Question: Exercise 3-7 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
Exercise 3-7 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, 2018 | |||
| Assets | |||
| Cash | $ | 52,000 | |
| Accounts receivable | 98,000 | ||
| Inventories | 61,000 | ||
| Machinery (net) | 126,000 | ||
| Franchise (net) | 36,000 | ||
| Total assets | $ | 373,000 | |
| Liabilities and Shareholders Equity | |||
| Accounts payable | $ | 62,000 | |
| Allowance for uncollectible accounts | 11,000 | ||
| Note payable | 67,000 | ||
| Bonds payable | 116,000 | ||
| Shareholders equity | 117,000 | ||
| Total liabilities and shareholders equity | $ | 373,000 | |
Additional information:
Cash includes a $26,000 restricted amount to be used for repayment of the bonds payable in 2022.
The cost of the machinery is $202,000.
Accounts receivable includes a $26,000 note receivable from a customer due in 2021.
The note payable includes accrued interest of $11,000. Principal and interest are both due on February 1, 2019.
The company began operations in 2013. Income less dividends since inception of the company totals $41,000.
56,000 shares of no par common stock were issued in 2013. 100,000 shares are authorized.
Required: Prepare a corrected, classified balance sheet. (Amounts to be deducted should be indicated by a minus sign.) it is asking you to correct the balance sheet with the given additional information.
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