The following balance sheet for the Los Gatos Corporation was prepared by a rece
ID: 2333081 • Letter: T
Question
The following balance sheet for the Los Gatos Corporation was prepared by a recently hired accountant. In reviewing the statement you notice several errors. LOS GATOS CORPORATION Balance Sheet At December 31, 2018 Assets Cash $ 70,000 Accounts receivable 125,000 Inventories 70,000 Machinery (net) 135,000 Franchise (net) 45,000 Total assets $ 445,000 Liabilities and Shareholders’ Equity Accounts payable $ 80,000 Allowance for uncollectible accounts 20,000 Note payable 85,000 Bonds payable 125,000 Shareholders’ equity 135,000 Total liabilities and shareholders’ equity $ 445,000
Additional information: Cash includes a $35,000 restricted amount to be used for repayment of the bonds payable in 2022. The cost of the machinery is $220,000. Accounts receivable includes a $35,000 note receivable from a customer due in 2021. The note payable includes accrued interest of $20,000. Principal and interest are both due on February 1, 2019. The company began operations in 2013. Income less dividends since inception of the company totals $50,000. 65,000 shares of no par common stock were issued in 2013. 100,000 shares are authorized. Required: Prepare a corrected, classified balance sheet. (Amounts to be deducted should be indicated by a minus sign.)
Explanation / Answer
Answer:
LOS GATOS CORPORATION
Balance Sheet
At December 31, 2018
Assets
Current assets:
Cash
35000
Accounts receivable, net of allowance for
uncollectible accounts of $20,000
70000
Inventories
70000
Total current assets
175000
Investments:
Bond sinking fund
35000
Note receivable
35000
Total investments
70000
Property, plant, and equipment:
Machinery
220,000
Less: Accumulated depreciation
-85,000
Net property, plant, and equipment
135000
Intangibles:
Franchise
45000
Total assets
425000
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable
80,000
Interest payable
20000
Note payable
65000
Total current liabilities
165,000
Long-term liabilities:
Bonds payable
125000
Shareholders’ equity:
Common stock, no par value; 100,000 shares
85,000
Retained earnings
50,000
Total shareholders’ equity
135,000
Total liabilities and shareholders’ equity
425,000
LOS GATOS CORPORATION
Balance Sheet
At December 31, 2018
Assets
Current assets:
Cash
35000
Accounts receivable, net of allowance for
uncollectible accounts of $20,000
70000
Inventories
70000
Total current assets
175000
Investments:
Bond sinking fund
35000
Note receivable
35000
Total investments
70000
Property, plant, and equipment:
Machinery
220,000
Less: Accumulated depreciation
-85,000
Net property, plant, and equipment
135000
Intangibles:
Franchise
45000
Total assets
425000
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable
80,000
Interest payable
20000
Note payable
65000
Total current liabilities
165,000
Long-term liabilities:
Bonds payable
125000
Shareholders’ equity:
Common stock, no par value; 100,000 shares
85,000
Retained earnings
50,000
Total shareholders’ equity
135,000
Total liabilities and shareholders’ equity
425,000
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