Question

2. The bookkeeper of Outdoor Life Landscaping prepared the company's balance sheet while the accountant was ill. The balance sheet, shown on the next page, contains numerous errors. In particular, the bookkeeper knew that the balance sheet should balance, so he plugged in the owner's equity amount needed to achieve this balance. The owner's equity is incorrect. All other amounts are correct, but some are out of place or should not be included in this statement.

Answer 1

R1. Corrected Balance Sheet |Liabilities: Accounts payable Note payable |Total liabilities Assets: Cash Ofice supplies Accounts receivable $4,600 $600 $2,700 $24,600 $2,000 $27,300 Land Ofice Furniture Owner's Equity |T capital (W.N) $34,100 $5,800 $19,800 Total Liabilities and Owner's equity Total Assets S47,100 $47,100 Working as follows: Total Assets=Total Liabilities +Owner's Equity Owner's Equity=Total Assets -Total Liabilities =$47,100 - $27,300 =$19,800 R2.

Total Assets decrease from original balance sheet because they include income statement item i.e rent expense and salaries expense. On the other hand, it has also include note payable which is a liability for the company. A balance sheet only lists a company's assets, liabilities and owner's equity.