
Concept explainers
This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and stockholders (stockholders’ equity) over those resources. The resources of the company are assets which include money contributed by stockholders and creditors. Hence, the main elements of the balance sheet are assets, liabilities, and stockholders’ equity.
To determine: The find out the errors while reviewing the 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 balance sheet of incorporation LG:
Incorporation LG | ||
Balance Sheet | ||
At December 31, 2018 | ||
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.
Want to see more full solutions like this?
Chapter 3 Solutions
INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
- Techtronic Inc., a manufacturing company, has just completed an order that Micro Solutions placed for 150 gadgets. The direct material, purchased parts, and direct labor costs for the Micro order are as follows: • Cost of direct materials: $54,000 • Cost of purchased parts: $30,000 • Direct labor hours: 300 hours • • Average direct labor pay rate: $18 per hour Overhead costs were applied at a plant wide overhead rate of 250 percent of direct labor dollars. Compute the total cost of the Micro order.arrow_forwardBlueSky Corp has total debt of $250 million and 40 million shares outstanding with a market price of $5.50 per share. Calculate BlueSky's market debt-equity ratio. A) 1.52 B) 0.88 C) 1.14 D) 2.15arrow_forwardPlease need answer the general accounting question not use aiarrow_forward
- Groot Co. (GC) sells $1,200,000 of 6-year, 10% bonds at par plus accrued interest. The bonds are dated January 1, 2026 but due to market conditions are not issued until May 1, 2026. Interest is payable on June 30 and December 31 each year. The market rate of interest at time of issue is the same as the stated rate. Required The issuance of the bonds on May 1, 2026. Assume that GC has adopted a policy of crediting accrued interest payable for the accrued interest on the date of sale. Payment of interest on June 30, 2026. Payment of interest on December 31, 2026.arrow_forward1. Define working capital and explain its importance in financial health and liquidity management. 2. Assess how the matching concept and accrual basis affect the reporting of current assets and liabilities. 3. Using a hypothetical balance sheet (you may create one), identify at least 5 current assets and 5 current liabilities and analyze how changes in these elements affect liquidity ratios. 4. Recommend at least two strategies VinGrenDom Ltd. can implement to optimize working capital.arrow_forwardNonearrow_forward
- No Ai Answerarrow_forwardI need the correct answer to this financial accounting problem using the standard accounting approach.arrow_forwardTheron Interiors manufactures handcrafted cabinetry and uses a process costing system. During the month of October, the company started Production on 720 units and completed 590 units. The remaining 120 units were 60% complete in terms of materials and 40% complete in terms of labor and overhead. The total cost incurred during the month was $45,000 for materials and $31,200 for labor and overhead. Using the weighted-average method, what is the equivalent unit cost for materials and conversion costs (labor and overhead)?arrow_forward
- General Accountingarrow_forwardKamala Khan has to decide between the following two options: Take out a student loan of $70,000 and study accounting full time for the next three years. The interest on the loan is 4% per year payable annually. The principle is to be paid in full after ten years. Study part time and work part time to earn $15,000 per year for the following six years. Once Kamala graduates, she estimates that she will earn $30,000 for the first three years and $40,000 the next four years. Kamala's banker says the market interest for a ten-year horizon is 6%. Required Calculate NPV of the ten-year cash flows of the two options. For simplification assume that all cash flows happen at year-end. Based on the NPV which of the two options is better for Kamala?arrow_forwardFinancial Accountingarrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





