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, 2021
Assets
Cash	$	40,000
Accounts receivable		80,000
Inventory		55,000
Machinery (net)		120,000
Franchise (net)		30,000
Total assets	$	325,000
Liabilities and Shareholders’ Equity
Accounts payable	$	50,000
Allowance for uncollectible accounts		5,000
Notes payable		55,000
Bonds payable		110,000
Shareholders’ equity		105,000
Total liabilities and shareholders’ equity	$	325,000

Additional Information:

1. Cash includes a $20,000 restricted amount to be used for repayment of the bonds payable in 2025.
2. The cost of the machinery is $190,000.
3. Accounts receivable includes a $20,000 notes receivable from a customer due in 2024.
4. The notes payable balance includes accrued interest of $5,000. Principal and interest are both due on February 1, 2022.
5. The company began operations in 2016. Net income less dividends since inception of the company totals $35,000.
6. 50,000 shares of no par common stock were issued in 2016. 100,000 shares are authorized.

Required:
Prepare a corrected, classified balance sheet. Use the additional information to help determine appropriate classifications and account balances. The cost of machinery and its accumulated depreciation are shown separately. (Amounts to be deducted should be indicated by a minus sign.)

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, 2021
Assets
Cash	$	40,000
Accounts receivable		80,000
Inventory		55,000
Machinery (net)		120,000
Franchise (net)		30,000
Total assets	$	325,000
Liabilities and Shareholders’ Equity
Accounts payable	$	50,000
Allowance for uncollectible accounts		5,000
Notes payable		55,000
Bonds payable		110,000
Shareholders’ equity		105,000
Total liabilities and shareholders’ equity	$	325,000

Additional Information:

1. Cash includes a $20,000 restricted amount to be used for repayment of the bonds payable in 2025.
2. The cost of the machinery is $190,000.
3. Accounts receivable includes a $20,000 notes receivable from a customer due in 2024.
4. The notes payable balance includes accrued interest of $5,000. Principal and interest are both due on February 1, 2022.
5. The company began operations in 2016. Net income less dividends since inception of the company totals $35,000.
6. 50,000 shares of no par common stock were issued in 2016. 100,000 shares are authorized.

Required:
Prepare a corrected, classified balance sheet. Use the additional information to help determine appropriate classifications and account balances. The cost of machinery and its accumulated depreciation are shown separately. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

Current asset Cash 20,000 Accts receivable 60,000 Allowance for uncollectible accts -5,000 Net accts receivable 55,000 Inventory 55,000 Total current assets 130,000 Investments Notes receivable 20,000 Restricted cash 20,000 Total investments 40,000 Property plant equipment Machinery 190,000 Accumulated dep-70,000 Net property plant equipment 120,000 Intangible assets Franchise 30,000 Total assets 320,000 Liabilities Shareholders equity Current liabilities Accts payable 50,000 Notes payable 50,000 Interest payable 5,000 Total current liabilities 105,000 Long term liabilities Bonds payable 110,000 Total liabilities 215,000 Shareholders equity Common stock 70,000 Retained earnings 35,000 Total shareholder equity 105,000 Total liabilities and shareholder equity 320,000

Answer 2

LOS GATOS CORPORATION Balance Sheet At December 31, 2021
Assets
Curent Assets		Amount $
Cash (40000-20000)		20,000
Accounts Receivable (net) (80000-20000-5000)		55000
Inventories		55000
Total Current Assets		130000
Investments
Restricted Cash	20,000
Note Receivable	20,000
Total Investments		40,000
Property,Plant & Equipment
Machinery	190,000
Accumulated Depriciation	70,000
Net property, plant, and equipment		120,000
Intangible Assets
Franchise		30,000
Total Assets		320000
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable		50,000
Interest payable		5,000
Note payable (55000-5000)		50,000
Total current liabilities		105000
Long­term liabilities
Bonds payable		110,000
Shareholders' equity
Common stock (105000-35000)	70000
Retained earnings	35,000
Total Shareholder's equity		105,000
Total Liabilities and Shareholders' Equity		320000

1. Cash includes a $20,000 restricted amount = it will reduces from cash . and show in restricted cash catagory .
2. The cost of the machinery is $190,000. = this is cost so we reduces depreciation in this amount , we have given net amount of machinery , so 190000-120000 = 70000 this is depreciation amount .
3. Accounts receivable includes a $20,000 notes receivable from a customer due in 2024.= we will reduces this amount from account receivable and Allowance for uncollectible accounts 5000 also reduce , and get net amount of account receivable
4. The notes payable balance includes accrued interest of $5,000. Principal and interest are both due on February 1, 2022.= we reduced this amount from notes payable , and show it in accrues intrest / intrest payable category for more proper way .
5. The company began operations in 2016. Net income less dividends since inception of the company totals $35,000.this amount inclue in shareholder equity( common stock + retained earning. so we classify it in two catagory ..