Reference no: EM132864362

Question - 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:

-Cash includes a $20,000 restricted amount to be used for repayment of the bonds payable in 2025.

-The cost of the machinery is $190,000.

-Accounts receivable includes a $20,000 notes receivable from a customer due in 2024.

-The notes payable balance includes accrued interest of $5,000. Principal and interest are both due on February 1, 2022.

-The company began operations in 2016. Net income less dividends since inception of the company totals $35,000.

-50,000 shares of no par common stock were issued in 2016. 100,000 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.