Exercise 3-7 (Static) 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	$	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
7. Required:
8. 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.)

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.)