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	$	64,000
Accounts receivable		116,000
Inventories		67,000
Machinery (net)		132,000
Franchise (net)		42,000
Total assets	$	421,000
Liabilities and Shareholders’ Equity
Accounts payable	$	74,000
Allowance for uncollectible accounts		17,000
Note payable		79,000
Bonds payable		122,000
Shareholders’ equity		129,000
Total liabilities and shareholders’ equity	$	421,000

Additional information:

1. Cash includes a $32,000 restricted amount to be used for repayment of the bonds payable in 2022.
2. The cost of the machinery is $214,000.
3. Accounts receivable includes a $32,000 note receivable from a customer due in 2021.
4. The note payable includes accrued interest of $17,000. Principal and interest are both due on February 1, 2019.
5. The company began operations in 2013. Income less dividends since inception of the company totals $47,000.
6. 62,000 shares of no par common stock were issued in 2013. 200,000 shares are authorized.

Required:
Prepare a corrected, classified balance sheet. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

Balance sheet for the Los Gatos Corporation

Liabilities Amount Assets       Amount

Equity shares 62000 Machinery at cost 214000   

Common stock 67000 -Accumulated depreciation (82000) 132000

Allowance for uncollectible accounts 17000 Franchises 42000

Notes payable 62000 Inventory 67000

+  accrued interest 17000 79000 Cash 32000  

Accounts payable 74000 +Bills payable 32000 64000

Bills payable 122000 Accounts receivable 148000

   -Doubtful debts (32000) 116000

Total 421000   421000