Question

You recently joined the internal auditing department of Kaitlyn Sportswear Corporation. As one of your first assignments, you are examining a balance sheet prepared by a staff accountant.   Prepare a classified balance sheet in good form to better represent Kaitlyn Sportswear Corporation.  

Kaitlyn Sportswear Corporation

At December 31, 2018

                                                             Assets

Cash                                                                                                              $ 220
Accounts receivable, net 340
Note receivable 8
Inventories                                                                                                        600
Prepaid expenses 40
Land 500
Buildings, net 2,200
Equipment, net 400
Investments 50
Patent 60
Total assets $4,490

Liabilities and Shareholders' Equity

Accounts payable                                                                                            $ 165
Salaries payable                                                                                                   75
Interest payable 45
Note payable 300
Bonds payable 500
Deferred revenue 80
Total liabilities 1,165
Common stock 2,000
Retained earnings                                                                                           1,325
Total shareholders' equity                                                                               3,181
Total liabilities and shareholders' equity $4,490

In the course of your examination of the company files, you uncover the following information pertaining to the balance sheet:

1. The land and buildings represent the corporate headquarters and manufacturing facilities.
2. The note receivable is due in 2020. The balance of $80 includes $5 of accrued interest. The next interest payment is due in July 2019.
3. The note payable is due in installments of $50 per year. Interest on both the notes and bonds is payable annually.
4. The company's investments consist of marketable equity securities of other corporations. Management does not intend to liquidate any investments in the coming year.
5. Deferred revenue will be recognized ratably (equally) over the next two years.
6. Accumulated Depreciation for the building is $1,200.
7. Accumulated Depreciation for equipment is $170.
8. Allowance for Bad Debt is $65,000

Answer 1

Kaitlyn Sportswear Corporation
Balance sheet
At December 31, 2018
Assets
Current Assets
Cash		220
Accounts receivable	405
Allowance for Bad Debts	65	340
Accrued Interest		5
Inventories		600
Prepaid expenses		40
Short term Investments		50
Total Current Assets			1,255
Long term Assets
Note receivable			75
Property , Plant & Equipment
Land		500
Buildings	3,400
Less: Accumulated Depreciation for building	1,200	2,200
Equipment	570
Less: Accumulated Depreciation for Equipment	170	400	3,100
Intangible Assets
Patent			60
Total Assets			4,490
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable		165
Salaries payable		75
Interest payable		45
Note payable		50
Deferred revenue		40
Total Current Liabilities			375
Long Term Liabilities
Note payable		250
Bonds payable		500
Deferred revenue		40
Total Long Term Liabilities			790
Total liabilities			1,165
Common stock		2,000
Retained earnings		1,325
Total shareholders' equity			3,325
Total liabilities and shareholders' equity			4,490