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Your friend, Daniel Nat, recently began work as the lead accountant for Asheville Company. Dan prepared the following balance sheet for December 31, 20Y5: White a brief memo to Daniel explaining the errors in Asheville Company’s balance sheet and provide the correct presentation for the balance sheet.

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Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

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Chapter
Section
BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
Chapter 4, Problem 3TIF
Textbook Problem
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Your friend, Daniel Nat, recently began work as the lead accountant for Asheville Company. Dan prepared the following balance sheet for December 31, 20Y5:

Chapter 4, Problem 3TIF, Your friend, Daniel Nat, recently began work as the lead accountant for Asheville Company. Dan , example  1

Chapter 4, Problem 3TIF, Your friend, Daniel Nat, recently began work as the lead accountant for Asheville Company. Dan , example  2

Chapter 4, Problem 3TIF, Your friend, Daniel Nat, recently began work as the lead accountant for Asheville Company. Dan , example  3White a brief memo to Daniel explaining the errors in Asheville Company’s balance sheet and provide the correct presentation for the balance sheet.

To determine

Write a brief memo explaining the errors in the balance sheet and present the correct balance sheet.

Explanation of Solution

MEMO

To:

Mr. D

From:

Mr. F

Subject: Correct presentation of the balance sheet of Company A

Mr. D,

The following are the brief explanation for the correct presentation of the balance sheet of Company A.

Errors in the asset side of the balance sheet of Company A:

  • Accounts payable is a liability account and it should be reported in the liabilities section of the balance sheet. But, here the accounts payable is wrongly reported in the assets side of the balance sheet.
  • Common stock is a component of stockholders equity account and it should be reported in the stockholders equity section of the balance sheet. But here it is wrongly reported in the asset side of the balance sheet.
  • The asset section should be classified into two different sections such as current assets and property, plant and equipment.
  • Cash and accounts receivable should be reported in the current assets section of the balance sheet.
  • Land account should be reported in the property, plant and equipment section of the balance sheet.

Errors in the liabilities side of the balance sheet of Company A:

  • Equipment is an asset account and it should be reported in the property, plant and equipment section of the balance sheet.
  • The liabilities section should be classified into different sections such as current liabilities, non-current liabilities and stockholders’ equity section,
  • Accounts payable and wages payable should be reported in the current liabilities section of the balance sheet.
  • Common stock and retained earnings should be reported in the stockholders’ equity section of the balance sheet...

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Chapter 4 Solutions

Financial And Managerial Accounting
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