Adjusted account balances and supplemental information for Brockbank Research Corp. as of December 31, 2011, are as

Question:

Adjusted account balances and supplemental information for Brockbank Research Corp. as of December 31, 2011, are as follows:

Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,160

Accounts Receivable—Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,731

Accumulated Depreciation—Leasehold Improvements and Equipment . . . . 579,472

Additional Paid-In Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265,000

Allowance for Bad Debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,731

Automotive Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132,800

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,600

Cash Fund for Bond Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,600

Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000

Deferred Income Tax Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000

Dividends Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,500

Franchises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,150

Furniture, Fixtures, and Store Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 769,000

Insurance Claims Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000

Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201,620

Investment in Unconsolidated Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000

Leasehold Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,800

7 ½%–12% Mortgage Notes Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000

Notes Payable—Banks (due in 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000

Notes Payable—Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,540

Patent Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,402

Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,500

Profit Sharing, Payroll, and Vacation Payable . . . . . . . . . . . . . . . . . . . . . . . . 40,000

Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225,800

Supplemental information is as follows:

(a) Depreciation is provided by the straight-line method over the estimated useful lives of the assets.

(b) Common stock is $1 par, and 35,000 of the 100,000 authorized shares were issued and are outstanding.

(c) The cost of an exclusive franchise to import a foreign company’s ball bearings and a related patent license are being amortized on the straight-line method over their remaining lives: franchise, 10 years; patents, 15 years.

(d) Inventories are stated at the lower of cost or market; cost was determined by the specific identification method.

(e) Insurance claims based on the opinion of an independent insurance adjustor are for property damages at the central warehouse. These claims are estimated to be two-thirds collectible in the following year and one-third collectible thereafter.

(f) The company leases all of its buildings from various lessors. Estimated fixed-lease obligations are $50,000 per year for the next 10 years. The leases do not meet the criteria for capitalization.

(g) The company is currently in litigation over a claimed overpayment of income tax of $13,000. In the opinion of counsel, the claim is valid. The company is contingently liable on guaranteed notes worth $12,000.


Instructions:

Prepare a properly classified balance sheet. Include all notes and parenthetical notations necessary to properly disclose the essential financial data.


Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
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Intermediate Accounting

ISBN: 978-0324592375

17th Edition

Authors: James D. Stice, Earl K. Stice, Fred Skousen

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