Business, Accounting, and You 43 1-35A. Error analysis and preparation of balanc

Question

Business, Accounting, and You 43 1-35A. Error analysis and preparation of balance sheet (Learning Objective) 0-25 min. The IT manager of Valley Realty, Inc., prepared the balance sheet of the company while the accountant was ill. The balance sheet contains numerous errors. In particular, the IT manager knew that the balance sheet should balance, so she plugged in the retained earnings amount to achieve this balance. The retained earnings amount, however, is not correct. All other amounts are accurate, but some are out of place. Valley Realty, Inc. Balance Sheet Month Ended November 30, 2016 ASSETS LIABILITIES Cash Rent Expense Supplies Expense Salaries Payable Equipment $9,400 Accounts Payable 1,900 Utiities Expense 500 Accounts Receivable 2,150 Notes Payable 17,300 $ 1,800 700 3,200 5,300 STOCKHOLDERS' EQUITY Common Stock Supplies Retained Earnings Total Stockholders' Equity Total Liabilities & 9,000 440 10,810 20,250 Total Assets $31250 Stockholders' Equity $31,250 Requirement 1. Prepare a new, corrected balance sheet for Valley Realty, Inc.

Explanation / Answer

Solution:

Valley Realty Inc. Balance Sheet Month Ended Nov 30, 2016 Assets Amount Liabilities Amount Cash $9,400.00 Salaries payable $2,150.00 Equipment $17,300.00 Accounts Payable $1,800.00 Accounts receivables $3,200.00 Notes Payable $5,300.00 Supplies $440.00 Stockholder's Equity: Common Stock $9,000.00 Retained Earnings (Balancing figure) $12,090.00 Total Assets $30,340.00 To Liabilities and stockholder's Equity $30,340.00

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