Scott Wood has operated a small auto repair shop for some time. The business has been rather small and Scott has always done all of the accounting for the business. Lately the business has grown quite a bit. Scott thinks that hiring you as his accountant will give him more time to manage his growing business. He brought you the following balance sheet: Scott Wood Auto Repair, Inc. Balance Sheet December 31, 2005 Assets Liabilities and Stockholders' Equity Cash $ 16,000 Note payable--family car $ 5,000 Accounts payable 4,000 Mortgage--bldg. 200,000 Parts inventory 130,000 Supplies 4,000 Total liabilities 205,000 Family car 9,000 Buildings 298,000 Stockholders' equity 256,000 Total $461,000 Total liabilities & equity $461,000 In addition to his balance sheet, Scott notes the following: a. Of the cash listed on the balance sheet, $6,000 is from his wife's decorating business. b. It would cost $144,000 to replace the inventory on the balance sheet. c. Of the Stockholders' Equity listed on the balance sheet, $18,000 represents a personal investment made by Scott in his wife's decorating business. Required: Prepare a corrected balance sheet for the auto shop and state reasons for your corrections
Scott Wood has operated a small auto repair shop for some time. The business has been rather small and Scott has always done all of the accounting for the business. Lately the business has grown quite a bit. Scott thinks that hiring you as his accountant will give him more time to manage his growing business. He brought you the following
Scott Wood Auto Repair, Inc.
Balance Sheet
December 31, 2005
Assets Liabilities and
Cash $ 16,000 Note payable--family
car
$ 5,000
Accounts payable 4,000 Mortgage--bldg. 200,000
Parts inventory 130,000
Supplies 4,000 Total liabilities 205,000
Family car 9,000
Buildings 298,000 Stockholders' equity 256,000
Total $461,000 Total liabilities & equity $461,000
In addition to his balance sheet, Scott notes the following:
a. Of the cash listed on the balance sheet, $6,000 is from his wife's decorating business.
b. It would cost $144,000 to replace the inventory on the balance sheet.
c. Of the Stockholders' Equity listed on the balance sheet, $18,000 represents a personal investment made by Scott in his wife's decorating business.
Required: Prepare a corrected balance sheet for the auto shop and state reasons
for your corrections
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
