Question

In: Accounting

The following balance sheet for the Los Gatos Corporation was prepared by a recently hired accountant....

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.)

Solutions

Expert Solution

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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