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                                                                                                   80

      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.

Answer 1

SOLUTION ::