
Concept explainers
This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and
To determine: A corrected, classified balance sheet.

Explanation of Solution
Classified balance sheet:
“A balance sheet with classification of assets and liabilities based on their current and noncurrent status and grouped under separate headings and sub-headings for its enhanced usefulness is known as classified balance sheet”.
Following is the corrected classified balance sheet of incorporation LG:
Incorporation LG | ||
Balance Sheet | ||
At December 31, 2016 | ||
Assets | Amount in $ | Amount in $ |
Current assets: | ||
Cash (1) | 20,000 | |
uncollectible accounts of $5,000 (2) |
55,000 |
|
Inventories | 55,000 | |
Total current assets | 130,000 | |
Investments: | ||
Restricted cash | 20,000 | |
Note receivable | 20,000 | |
Total investments | 40,000 | |
Property, plant, and equipment: | ||
Machinery | 190,000 | |
Less: |
-70,000 | |
Net property, plant, and equipment | 120,000 | |
Intangible assets: | ||
Franchise | 30,000 | |
Total assets | $320,000 | |
Liabilities and Shareholders' Equity | Amount in $ | Amount in $ |
Current liabilities: | ||
Accounts payable | $50,000 | |
Interest payable | 5,000 | |
Note payable (4) | 50,000 | |
Total current liabilities | 105,000 | |
Long-term liabilities: | ||
Bonds payable | 110,000 | |
Total liabilities | 215,000 | |
Shareholders’ equity: | ||
Common stock, no par value; 100,000 shares authorized; 50,000 shares issued and outstanding (5) |
70,000 |
|
|
35,000 | |
Total shareholders’ equity | 105,000 | |
Total liabilities and shareholders’ equity | $320,000 |
Working notes:
1. Calculate the amount of cash:
2. Calculate the amount of accounts receivable:
3. Calculate the amount of accumulated depreciation:
4. Calculate the amount of note payable:
5. Calculate the amount of common stock:
Hence, the total assets and the total liabilities and share holders’ equity agrees to the amount of $320,000
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Chapter 3 Solutions
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