Question

The following is the ending balances of accounts at December 31, 2018 for the Valley Pump Corporation Account Title Cash Accounts receivable Inventories Interest payable Marketable securities Land Buildings Accumulated depreciation-buildings Equipment Accumulated depreciation-equipment Copyright (net of amortization) Prepaid expenses (next 12 months) Accounts payable Deferred revenues (next 12 months) Notes payable Allowance for uncollectible accounts Common stock Retained earnings Totals Debits Credits 30,000 66,000 91,000 15,000 54,000 130,000 325,000 105,000 85,000 30,000 17,000 37,000 70,000 25,000 275,000 5,000 250,000 60,000 835,000 835,000
1. The $130,000 balance in the land account consists of $105,000 for the cost of land where the plant and office buildings are located. The remaining $25,000 represents the cost of land being held for speculation.
2. The $54,000 balance in the investment in equity securities account represents an investment in the common stock of another corporation. Valley intends to sell one-half of the stock within the next year.
3. The notes payable account consists of a $110,000 note due in six months and a $165,000 note due in three annual installments of $55,000 each, with the first payment due in August of 2022.
Required:
Prepare a classified balance sheet for the Valley Pump Corporation at December 31, 2018. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

Answer and Explanation:

The preparation of the classified balance sheet is presented below:

Valley Pump Corporation

Balance sheet

December 31, 2018

Assets

Current assets

Cash                                    $30,000              

Marketable securities           $27,000

Account receivable             $61,000

Inventory                               $91,000

Prepaid expense                   $37,000

Investments

Marketable securities  $27,000

Land                               $25,000   $52,000

Property, plant & equipment

Land                           $105,000

Buildings                    $325,000

Equipment                  $85,000

Less:

Accumulated depreciation -$135,000

Net property, plant & equipment     $380,000

Intangibles

Copyright                                          $17,000

Total assets                                      $695,000

Liabilities & shareholder equity

Current liabilities

Account payable                        $70,000

Interest payable                          $15,000

Unearned revenue                     $25,000

Note payable                              $110,000

Current maturities                      $55,000

Total current liabilities                $275,000

Long term liabilities

Note payable                               $110,000

Shareholder equity

Common stock           $250,000

Retained earnings      $60,000

Total shareholder equity               $310,000

Total liabilities & shareholder equity $695,000

Working notes

Accumulated depreciation = building + equipment

= $105,000 + $60,000

= $695,000

The note payable is

= $55,000 × 2

= $110,000