The following balance sheet, prepared by a careless bookkeeper, has been given t
ID: 461990 • Letter: T
Question
The following balance sheet, prepared by a careless bookkeeper, has been given to you to review.
Required:
List any corrections that need to be made. Errors can be in classification, lack of disclosure, format, or terminology.
Eldorado, Inc.
Balance Sheet
For the Year Ended June 30, 2010
Assets
Current Assets:
Accounts Receivable
$ 37,000
Merchandise Inventory
62,000
Cash
17,000
$116,000
Investments:
Marketable Securities
$ 18,000
Treasury Stock
4,000
22,000
Tangible Assets:
Buildings
$194,000
Less: Reserve for Depreciation
(34,000)
160,000
Other Assets:
Unamortized Portion of Bond Payable Discount
3,000
$301,000
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts Payable
$ 26,000
Bank Note Payable (due 6/1/2011)
22,000
$ 48,000
Long-Term Liabilities:
Bonds Payable
112,000
Capital Stock:
Common Stock
$ 49,000
Earned Surplus
92,000
141,000
$301,000
Eldorado, Inc.
Balance Sheet
For the Year Ended June 30, 2010
Assets
Current Assets:
Accounts Receivable
$ 37,000
Merchandise Inventory
62,000
Cash
17,000
$116,000
Investments:
Marketable Securities
$ 18,000
Treasury Stock
4,000
22,000
Tangible Assets:
Buildings
$194,000
Less: Reserve for Depreciation
(34,000)
160,000
Other Assets:
Unamortized Portion of Bond Payable Discount
3,000
$301,000
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts Payable
$ 26,000
Bank Note Payable (due 6/1/2011)
22,000
$ 48,000
Long-Term Liabilities:
Bonds Payable
112,000
Capital Stock:
Common Stock
$ 49,000
Earned Surplus
92,000
141,000
$301,000
Explanation / Answer
1.
The date should read "June 30, 2010," as a balance sheet is at a particular point in time.
2.
Cash should be listed first under current assets.
3.
Marketable securities should be a current asset, listed after cash.
4.
Treasury stock should be deducted from stockholders' equity.
5.
"Allowance" is a better term than "Reserve" in relation to depreciation.
6.
The bond discount should be subtracted from bonds payable rather than being shown as an asset.
7.
The bank note payable is not due within a year and should be classified as long-term.
8.
Retained earnings is now common terminology to replace earned surplus.
9.
The par value and number of shares should be disclosed for the stock.
1.
The date should read "June 30, 2010," as a balance sheet is at a particular point in time.
2.
Cash should be listed first under current assets.
3.
Marketable securities should be a current asset, listed after cash.
4.
Treasury stock should be deducted from stockholders' equity.
5.
"Allowance" is a better term than "Reserve" in relation to depreciation.
6.
The bond discount should be subtracted from bonds payable rather than being shown as an asset.
7.
The bank note payable is not due within a year and should be classified as long-term.
8.
Retained earnings is now common terminology to replace earned surplus.
9.
The par value and number of shares should be disclosed for the stock.
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