Question

The following balance sheet for the LG Corporation was prepared by a recently hired accountant. In reviewing the statement, you notice several errors.

LG CORPORATION
Balance Sheet
At December 31, 2021
Assets
Cash	$	58,000
Accounts receivable		107,000
Inventory		64,000
Machinery (net)		129,000
Franchise (net)		39,000
Total assets	$	397,000
Liabilities and Shareholders’ Equity
Accounts payable	$	68,000
Allowance for uncollectible accounts		14,000
Notes payable		73,000
Bonds payable		119,000
Shareholders’ equity		123,000
Total liabilities and shareholders’ equity	$	397,000

Additional Information:

1. Cash includes a $29,000 restricted amount to be used for repayment of the bonds payable in 2025.
2. The cost of the machinery is $208,000.
3. Accounts receivable includes a $29,000 notes receivable from a customer due in 2024.
4. The notes payable balance includes accrued interest of $14,000. 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 $44,000.
6. 59,000 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.

Answer 1

Amount $ Amount $ Balance Sheet as at 31st December 2021 :- Assets Current Assets :- Cash (58000-29000) Accounts Receivable (107000-29000) Less: Allowance for uncollectible accounts 29,000 78,000 (14,000) 64,000 Inventory Total Current Assets 64,000 1,57,000 Investments - Restricted cash Notes Receivable Total Investments 29,000 29,000 58,000 Property, plant, and equipment :- Machinery Less: Accumulated depreciation Net, Property, plant, and equipment 2,08,000 (79,000) 1,29,000 Intangibles : Franchise Total Assets 39,000 3,83,000 Amount $ Amount $ 68,000 Liabilities and Shareholders Equity Current Liabilities :- Accounts Payable Interest Payable Notes Payable (73000-14000) Total Current Liabilities 14,000 59,000 1,41,000 Long term Liabilitiess: Bonds Payable 1,19,000 Shareholders Equity : Common stock Retained earnings (123000-59000) Total Shareholders Equity Total Liabilities and Shareholders Equity 59,000 64,000 1,23,000 3,83,000