Diane Wynne is the bookkeeper for Bates Company, Inc. Diane has been trying to get the company’s balance sheet to balance. She finally got it to balance, but she still isn’t sure that it is correct.
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BATESCOMPANY,INC. Balance Sheet For the Month Ended December 31, 2010 |
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Assets |
Liabilities and Stockholders’ Equity |
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|
Equipment |
$20,500 |
Common stock |
$12,000 |
|
Cash |
10,500 |
Accounts receivable |
6,000 |
|
Supplies |
2,000 |
Dividends |
2,000 |
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Accounts payable |
5,000 |
Notes payable |
14,000 |
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Total assets |
$28,000 |
Retained earnings |
10,000 |
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Total liabilities and |
$28,000 |
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Instructions
Explain to Diane Wynne in a memo (a) the purpose of a balance sheet, and (b) why this balance sheet is incorrect and what she should do to correct it.