Question

Exercise 5-6 The bookkeeper for Metlock Company has prepared the following balance sheet as of July 31, 2020. Cash Accounts receivable (net) Inventory Equipment (net) Patents METLOCK COMPANY BALANCE SHEET AS OF JULY 31, 2020 $ 72,670 Notes and accounts payable 44,170 Long-term liabilities 63,670 Stockholders' equity 84,000 21,000 $285,510 $ 47,670 78,670 159,170 $285,510 The following additional information is provided. 1. Cash includes $1,200 in a petty cash fund and $13,020 in a bond sinking fund. 2. The net accounts receivable balance is comprised of the following two items: (a) accounts receivable $47,670 and (b) allowance for doubtful accounts $3,500. 3. Inventory costing $5,418 was shipped out on consignment on July 31, 2020. The ending inventory balance does not include the consigned goods. Receivables in the amount of $5,418 were recognized on these consigned goods. 4. Equipment had a cost of $115,670 and an accumulated depreciation balance of $31,670. 5. Income taxes payable of $6,000 were accrued on July 31. Metlock Company, however, had set up a cash fund to meet this obligation. This cash fund was not included in the cash balance but was offset against the income taxes payable amount. Prepare a corrected classified balance sheet as of July 31, 2020, from the available information, adjusting the account balances using the additional information. (List Current Assets in order of liquidity)

Answer 1

Preparation of Clssified Balance Sheet as of July 31, 2020 METLOCK COMPANY Balance Sheet For the year July 31, 2020 Amount Particulars Amount Assets Current Assets: Cash $ 65,650 Accounts Receivable $ 42,252 Less: Allowance for doubtful accour $ -3,500 Net Accounts Receivable $ 38,752 Inventories $ 69,088 Total Current Assets Long-term investments:- Bond sinking fund Property, Plant and Equipment :- Equipment (Net) Intangible assets: Patents Total Assets $ 1,73,490 $ 13,020 $ 84,000 $ 21,000 $ 2,91,510 Liabilities & Stock Holders Equity Current Liabilities Notes and accounts payable $ 47,670 Taxes Payable $ 6,000 Total current liabilities $ 53,670 Long-term Liabilities: $ 78,670 Total Liabilities $ 1,32,340 Stockholder's Equity $ 1,59,170 Total Liabilities and Equity $ 2,91,510 $ Working Notes: Particulars Amount ($) Cash Balance Cash $ 72,670 Less: Sinking fund balance $ -13,020 Add: Increase in income tax payable $ 6,000 Cash at the end of the period $ 65,650 Accounts Receivables Accounts Receivable Less: consignment Accounts Receivables at end $ $ $ 47,670 -5,418 42,252 Inventories Inventories Add: consignment Inventory Inventories at end $ $ $ 63,670 5,418 69,088 * Kindly Comment down for any clarifications/ queries and please upvote.