Corrected Balance Sheet
The accountant for Delicious Bakery prepares the following condensed balance sheet.
|
Delicious Bakery |
|
|
Current assets |
$53,415 |
|
Less: Current liabilities |
29000 |
|
Working capital |
$24,415 |
|
Add: Other assets |
75120 |
|
$99,535 |
|
|
Less: Other liabilities |
3600 |
|
Investment in business |
$95,935 |
A review of the account balances disclosed the following data.
(a) An analysis of the current asset grouping revealed the following:
|
Cash |
$10,600 |
|
Accounts receivable (fully collectible) |
12,500 |
|
Notes receivable (notes of customer who has been declared bankrupt and |
|
|
is unable to pay anything on the obligations) |
1,000 |
|
Investment securities—trading, at cost (market value $2,575) |
4,250 |
|
Inventory |
20,965 |
|
Cash surrender value of insurance on officers’ lives |
4100 |
|
Total current assets |
$53,415 |
The inventory account was found to include supplies costing $425, a delivery truck acquired at the end of 2008 at a cost of $2,100, and fixtures at a depreciated value of $10,400.The fixtures had been acquired in 2002 at a cost of $12,500.
(b) The total for other assets was determined as follows.
|
Land and buildings at cost of acquisition, July 1, 2006 |
$92,000 |
|
Less balance due on mortgage, $16,000, and accrued interest on mortgage, |
$880 |
|
(mortgage is payable in annual installments of $4,000 on July 1 of each year |
|
|
together with interest for the year at that time at 11%) |
16880 |
|
Total other assets |
$75,120 |
It was estimated that the land at the time of the purchase was worth $30,000. Buildings as of December 31, 2008,were estimated to have a remaining life of 171⁄2 years.
(c) Current liabilities represented balances that were payable to trade creditors.
(d) Other liabilities consisted of withholding, payroll, real estate, and other taxes payable to the federal, state, and local governments. However, no recognition was given the accrued salaries, utilities, and other miscellaneous items totaling $350.
(e) The company was originally organized in 2001 when 5,000 shares of no par stock with a stated value of $5 per share were issued in exchange for business assets that were recognized on the books at their fair market value of $55,000.
Instructions: Prepare a corrected balance sheet with the items properly classified.