increase (decrease) in cash | $ |
2. Prepare a statement of cash flows for 2017 using the indirect method in the Operating Activities section. Use the minus sign to indicate cash payments, cash outflows, or decreases in cash.
Peoria Corp. | |
Statement of Cash Flows | |
For the Year Ended December 31, 2017 | |
Cash Flows from Operating Activities | |
$ | |
Adjustments to reconcile net income to net cash provided by operating activities: | |
$ | |
Cash Flows from Investing Activities | |
$ | |
$ | |
Cash Flows from Financing Activities | |
$ | |
$ | |
$ | |
Cash balance, December 31, 2016 | |
Cash balance, December 31, 2017 | $ |
3. During the year Peoria experienced a decrease in cash at the end of the year due to
Balance Sheet Preparation The following is a December 31, 2015, post-closing trial balancefor the Happy Valley Corporation.
Additional Information: 1. The $105000 balance in the landaccount consists of $87600 for the cost of land where the plant andoffice buildings are located. The remaining amount represents thecost of land being held for speculation. 2. The $41600 in the marketablesecurities account represents an investment in the common stock ofanother corporation. Valley intends to sell one-half of the stockwithin the next year. 3. The notes payable account consistsof a note due in six months and a $187000 note due in three equalannual installments, with the first payment due in August of2015. Required: Calculate the following balance sheet totals for theValley Pump Corporation at December 31, 2014. Common Stock Current Assets Property, Plant and Equipment (net) Intangible and Other Assets Total Assets Short-term Note Payable Current Liabilities Long-term Liabilities Total Equity Total Liabilities and Equity |
Please include a detailed answer for the accounts you includedto find the balance of each.