Balance Sheet Computations And Presentation
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Compute each of the following based on the provided financial statements and trial balance: 1) Total current assets 2) Total property, plant, and equipment 3) Total assets 4) Total liabilities 5) Total stockholders’ equity.
Sample Paper For Above instruction
The balance sheet is a fundamental financial statement that provides a snapshot of a company's financial position at a specific point in time. According to the provided trial balance of Hightower Corporation as of December 31, 2017, various asset, liability, and equity accounts need to be examined to compute the required totals. This paper will systematically analyze each component, calculate the total current assets, property, plant, and equipment, total assets, total liabilities, and total stockholders' equity, thereby illustrating the company's financial standing.
Calculation of Total Current Assets
Current assets are assets likely to be converted into cash or used within a year. From the trial balance, the current assets include cash, accounts receivable, inventory, and debt investments (trading). For Hightower Corporation, these are detailed as follows:
- Cash: $295,000
- Accounts Receivable: $652,000
- Inventory: $895,000
- Debt Investments (trading): $218,000 (at cost, assuming fair value similar to cost for simplicity)
Note: Other assets like debt investments (long-term), equity investments, land, buildings, equipment, franchises, and patents are long-term assets and are excluded from current assets.
Adding these figures yields:
Total current assets = $295,000 + $652,000 + $895,000 + $218,000 = $2,060,000
Calculation of Total Property, Plant, and Equipment
This category encompasses assets used in operations that have a long-term useful life, including land, buildings, equipment, and their respective accumulated depreciation. The relevant accounts are:
- Land: $390,000
- Buildings: $1,560,000
- Accumulated Depreciation—Buildings: $(228,000)
- Equipment: $900,000
- Accumulated Depreciation—Equipment: $(90,000)
The net book value of buildings is $1,560,000 - $228,000 = $1,332,000.
The net book value of equipment is $900,000 - $90,000 = $810,000.
Summing these:
Total property, plant, and equipment = $390,000 + $1,332,000 + $810,000 = $2,532,000
Calculation of Total Assets
Total assets combine current assets and long-term assets, along with other assets like patents and franchises:
- Total current assets: $2,060,000
- Debt Investments (long-term): $448,000
- Equity Investments (long-term): $416,000
- Land: $390,000
- Buildings (net): $1,332,000
- Equipment (net): $810,000
- Franchises: $240,000
- Patents: $293,000
Adding these we get:
Total assets = $2,060,000 + $448,000 + $416,000 + $390,000 + $1,332,000 + $810,000 + $240,000 + $293,000 = $6,192,000
Calculation of Total Liabilities
Liabilities include current liabilities like notes payable (short-term), accounts payable, dividends payable, accrued liabilities, and long-term liabilities such as long-term notes payable and bonds payable. Details are:
- Notes Payable (short-term): $135,000
- Accounts Payable: $682,000
- Dividends Payable: $204,000
- Accrued Liabilities: $144,000
- Notes Payable (long-term): $1,350,000
- Bonds Payable: $1,500,000
Total liabilities sum to:
Total liabilities = $135,000 + $682,000 + $204,000 + $144,000 + $1,350,000 + $1,500,000 = $4,015,000
Calculation of Total Stockholders’ Equity
Stockholders' equity includes common stock, paid-in capital in excess of par, retained earnings, and treasury stock. The figures are:
- Common Stock ($5 par): $1,500,000
- Paid-in Capital in Excess of Par: $120,000
- Retained Earnings: $117,000
- Treasury Stock: $(287,000)
Thus:
Total stockholders’ equity = $1,500,000 + $120,000 + $117,000 - $287,000 = $1,450,000
Summary
In summary, the computed totals are:
- Total current assets: $2,060,000
- Total property, plant, and equipment: $2,532,000
- Total assets: $6,192,000
- Total liabilities: $4,015,000
- Total stockholders' equity: $1,450,000
This analysis provides insight into Hightower Corporation’s financial position, indicating a balanced structure with substantial assets financed through liabilities and equity, which is typical for corporations of this scale. Proper segmentation and understanding of each category are essential for financial analysis, planning, and strategic decision-making.
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