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.