Exercise 3-7 (Algo) Balance sheet preparation; errors [LO3-2, 3-3]

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	$	46,000
Accounts receivable		89,000
Inventory		58,000
Machinery (net)		123,000
Franchise (net)		33,000
Total assets	$	349,000
Liabilities and Shareholders Equity
Accounts payable	$	56,000
Allowance for uncollectible accounts		8,000
Notes payable		61,000
Bonds payable		113,000
Shareholders equity		111,000
Total liabilities and shareholders equity	$	349,000

Additional Information:

1. Cash includes a $23,000 restricted amount to be used for repayment of the bonds payable in 2025.
2. The cost of the machinery is $196,000.
3. Accounts receivable includes a $23,000 notes receivable from a customer due in 2024.
4. The notes payable balance includes accrued interest of $8,000. 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 $38,000.
6. 53,000 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.

LOS GATOS CORPORATION Balance Sheet At December 31, 2021 Assets Current assets: Cash Accounts receivable $ 58,000 7X Inventory 58,000> Net accounts receivable $ 23,000 116,000 139,000 Total current assets Investments: Notes receivable Restricted cash $ 23,000 23,000 46,000 Total investments Property, plant, and equipment Machinery Accumulated depreciation Net property, plant, and equipment Intangible assets: Franchise (net) 196,000 (73,000) 123,000 33,000 Total assets $ 341,000 Liabilities and Shareholders' Equity Current liabilities: Accounts payable Interest payable Notes payable $ 56,000 8,000 53,000 117,000 Total current liabilities Long-term liabilities: Bonds payable 113,000 230,000 Total liabilities Shareholders' equity: Common stock Retained earnings $ 73,000 38,000 Total shareholders' equity Total liabilities and shareholders' equity 111,000 $ 341,000 Red text indicates no ponse was tion is incorrect no points deducted