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Chapter 5: 10BE (page 239)

Hawthorn Corporation’s adjusted trial balance contained the following accounts at December 31, 2017: Retained Earnings \(120,000, Common Stock \)750,000, Bonds Payable \(100,000, Paid-in Capital in Excess of Par—Common Stock \)200,000, Goodwill \(55,000, Accumulated Other Comprehensive Loss \)150,000, and Noncontrolling Interest $35,000. Prepare the stockholders’ equity section of the balance sheet.

Short Answer

Expert verified

The stockholder’s equity section totals$955,000.

Step by step solution

01

Definition of Goodwill

The intangible asset reported by the company that represents the company’s reputation is known as goodwill. It can be calculated as the excess of the amount received over the fair value of the assets when the business is sold.

02

Stockholder’s Equity Section

Particular

Amount $

Common stock

$750,000

Paid-in-capital in excess of par – common stock

200,000

Retained earnings

120,000

Non-controlling interest

35,000

Accumulated other comprehensive loss

(150,000)

Total stockholder’s Equity

$955,000

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Most popular questions from this chapter

How does information from the balance sheet help users of the financial statements?

(Balance Sheet Adjustment and Preparation) The adjusted trial balance of Eastwood Company and other related information for the year 2017 are presented as follows.

EASTWOOD COMPANY

Adjusted Trial Balance

December 31, 2017

Debit

Credit

Cash

\(41,000

Accounts receivables

163,500

Allowance for doubtful account

\)8,700

Prepaid Insurance

5,900

Inventory

208,500

Equity Investment (long-term)

339,000

Land

85,000

Construction in the process (building)

124,000

Patent

36,000

Equipment

400,000

Accumulated depreciation – Equipment

240,000

Discount on bonds payable

20,000

Account payable

148,000

Accrued liabilities

49,200

Notes payable

94,000

Bond payable

200,000

Common stock

500,000

Paid-in-capital in Excess of par – Common stock

45,000

Retained earnings

138,000

Total

\(1,422,900

\)1,422,900

Additional information:

1. The LIFO method of inventory value is used.

2. The cost and fair value of the long-term investments that consist of stocks (with ownership less than 20% of total shares) are the same.

3. The amount of the Construction in Progress account represents the costs expended to date on a building in the process of construction. (The company rents factory space at the present time.) The land on which the building is being constructed costs \(85,000, as shown in the trial balance.

4. The patents were purchased by the company at a cost of \)40,000 and are being amortized on a straight-line basis.

5. Of the discount on bonds payable, \(2,000 will be amortized in 2018.

6. The notes payable represent bank loans that are secured by long-term investments carried at \)120,000. These bank loans are due in 2018.

7. The bonds payable bear interest at 8% payable every December 31, and are due January 1, 2028.

8. 600,000 shares of common stock of a par value of $1 were authorized, of which 500,000 shares were issued and outstanding.

Instructions

Prepare a balance sheet as of December 31, 2017, so that all-important information is fully disclosed.

What are the major limitations of the balance sheet as a source of information?

Keyser Beverage Company reported the following items in the most recent year.

Net income $40,000

Dividends paid 5,000

Increase in accounts receivable 10,000

Increase in accounts payable 7,000

Purchase of equipment (capital expenditure) 8,000

Depreciation expense 4,000

Issue of notes payable 20,000

Compute net cash provided by operating activities, the net change in cash during the year, and free cash flow.

Case 3: Deere & Company Presented below is the SEC-mandated disclosure of contractual obligations provided by Deere & Company in a recent annual report. Deere & Company reported current assets of \(50,060 and total current liabilities of \)21,394 at year-end. (All dollars are in millions.)

Aggregate Contractual Obligations

The payment schedule for the company’s contractual obligations at year-end in millions of dollars is as follows:

Total

Less than 1 year

1-3 Years

4 and 5 Years

More than 5 Years

Debt

Equipment Operations

\( 5,091

\) 434

\( 270

\)775

\( 3,612

Financial services

31,692

9,962

11,477

6,578

3,675

Total

36,783

10,396

11,747

7,353

7,287

Interest on debt

4,777

609

1,069

745

2,354

Account payable

2,743

2,611

90

39

3

Capital lease

87

39

42

4

2

Purchase obligations

3,007

2,970

37

0

0

Operating leases

371

121

134

70

46

Total

\) 47,768

\( 16,746

\)13,119

8,211

9,692

Instructions

(a) Compute Deere & Company’s working capital and current ratio (current assets ÷ current liabilities) with and without the off-balance-sheet contractual obligations reported in the schedule.

(b) Briefly discuss how the information provided in the contractual obligation disclosure would be useful in evaluating Deere & Company for loans (1) due in one year and (2) due in five years.
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