Liabilities Accounts payable Salaries payable Interest payable (bonds} Income tax payable Deferred tax liability Notes payable Lease liability Bonds payable Less: Discount on bonds Shareholders' Equity Common stock Paidin capitalexcess of par Preferred stock Retained earnings Less: Treasury stock $50 12 11 23 75 215 (22} 430 $65 ll 14 275 (25} 410 ARDUOUS COMPANY Income Statement For Year Ended December 31, 2021 ("-5 in millions) Revenues and gain: Sales revenue $410 Investment revenue ll Gain on sale of Treasury bills 2 $423 Expenses and loss: lCost of goods sold 180 Salaries expense 73 Depreciation expense ]2 Amortization expense 2 Insurance expense 7" Interest expense 28 Loss on sale of equipment 18 Income tax expense 36 356 69 G\" -._| Net income Additional infomoon'om the accounting records: a. Investment revenue includes Arduous Company's $6 million share of the net income of Demur Company, an equity method investee. b. Treasury bills were sold during 2021 at a gain of $2 million. Arduous Company classies its investments in Treasury bills as cash equivalents. c. Equipment originally costing $20 million that was onehalf depreciated was rendered unusable by a ood. Most major components Page 1284 of the equipment were unharmed and were sold for $17 million. d. Temporary differences between pretax accounting income and taxable income caused the deferred tax liability to increase by $3 million. e. The preferred stock of Tory Corporation was purchased for $25 million as a longterm investment. f. Land costing $46 million was acquired by issuing $23 million cash and a 15%. fouryear, $23 million note payable to the seller. g. The right to use a building was acquired with a 15-year lease agreement; present value of lease payments, $82 million. Annual lease payments of $7 million are paid at the beginning of each year starting January 1, 2021. h. $60 million of bonds were retired at maturity. i. In February, Arduous issued a 5% stock dividend (4 million shares}. The market price of the $5 par value common stock was $150 per share at that time. j. In April, 1 million shares of common stock were repurchased as treasury stock at a cost of$9 million. Accounts Receivable Inventory Beg. Bal Beg. Bal From customers To suppliers of goods End. Bal. End. Bal. Prepaid Insurance Investment Revenue Receivable Beg. Bal. Beg. Bal. For insurance From investment revenue End. Bal. End. Bal. Long-term Investments Land Beg. Bal. Beg. Bal From investment revenue Noncash investing and financing activity Purchase of long-term investment End. Bal. End. Bal. Buildings and Equipment Accumulated Depreciation Beg. Bal. Beg. Bal Noncash investing and financing activity Depreciation expense Sale of equipment End. Bal. End. Bal.Patent Accounts Payable Beg. Bal. Beg. Bal Amortization of patent Payment of dividends End. Bal. End. Bal. Salaries Payable Interest Payable Beg. Bal. Beg. Bal To employees For interest End. Bal. End. Bal Income Tax Payable Deferred Tax Liability Beg. Bal. Beg. Bal For income taxes For income taxes End. Bal. End. Bal. Notes Payable Lease Liability Beg. Bal. Beg. Bal Noncash investing and financing activity Payment on lease Purchase of long-term investment End. Bal. End. BalBonds Payable Discount on Bonds Beg. Bal. Beg. Bal Retirement of bonds For interest End. Bal End. Bal Common Stock Paid-in Capital Beg. Bal. Beg. Bal Sale of preferred stock From investment revenue End. Bal End. Bal Preferred Stock Retained Earnings Beg. Bal. Beg. Bal Sale of preferred stock Purchase of long-term investment Purchase of treasury stock Purchase of long-term investment End. Bal. End. Bal. Treasury Stock Sales Beg. Bal. Beg. Bal. Purchase of treasury stock From sale of cash equivalents End. Bal. End. Bal.Investment Revenue Gain on Sale of Treasury Bills Beg. Bal. Beg. Bal. From investment revenue Noncash investing and financing activity End. Bal End. Bal. Cost of Goods Sold Salaries Expense Beg. Bal. Beg. Bal. To suppliers of goods To employees To suppliers of goods End. Bal. End. Bal. Depreciation Expense Amortization Expense Beg. Bal Beg. Bal. Depreciation expense Amortization of patent 35 Depreciation expense End. Bal. End. Bal. Insurance Expense Interest Expense Beg. Bal. Beg. Bal For insurance For interest End. Bal. End. Bal.Income Tax Expense Loss on Sale of Equipment Beg. Bal. Beg. Bal. For income taxes Sale of equipment End. Bal. End. Bal. Net Income (Income Summary) Beg. Bal. Net income End. Bal
