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 $ 44,000 Accounts receivable 86,000 Inventory 57,000 Machinery (net) 122,000 Franchise (net) 32,000 Total assets $ 341,000 Liabilities and Shareholders’ Equity Accounts payable $ 54,000 Allowance for uncollectible accounts 7,000 Notes payable 59,000 Bonds payable 112,000 Shareholders’ equity 109,000 Total liabilities and shareholders’ equity $ 341,000 Additional Information: Cash includes a $22,000 restricted amount to be used for repayment of the bonds payable in 2025. The cost of the machinery is $194,000. Accounts receivable includes a $22,000 notes receivable from a customer due in 2024. The notes payable balance includes accrued interest of $7,000. 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 $37,000. 52,000 shares of no par common stock were issued in 2016. 200,000 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. (Amounts to be deducted should be indicated by a minus sign.)
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
The following
| LOS GATOS CORPORATION | |||
| Balance Sheet | |||
| At December 31, 2021 | |||
| Assets | |||
| Cash | $ | 44,000 | |
| 86,000 | |||
| Inventory | 57,000 | ||
| Machinery (net) | 122,000 | ||
| Franchise (net) | 32,000 | ||
| Total assets | $ | 341,000 | |
| Liabilities and Shareholders’ Equity | |||
| Accounts payable | $ | 54,000 | |
| Allowance for uncollectible accounts | 7,000 | ||
| Notes payable | 59,000 | ||
| Bonds payable | 112,000 | ||
| Shareholders’ equity | 109,000 | ||
| Total liabilities and shareholders’ equity | $ | 341,000 | |
Additional Information:
- Cash includes a $22,000 restricted amount to be used for repayment of the bonds payable in 2025.
- The cost of the machinery is $194,000.
- Accounts receivable includes a $22,000 notes receivable from a customer due in 2024.
- The notes payable balance includes accrued interest of $7,000. 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 $37,000.
- 52,000 shares of no par common stock were issued in 2016. 200,000 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
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