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6E

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Intermediate Accounting (Kieso)
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Short Answer

The bookkeeper for Geronimo Company has prepared the following balance sheet as of July 31, 2017.

GERONIMO COMPANY

Balance Sheet

As of July 31, 2017

Cash

$69,000

Notes and accounts payable

$44,000

Account receivable (net)

40,500

Long-term liabilities

75,000

Inventory

60,000

Stockholder’s equity

155,500

Equipment (net)

84,000

Patents

21,000

$274,500

$274,500

The following additional information is provided.

1. Cash includes $1,200 in a petty cash fund and $15,000 in a bond sinking fund.

2. The net accounts receivable balance is comprised of the following two items: (a) accounts receivable $44,000 and (b) allowance for doubtful accounts $3,500.

3. Inventory costing $5,300 was shipped out on consignment on July 31, 2017. The ending inventory balance does not include the consigned goods. Receivables in the amount of $5,300 were recognized on these consigned goods.

4. Equipment had a cost of $112,000 and an accumulated depreciation balance of $28,000.

5. Income taxes payable of $6,000 were accrued on July 31. Geronimo Company, however, had set up a cash fund to meet this obligation. This cash fund was not included in the cash balance but was offset against the income taxes payable amount.

Instructions

Prepare a corrected classified balance sheet as of July 31, 2017, from the available information, adjusting the account balances using the additional information.

The total of the company’s balance sheet is $280,500.

See the step by step solution

Step by Step Solution

Definition of Income Tax

The charges paid by the business entity earning income in the country’s government are known as income tax. It is charged on the benefits generated during the fiscal year.

Classified Balance Sheet

GERONIMO COMPANY
Balance Sheet
As of July 31, 2017

Cash

$52,800

Notes and accounts payable

$44,000

Add: Income tax offset

6,000

$58,800

Income tax payable

6,000

Petty cash

1,200

Account receivable

44,000

35,200

Long-term liabilities

75,000

Less: Inventory consigned receivables

(5,300)

Less: allowance for doubtful accounts

(3,500)

Stockholder’s equity

155,500

Inventory

60,000

65,300

Add: Consigned inventory

5,300

Bond sinking funds

15,000

Equipment

112,000

84,000

Less: Accumulated depreciation

(28,000)

Patents

21,000

$280,500

$280,500

Most popular questions for Business-studies Textbooks

The current assets and current liabilities sections of the balance sheet of Allessandro Scarlatti Company appear as follows.

ALLESSANDRO SCARLATTI COMPANY

BALANCE SHEET PARTIAL

December 31, 2017

Cash

$40,000

Account payable

$61,000

Accounts receivables

$89,000

Note payable

67,000

Less: Allowance for doubtful accounts

(7,000)

82,000

$128,000

Inventory

171,000

Prepaid expenses

9,000

$302,000

The following errors in the corporation’s accounting have been discovered:

1. January 2018 cash disbursements entered as of December 2017 included payments of accounts payable in the amount of $39,000, on which a cash discount of 2% was taken.

2. The inventory included $27,000 of merchandise that had been received at December 31 but for which no purchase invoices had been received or entered. Of this amount, $12,000 had been received on consignment; the remainder was purchased f.o.b. destination, terms 2/10, n/30.

3. Sales for the first four days in January 2018 in the amount of $30,000 were entered in the sales journal as of December 31, 2017. Of these, $21,500 were sales on account and the remainder were cash sales.

4. Cash, not including cash sales, collected in January 2018 and entered as of December 31, 2017, totaled $35,324. Of this amount, $23,324 was received on account after cash discounts of 2% had been deducted; the remainder represented the proceeds of a bank loan.

Instructions

(a) Restate the current assets and current liabilities sections of the balance sheet in accordance with good accounting practice. (Assume that both accounts receivable and accounts payable are recorded gross.)

(b) State the net effect of your adjustments on Allessandro Scarlatti Company’s retained earnings balance.

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