indicate your criticisms of the balance sheet and briefly explain the proper treatme 638761
The following is the balance sheet of McDonald Company:
McDONALD COMPANY |
|||
Assets |
|||
Current assets: |
|||
Cash (including $10,000 restricted for payment of note) |
$40,000 |
||
Assets |
|||
Marketable equity securities |
20,000 |
||
Accounts receivable, less allowance for doubtful |
70,000 |
||
Inventory |
60,000 |
||
Total current assets |
|||
Plant assets: |
|||
Land |
$40,000 |
||
Buildings, net |
100,000 |
||
Equipment |
$80,000 |
||
Less: Accumulated depreciation |
20,000 |
60,000 |
|
Patent |
20,000 |
||
Organizational costs |
15,000 |
||
235,000 |
|||
Other assets: |
|||
Prepaid insurance |
5,000 |
||
Total assets |
$430,000 |
||
Liabilities and Stockholders’ Equity |
|||
Current liabilities: |
|||
Accounts payable |
$60,000 |
||
Wages payable |
10,000 |
||
Notes payable, due July 1, 2012 |
20,000 |
||
Bonds payable, due December 2016 |
100,000 |
||
Total current liabilities |
$190,000 |
||
Dividends payable |
4,000 |
||
Deferred tax liability, long term |
30,000 |
||
Stockholders’ equity: |
|||
Common stock ($10 par, 10,000 shares authorized, 5,000 shares outstanding) |
$50,000 |
||
Retained earnings |
156,000 |
||
Total stockholders’ equity |
206,000 |
||
Total liabilities and stockholders’ equity |
$430,000 |
Required
Indicate your criticisms of the balance sheet and briefly explain the proper treatment of any item criticized.