Question
Take-home (20 points) Part I: Classified balance sheet Use the following post-closing balance information at 12/31/20 to create a professional balance sheet. All amounts listed
Take-home (20 points)
Part I: Classified balance sheet
- Use the following post-closing balance information at 12/31/20 to create a professional balance sheet. All amounts listed in thousands.
Inventory | 250 | Deferred tax asset | 150 |
Prepaid insurance | 35 | Accounts payable | 40 |
Accumulated depreciation | 6,000 | Bonds payable (2030 maturity) | 7,000 |
Note receivable (2022 maturity) | 40 | Equipment | 3,000 |
Treasury stock | 5 | Accounts receivable | 40 |
Premium on bonds payable | 100 | Preferred stock | 500 |
Accumulated other comprehensive income (debit balance) | 25 | Goodwill | 200 |
Allowance for doubtful accounts | 3 | Discount on notes receivable | 4 |
Security FV adjustment AFS (debit balance) | 10 | Pension liability | 350 |
Additional paid-in capital | 5,000 | Cash and cash equivalents | 600 |
Available for sale securities debt (2025 maturity) | 50 | Common stock | 30 |
Factories | 15,000 | Accrued expenses and payables | 70 |
- 10% of the bonds will come due 7/1/21. 5% of the premium will expire with their maturity.
- 10% of the equipment account is no longer used in operations and is being held idle. 5% of the accumulated depreciation is associated with this idle equipment.
- 5% of the cash and cash equivalents are legally-restricted in accordance with agreements tied to the long-term bonds payable.
- Only 70% of the prepaid insurance contract will be used in 2021.
- The inventory in the ledger is presented at cost, the net realizable value of the inventory is $190,000.
- You must calculate retained earnings from the information given.
- Answer the following questions as completely as possible:
- What is the book value of the idle equipment? What does this value indicate about the equipment to investors?
- What does the book value of the bonds and note receivable represent? (not the numerical value, explain what the numerical value means)
Part II: Multistep income statement
- Use the following income-related items to create a multistep income statement for 2020 including EPS disclosures. Assume a 20% tax rate (all amounts listed in thousands and pretax).
Cost of goods sold | 700 | Impairment of patent used in continuing operations | 170 |
Dividend revenue | 70 | Selling, general and administrative expenses | 650 |
Sales revenue | 3,250 | Interest expense | 100 |
Unrealized gain on trading securities | 40 | Research and development | 150 |
Depreciation and amortization | 350 | Restructuring costs | 200 |
In addition, the following information is available regarding a division the company decided to discontinue (all amounts in thousands).
Book value of assets | $5,100 | Book value of liabilities | $2,700 |
Fair value of assets | $3,190 | Fair value of liabilities | $1,700 |
Estimated selling costs | $200 | Loss from operations of the division | $750 |
Finally, the company has the following balance sheet disclosure regarding its accumulated other comprehensive income accounts (all amounts in thousands).
| 12/31/20 | 12/31/19 |
Accumulated other comprehensive income |
|
|
Available for sale | (150) | (20) |
Pension | 100 | (50) |
Cash flow hedges | (20) | 150 |
Total | ($70) | $80 |
The company declared $300,000 of preferred dividends and had 1,000,000 shares of common stock outstanding throughout 2020.
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