Required information

Skip to question

[The following information applies to the questions displayed below.]

The comparative balance sheets for 2024 and 2023 and the income statement for 2024 are given below for Arduous Company. Additional information from Arduouss accounting records is provided also.

ARDUOUS COMPANY
Comparative Balance Sheets
December 31, 2024 and 2023
($ in millions)
	2024	2023
Assets
Cash	$ 225	$ 91
Accounts receivable	200	204
Investment revenue receivable	16	14
Inventory	215	210
Prepaid insurance	14	18
Long-term investment	156	125
Land	206	160
Buildings and equipment	464	410
Less: Accumulated depreciation	(107)	(130)
Patent	49	51
	$ 1,438	$ 1,153
Liabilities
Accounts payable	$ 60	$ 85
Salaries payable	16	21
Interest payable (bonds)	18	14
Income tax payable	22	24
Deferred tax liability	21	18
Notes payable	23	0
Lease liability	117	0
Bonds payable	225	285
Less: Discount on bonds	(23)	(26)
Shareholders Equity
Common stock	430	410
Paid-in capitalexcess of par	127	115
Preferred stock	85	0
Retained earnings	326	207
Less: Treasury stock	(9)	0
	$ 1,438	$ 1,153

ARDUOUS COMPANY
Income Statement
For Year Ended December 31, 2024
($ in millions)
Revenues and gain:
Sales revenue	$ 610
Investment revenue	41
Gain on sale of treasury bills	2	$ 653
Expenses and loss:
Cost of goods sold	190
Salaries expense	83
Depreciation expense	12
Amortization expense	2
Insurance expense	17
Interest expense	38
Loss on sale of equipment	25
Income tax expense	46	413
Net income		$ 240

Additional information from the accounting records:

Investment revenue includes Arduous Companys $6 million share of the net income of Demur Company, an equity method investee.

Treasury bills were sold during 2024 at a gain of $2 million. Arduous Company classifies its investments in Treasury bills as cash equivalents.

Equipment originally costing $70 million that was one-half depreciated was rendered unusable by a flood. Most major components of the equipment were unharmed and were sold for $10 million.

Temporary differences between pretax accounting income and taxable income caused the deferred tax liability to increase by $3 million.

The preferred stock of Tory Corporation was purchased for $25 million as a long-term investment.

Land costing $46 million was acquired by issuing $23 million cash and a 15%, four-year, $23 million note payable to the seller.

The right to use a building was acquired with a 15-year lease agreement; present value of lease payments, $124 million. Annual lease payments of $7 million are paid at the beginning of each year starting January 1, 2024.

$60 million of bonds were retired at maturity.

In February, Arduous issued a stock dividend (4 million shares). The market price of the $5 par value common stock was $8 per share at that time.

In April, 1 million shares of common stock were repurchased as treasury stock at a cost of $9 million.

Required:

1. Prepare the T-accounts for Arduous Company.

Note: Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Amounts to be deducted should be indicated with a minus sign.)