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Balance sheet List the errors you find in the following balance sheet. Prepare a corrected balance sheet. Labyrinth Services Co. Balance Sheet For the Year Ended August 31, 2018 Assets Current assets: Cash................................................................ $ 18,500 Accounts payable.................................................... 31,300 Supplies............................................................ 6,500 Prepaid insurance................................................... 16,600 Land................................................................ 225,000 Total current assets................................................ $297,900 Property, plant, and equipment: Building............................................................. $400,000 Equipment.......................................................... 97,000 Total property, plant, and equipment................................ 635,400 Total assets............................................................ $933,300 Liabilities Current liabilities: Accounts receivable.................................................. $ 41,400 Accumulated depreciation—building.................................. 155,000 Accumulated depreciation—equipment................................... 25,000 Net income.......................................................... 118,200 Total liabilities......................................................... $339,600 Stockholders’ Equity Wages payable........................................................ $ 6,500 Common stock......................................................... 75,000 Retained earnings...................................................... 512,200 Total stockholders’ equity............................................... 593700 Total liabilities and stockholders’ equity.................................. $933,300

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Corporate Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305653535

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Section
BuyFindarrow_forward

Corporate Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305653535
Chapter 4, Problem 4.13EX
Textbook Problem
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Balance sheet

List the errors you find in the following balance sheet. Prepare a corrected balance sheet.

Labyrinth Services Co. Balance Sheet For the Year Ended August 31, 2018
Assets
Current assets:
Cash................................................................ $ 18,500
Accounts payable.................................................... 31,300
Supplies............................................................ 6,500
Prepaid insurance................................................... 16,600
Land................................................................ 225,000
Total current assets................................................ $297,900
Property, plant, and equipment:
Building............................................................. $400,000
Equipment.......................................................... 97,000
Total property, plant, and equipment................................ 635,400
Total assets............................................................ $933,300
Liabilities
Current liabilities:
Accounts receivable.................................................. $ 41,400
Accumulated depreciation—building.................................. 155,000
Accumulated depreciation—equipment................................... 25,000
Net income.......................................................... 118,200
Total liabilities......................................................... $339,600
Stockholders’ Equity
Wages payable........................................................ $ 6,500
Common stock......................................................... 75,000
Retained earnings...................................................... 512,200
Total stockholders’ equity............................................... 593700
Total liabilities and stockholders’ equity.................................. $933,300

To determine

Classified balance sheet

Classified Balance Sheet: In order to improve the ease of understanding, a classified balance sheet is used. Classified balance sheet categorizes each item of assets, liabilities, and stockholders ‘equity into a specific category.

A classified balance sheet is prepared under the following heading:

Assets Liabilities
Current assets: Current liabilities:
Cash Accounts payable
Marketable securities Interest payable
Accounts receivable Unearned revenues
Inventories Notes payable
Prepaid expenses Current maturities of long-term debt
Office supplies Total current liabilities
Total current assets
Investments: Long-term liabilities:
Marketable securities Bonds payable
Land held for investment Notes payable
Total investments Mortgage payable
Total long-term liabilities
Property, plant and equipment:  
Land Shareholders’ equity:
Building Common stock
Equipment Retained earnings
Less: Accumulated depreciation Total shareholders’ equity
Net property, plant and equipment Total Liabilities and Shareholders’ Equity
Intangibles:
Copyrights
Total Assets

Table (1)

To List: The errors in the balance sheet.

Explanation of Solution

  • In balance sheet the date must be “at august or as on August 31, 2018” but in the given balance sheet it’s mentioned as “For the Year Ended August 31, 2018”.
  • In current asset category, instead of accounts receivable, the item of accounts payable were wrongly reported. Similarly, In current liabilities category, instead of accounts payable, the item of accounts receivable were wrongly reported.
  • The item of land should be reported under the category of property, plant and equipment...
To determine

To Prepare: A Corrected balance sheet of L Service Company at August 31, 2018.

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Chapter 4 Solutions

Corporate Financial Accounting
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Ch. 4 - Flow of accounts into financial statements The...Ch. 4 - Retained earnings statement Blake Knudson owns and...Ch. 4 - Classified balance sheet The following accounts...Ch. 4 - Closing entries After the accounts have been...Ch. 4 - Accounting cycle From the following list of steps...Ch. 4 - Flow of accounts into financial statements The...Ch. 4 - Classifying accounts Balances for each of the...Ch. 4 - Financial statements from the end-of-period...Ch. 4 - Financial statements from the end-of-period...Ch. 4 - Income statement The following account balances...Ch. 4 - Income statement; net loss The following revenue...Ch. 4 - Income statement FedEx Corporation had the...Ch. 4 - Retained earnings statement Climate Control...Ch. 4 - Retained earnings statement; net loss Selected...Ch. 4 - Classifying assets Identify each of the following...Ch. 4 - Balance sheet classification At the balance sheet...Ch. 4 - Balance sheet Dynamic Weight Loss Co. offers...Ch. 4 - Balance sheet List the errors you find in the...Ch. 4 - Identifying accounts to be closed From the list...Ch. 4 - Closing entries Prior to its closing, Income...Ch. 4 - Closing entries with net income After all revenue...Ch. 4 - Closing entries with net loss Rainbow Services Co....Ch. 4 - Identifying permanent accounts Which of the...Ch. 4 - Post-closing trial balance An accountant prepared...Ch. 4 - Steps in the accounting cycle Rearrange the...Ch. 4 - Appendix 1 Completing an end-of-period spreadsheet...Ch. 4 - Appendix 1 Adjustment data on an end-of-period...Ch. 4 - Appendix 1 Completing an end-of-period spreadsheet...Ch. 4 - Appendix 1 Financial statements from an...Ch. 4 - Appendix 1 Adjusting entries from an end-of-period...Ch. 4 - Appendix 1 Closing entries from an end-of-period...Ch. 4 - Appendix 2 Reversing entry The following adjusting...Ch. 4 - Appendix 2 Adjusting and reversing entries On the...Ch. 4 - Appendix 2 Adjusting and reversing entries On the...Ch. 4 - Appendix 2 Entries posted to wages expense account...Ch. 4 - Appendix 2 Entries posted to wages expense account...Ch. 4 - Financial statements and closing entries Lamp...Ch. 4 - Financial statements and closing entries Foxy...Ch. 4 - T accounts, adjusting entries, financial...Ch. 4 - Ledger accounts, adjusting entries, financial...Ch. 4 - Complete accounting cycle For the past several...Ch. 4 - Financial statements and closing entries Last...Ch. 4 - Financial statements and closing entries The...Ch. 4 - T accounts, adjusting entries, financial...Ch. 4 - Ledger accounts, adjusting entries, financial...Ch. 4 - Complete accounting cycle For the past several...Ch. 4 - The unadjusted trial balance of PS Music as of...Ch. 4 - Kelly Pitney began her consulting business, Kelly...Ch. 4 - Continuing Company Analysis- Amazon: Working...Ch. 4 - Under Armour: Current ratio The following year-end...Ch. 4 - Sears: Current ratio Sears Holdings Corporation is...Ch. 4 - Google and Microsoft: Current ratio Google, Inc....Ch. 4 - Ethics in Action New Wave Images is a graphics...Ch. 4 - Communication Your friend, Daniel Nat, recently...

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