Question

American Laser, Inc., reported the following account balances on January 1.

Accounts Receivable $5,000
Accumulated Depreciation 30,000
Additional Paid-in Capital 90,000
Allowance for Doubtful Accounts 2,000
Bonds Payable 0
Buildings 247,000
Cash 10,000
Common Stock, 10,000 shares of $1 par 10,000
Notes Payable (long-term) 10,000
Retained Earnings 120,000
Treasury Stock 0

The company entered into the following transactions during the year.

Jan. 15 Issued 5,000 shares of $1 par common stock for $50,000 cash.
Feb. 15 Reacquired 3,000 shares of $1 par common stock into treasury for $33,000 cash.
Mar. 15 Reissued 2,000 shares of treasury stock for $24,000 cash.
Aug. 15 Reissued 600 shares of treasury stock for $4,600 cash.
Sept. 15 Declared (but did not yet pay) a $1 cash dividend on each outstanding share of common stock.
Oct. 1 Issued 100, 10-year, $1,000 bonds, at a quoted bond price of 101.
Oct. 3 Wrote off a $500 balance due from a customer who went bankrupt.

Prepare a Balance Sheet (partial) At December 31.

Answer 1

A partial balance sheet is prepared by adjusting the initial account balances with the year's transactions. Calculations include issuance and repurchase of stock, dividend declarations, bond issuance, and writing off doubtful accounts. Account balances are updated and listed under Assets, Liabilities, and Shareholder's Equity.

Step-by-step explanation:

To prepare a partial balance sheet for American Laser, Inc. as of December 31, we start by adjusting the account balances based on the transactions provided. Here are the key steps and adjustments:

• Issuance of common stock increases Cash by $50,000 and increases Common Stock by $5,000 with the excess $45,000 (over the par value) added to Additional Paid-in Capital.
• Acquisition of treasury stock reduces Cash by $33,000 and records Treasury Stock at the same amount.
• Reissuance of treasury stock increases Cash by $24,000 and $4,600 respectively, and reduces Treasury Stock by the cost previously recorded with any excess credited to Additional Paid-in Capital (since it's not specified, we assume the original cost to be $33,000 / 3,000 shares = $11 per share).
• The declared dividend reduces Retained Earnings by $15,000 (since no share count is mentioned after repurchase and reissuance, I'm assuming 12,000 outstanding shares: 10,000 originally + 5,000 issued - 3,000 reacquired + 2,000 and 600 reissued).
• Issuing bonds increases Cash by $101,000 (100 bonds at 101% of $1,000 each) and increases Bonds Payable by $100,000, with the premium of $1,000 recorded in a bonds premium account (not mentioned, but standard accounting practice).
• Writing off doubtful accounts reduces Accounts Receivable by $500 and reduces the Allowance for Doubtful Accounts by the same amount.

After making these adjustments, we calculate the new balances for each account and list them on the balance sheet under their respective categories of Assets, Liabilities, and Shareholder's Equity.