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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

  1. 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.

  1. Answer the following questions as completely as possible:
    1. What is the book value of the idle equipment? What does this value indicate about the equipment to investors?
    2. 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

  1. 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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