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, 2024
Assets
Cash	$ 44,000
Accounts receivable	86,000
Inventory	57,000
Machinery (net)	122,000
Franchise (net)	32,000
Total assets	$ 341,000
Liabilities and Shareholders Equity
Accounts payable	$ 54,000
Allowance for uncollectible accounts	7,000
Notes payable	59,000
Bonds payable	112,000
Shareholders equity	109,000
Total liabilities and shareholders equity	$ 341,000

Additional Information:

1. Cash includes a $22,000 restricted amount to be used for repayment of the bonds payable in 2028.
2. The cost of the machinery is $194,000.
3. Accounts receivable includes a $22,000 notes receivable from a customer due in 2027.
4. The notes payable balance includes accrued interest of $7,000. Principal and interest are both due on February 1, 2025.
5. The company began operations in 2019. Net income less dividends since inception of the company totals $37,000.
6. 52,000 shares of no par common stock were issued in 2019. 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.

Note: Amounts to be deducted should be indicated by a minus sign.