Chapter 4, Problem 9E

To determine

Fill in the blanks labeled (a) through (n).

Explanation of Solution

Balance sheet: This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and stockholders (stockholders’ equity) over those resources. The resources of the company are assets which include money contributed by stockholders and creditors. Hence, the main elements of the balance sheet are assets, liabilities, and stockholders’ equity.

Fill the missing information:

Company F
Balance Sheet
December 31
Particulars	2016	2017
Current assets	$19,100	(h)$20,000 (8)
Long-term investments	$23,700	(m)$21,200 (12)
Property, plant, and equipment (net)	(c) $79,400 (3)	$87,500
Intangible assets	$12,600	$12,000
Total assets	(e)$134,800(5)	(k)$140,700
Current liabilities	(b)$9,200(2)	$9,800
Long-term liabilities	(d)$28,900(4)	$30,200
Total liabilities	$38,100	(n)$40,000 (13)
Common stock, $10 par	(f)$17,000 (6)	(l)$18,000(11)
Additional paid-in capital	(g)$34,000(7)	$36,000
Total contributed capital	$51,000	(i)$54,000(9)
Retained earnings	$40,900	(j)$41,700(10)
Accumulated other comprehensive income	$4,800	$5,000
Total shareholders’ equity	(a)$96,700(1)	$100,700
Total liabilities and shareholders’ equity	$134,800	$140,700

Table (1)

Note:

The amount of total assets for missing information (k) is same as the amount of total liabilities and shareholders’ equity ($140,700) since, total assets equals total of liabilities and shareholders’ equity.

Working notes:

Year 2016:

(1) Calculate the amount of total shareholders’ equity:

$\begin{array}{c}\text{Total}\text{shareholders'}\text{equity}\text{=}\left(\begin{array}{l}\text{Common}\text{stock}\text{+}\text{Additional}\text{paid-in}\text{capital}(7)\text{+}\\ \text{Retained}\text{earnings}\text{+}\text{Accumulated}\text{other}\\ \text{comprehensive}\text{income}\end{array}\right)\\ \text{=\$17,000}\text{+}\text{\$34,000}\text{+\$40,900}\text{+}\text{\$4,800}\\ \text{=\$96,700}\end{array}$

(2) Calculate the amount of current liabilities:

$\begin{array}{c}\text{Current}\text{liabilities}\text{=}\text{Current}\text{assets}-\text{Working}\text{capital}\\ \text{=}\text{\$19,100}-\text{\$9,900}\\ \text{=\$9,200}\end{array}$

(3) Calculate the amount of property, plant and equipment:

$\begin{array}{c}\text{Property,}\text{plant}\text{and}\text{equipment}\text{=}\left(\begin{array}{l}\text{Total}\text{assets}\text{(5)}-\text{Current}\text{assets}-\\ \text{Long-term}\text{investments}-\text{Intangible}\text{assets}\end{array}\right)\\ \text{=}\text{\$134,800}-\text{\$19,100}-\text{\$23,700}-\text{\$12,600}\\ \text{=\$79,400}\end{array}$

(4) Calculate the amount of long-term liabilities:

$\begin{array}{c}\text{Long-term}\text{liabilities}\text{=}\text{Total}\text{liabilities}-\text{Current}\text{liabilities}\\ \text{=}\text{\$38,100}-\text{\$9,200}\text{(2)}\\ \text{=\$28,900}\end{array}$

(5) Calculate the amount of total liabilities and shareholders’ equity:

$\begin{array}{c}\text{Total}\text{assets}\text{=}\left(\begin{array}{l}C\text{urrent}\text{assets}\text{+}\text{Long-term}\text{investments}\text{+}\\ \text{Property,plant}\text{and}\text{equipment}(3)\text{+}\text{Intangible}\text{assets}\end{array}\right)\\ \text{=}\text{\$19,100}\text{+}\text{\$23,700}\text{+}\text{\$79,400}\text{+}\text{\$12,600}\\ \text{=\$134,800}\end{array}$

(6) Calculate the amount of common stock for the year 2016:

$\begin{array}{c}\text{Common}\text{stock(x)}\text{=}\text{Additional}\text{paid-in}\text{capital}\text{(2x)}-\text{Contributed}\text{capital}\\ \text{x}\text{=}\text{2x}-\text{\$51,000}\\ \text{\$51,000}\text{=}\text{x+}\text{2x}\\ \text{\$51,000}\text{= 3x}\end{array}$

$\begin{array}{c}\text{Common}\text{stock}\text{(x)}\text{=}\frac{\text{\$51,000}}{\text{3}}\\ \text{=}\text{\$17,000}\end{array}$

(7) Calculate the amount of additional paid-in capital for the year 2016:

$\begin{array}{c}\text{Additional}\text{paid-in}\text{capital}\text{=}\text{Common}\text{stock}\text{×}\text{2x}\\ \text{=}\text{\$17,000}(6)\text{×}\text{2x}\\ \text{x}\text{=}\text{\$17,000×2}\\ \text{x}\text{=\$34,000}\end{array}$

Year 2017:

(8) Calculate the amount of current assets:

$\begin{array}{c}\text{Current}\text{Assets}\text{=}\text{Current}\text{liabilities}\text{+Working}\text{capital}\\ \text{=}\text{\$9,800}+\text{\$10,200}\\ \text{=\$20,000}\end{array}$

(9) Calculate the amount of total contributed capital:

$\begin{array}{c}\text{Total}\text{contributed}\text{capital}\text{=}\text{Common}\text{stock}\text{(11)+}\text{Additional}\text{paid-in}\text{capital}\\ \text{=}\text{\$18,000}\text{+}\text{\$36,000}\\ \text{=\$54,000}\end{array}$

(10) Calculate the amount of retained earnings:

$\begin{array}{c}\text{Retained}\text{earnings}\text{=}\left(\begin{array}{l}\text{Total}\text{shareholders'}\text{equity}-\text{Total}\text{contributed}\text{capital}\text{(9)}\\ -\text{Accumulated}\text{other}\text{comprehensive}\text{income}\end{array}\right)\\ \text{=}\text{\$100,700}-\text{\$54,000}-\text{\$5,000}\\ \text{=\$41,700}\end{array}$

(11) Calculate the amount of common stock:

$\begin{array}{c}\text{Common}\text{stock}\text{=}\frac{\text{Additional}\text{paid-in}\text{capital}}{\text{2x}}\\ \text{x}\text{=}\frac{\text{\$36,000}}{\text{2}}\\ \text{x}\text{=}\text{\$18,000}\end{array}$

(12) Calculate the amount of long-term investments:

$\begin{array}{c}\text{Long-term}\text{investments}\text{=}\left(\begin{array}{l}\text{Total}\text{assets}-\text{Current}\text{assets}\text{(8)}-\text{property,plant}\\ \text{and}\text{equipments}-\text{Intangible}\text{assets}\end{array}\right)\\ \text{=\$140,700}-\text{\$20,000}-\text{\$87,500}-\text{\$12,000}\\ \text{=\$21,200}\end{array}$

(13) Calculate the amount of total liabilities:

$\begin{array}{c}\text{Total}\text{liabilities}\text{=}\text{Current}\text{liabilities}\text{+}\text{Long-term}\text{liabilities}\\ \text{=}\text{\$9,800}\text{+}\text{\$30,200}\\ \text{=\$40,000}\end{array}$