P1-5A Micado Corporation was formed on January 1, 2017. At December 31, 2017, Mi
ID: 2330962 • Letter: P
Question
P1-5A Micado Corporation was formed on January 1, 2017. At December 31, 2017, Miko Liu, the president and sole stockholder, decided to prepare a balance sheet, which appeared as follows. MICADO CORPORATION Balance Sheet December 31,2017 Assets Cash Accounts receivable 50,000 Notes payable Inventory Boat S20,000 Accounts payable $30,000 15,000 22,000 63,000 36,000 Boat loan 24,000 Stockholders' equity Miko willingly admits that she is not an accountant by training. She is concerned that her balance sheet might not be correct. She has provided you with the following additional information. 1. The boat actually belongs to Miko, not to Micado Corporation. However, because she thinks she might take customers out on the boat occasionally, she decided to list it as an asset of the company. To be consistent, she also listed as a liability of the corporation her personal loan that she took out at the bank to buy the boat. thinks she could sell it for $36,000. She thought it would be best to record it at $36,000 ago. Miko included this in the receivables of Micado Corporation so she wouldn't forget that her 2. The inventory was originally purchased for $25,000, but due to a surge in demand Miko now 3. Included in the accounts receivable balance is $10,000 that Miko loaned to her brother 5 years brother owes her money Instructions (a) Comment on the proper accounting treatment of the three items above. (b) Provide a corrected balance sheet for Micado Corporation. (Hint: To get the balance sheet to balance, adjust stockholders' equity.) Cookie Creations Tot. assets $85,000Explanation / Answer
A)Since the boat is not owned by business /Micado corporation rather it is a personal asset of owner ,so it should not be recorded in books of business neither the loan associated with boat should be recorded in books
2)The inventory should be recorded at Lower of cost or market value .so the value of inventory should be Lower of 25000 or 36000 = $ 25000
3)Since The Receivables is a personal asset of owner and not of business ,it should not be recorded in books of business (asset not owned by business)
b)
MICADO CORPORATION
BALANCE SHEET
AS ON DECEMBER 31 ,2017
MICADO CORPORATION
BALANCE SHEET
AS ON DECEMBER 31 ,2017
Asset Liabilities and stockholders equity cash 20000 Accounts payable 30000 Accounts receivables [50000-10000] 40000 Note payable 15000 Inventory 25000 stockholders equity [Balancing figure ][85000-30000-15000] 40000 Total asset 85000 Total Liabilities and stockholders equity 85000Related Questions
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