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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, 2016 Assets Cash Accounts receivable Inventories Machinery (net) Franchise (net) $ 46,000 89,000 58,000 123,000 33,000 Total assets $349,000 Liabilities and Shareholders Equity Accounts payable Allowance for uncollectible accounts Note payable Bonds payable Shareholders equity S 56,000 8,000 61,000 113,000 111,000 otal 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 20 2 The cost of the machinery is $196,000 3. Accounts receivable includes a $23,000 note receivable from a customer due in 2019 4. The note payable includes accrued interest of $8,000. Principal and interest are both due on February 1, 2017 5. The company began operations in 2011. Income less dividends since inception of the company totals $38,000 6. 53,000 shares of no par common stock were issued in 2011. 100,000 shares are authorized. Required: Prepare a corrected, classified balance sheet. (Amounts to be deducted should be indicated by a minus sign.) LOS GATOS CORPORATION Balance Sheet
Expert Answer
| LOS GATOS CORPORATION | ||||
| Balance Sheet | ||||
| As at December , 3016 | ||||
| Assets | ||||
| Current assets: | ||||
| Cash | 46000 | |||
| Less: Restricted cash (Note 1) | -23000 | 23000 | ||
| Inventory | 58000 | |||
| Accounts receivable | 89000 | |||
| Less: Receivable in 2019 (Note 2) | -23000 | |||
| 66000 | ||||
| Less: allowance for uncollectible accounts | -8000 | 58000 | ||
| Total Current assets | 139000 | |||
| Machinery , at cost | 196000 | |||
| Less: Accumulated depreciation (Note 3) | -73000 | 123000 | ||
| Franchise(net) | 33000 | |||
| Cash avaibable for repayment of bonds payable in 2020 (Note 1) | 23000 | |||
| Accounts receivable due in 2019 (Note 2) | 23000 | |||
| Total Assets | 341000 | |||
| Liabilities and Shareholders’ equity | ||||
| Current liabilities | ||||
| Accounts payable | 56000 | |||
| Notes payable including interest due | 61000 | |||
| Total current liabilities | 117000 | |||
| Bonds payable | 113000 | |||
| Shareholders’ equity | ||||
| Common stock | 73000 | |||
| (Authorised 100,000 shares of no par , out of which 53,000 issued | ||||
| and paid up) | ||||
| Retained earnings | 38000 | |||
| Total shareholders’ equity | 111000 | |||
| Total liabilities & shareholders’ equity | 341000 | |||
| Notes: | ||||
| 1. Cash balance of $23,000 restricted to be used for repayment of bonds payable in 2020 | ||||
| to be shown as a long term asset. | ||||
| 2. Accounts receivable of $23,000 due from customer in 2019 shall be shown as a long term asset. | ||||
| 3. Cost of the machinery (A) =196,000 | ||||
| Net value of machinery (B) =123,000 | ||||
| Accumulated depreciation (A – B) =73,000 | ||||
| 4. Note payable should be presented as a current liability as it due to be paid in 2017. | ||||
| 5. Shareholders’ equity (A) 111,000 | ||||
| Less: Income less dividends from inception (Retained earnings) (B) 38,000 | ||||
| Common stock (A – B) 73,000 | ||||
