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 $ 50,000

Accounts receivable 95,000

Inventory 60,000

Machinery (net) 125,000

Franchise (net) 35,000

Total assets $ 365,000

Liabilities and Shareholders Equity

Accounts payable $ 60,000

Allowance for uncollectible accounts 10,000

Notes payable 65,000

Bonds payable 115,000

Shareholders equity 115,000

Total liabilities and shareholders equity $ 365,000

Additional Information:

1. Cash includes a $25,000 restricted amount to be used for repayment of the bonds payable in 2025.
2. The cost of the machinery is $200,000.
3. Accounts receivable includes a $25,000 notes receivable from a customer due in 2024.
4. The notes payable balance includes accrued interest of $10,000. 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 $40,000.
6. 55,000 shares of no par common stock were issued in 2016. 200,000 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.)