
Balance sheet is the snapshot which shows the financial position of the business on a particular date. It provides the users of the financial statement to make effective decision.
The components of balance sheet are assets, liabilities and shareholders’ equity.
To Prepare: The balance sheet with given additional information and rectify its errors.

Explanation of Solution
Prepare a corrected balance sheet for Corporation H at December 31, 2016 as follows:
Corporation H | ||
Balance Sheet | ||
December 31, 2016 | ||
Assets
|
||
Current assets: | Amount ($) | Amount ($) |
Cash | 60,000 | |
Marketable securities (net) (f) | 20,000 | |
|
120,000 | |
Inventories (g) | 160,000 | |
Total current assets | 360,000 | |
Investments: | ||
Marketable securities (a) | 40,000 | |
Land held for sale (b) | 50,000 | |
Total investments | 90,000 | |
Property, plant and equipment: | ||
Land (c) | 130,000 | |
Buildings | 750,000 | |
Machinery | 280,000 | |
Less: |
(255,000) | |
Net property, plant and equipment | 905,000 | |
Intangible assets: | ||
Patent (net) | 100,000 | |
Total assets | 1,455,000 | |
Liabilities and shareholders’ Equity
|
||
Current liabilities: | ||
Accounts payable | 215,000 | |
Current maturities of long-term debt (h) | 25,000 | |
Total current liabilities | 240,000 | |
Long-term liabilities: | ||
Notes payable (d) | 475,000 | |
Shareholders’ equity: | ||
Common stock | 430,000 | |
|
310,000 | |
Total shareholders’ equity | 740,000 | |
Total liabilities and shareholders’ equity | 1,455,000 |
Table (1)
Working notes:
1.
Calculate the amount of marketable securities of Corporation H.
2.
Calculate the amount of land held for sale of Corporation H.
3.
Calculate the amount of land of Corporation H.
Or,
4.
Calculate the amount of notes payable of Corporation H.
5.
Calculate the amount of retained earnings of Corporation H.
Notes:
- The amount of marketable equity securities is $20,000 is to be sold in the coming year is shown in the current asset side of the balance sheet. (f)
- The original cost of inventories is $160,000 is shown in the current asset side of the balance sheet. (g)
- Notes payable is a long-term liability and the note is payable in installment of amount $25,000 which is classified under current maturities of long-term debt. (h)
Therefore, total assets as well as total liabilities and shareholder’s equity of Corporation H as on December 31, 2016 is $1,455,000.
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Chapter 3 Solutions
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