Country Cooking Prepared Meals is a retail shop owned by Beatrice Wilson. She wants to expand her business and has submitted the following balance sheet to her bank as part of the business loan application.
Instructions
1. Identify any errors in the balance sheet and explain why they should be considered errors.
2. Prepare a corrected balance sheet in accordance with generally accepted accounting principles.
Country Cooking Prepared Meals
Balance Sheet
December 31, 2016
Assets
Cash .............................................. $ 36,000
Accounts Receivable ............................... 8,500
Inventory ........................................... 38,550
Store Fixtures ..................................... 28,000
Store Equipment ................................. 16,000
Personal Residence ............................. 340,000
Personal Automobile ............................ 33,250
Total Assets ................................... $500,300
Liabilities and Owner's Equity
Accounts Payable ............................... $ 28,000
Note Payable on Personal Automobile ..........16,550
Mortgage Payable on Personal Residence ... 110,500
Beatrice Wilson, Capital .................. 345,250
Total Liabilities and Owner's Equity ... $500,300
The following additional information is provided by Wilson:
a. The inventory has an original cost of $35,000. Wilson has valued it on the balance sheet at what it would cost today.
b. Wilson has counted $8,000 in her personal savings account in the business cash account.
c. The store fixtures, shown at original cost, were purchased two years ago. No depreciation has been taken on them. Depreciation for the two years, based on their estimated life of 10 years, would be $5,600.
d. The store equipment cost $19,200. No depreciation has been computed on the equipment, but it has been written down to its estimated replacement cost by a charge to expense. Depreciation on the equipment's original cost for the 24 months since its purchase would be $3,800.
e. Both the personal residence and personal automobile are only occasionally used for business purposes.
Analyze: Based on the new balance sheet that you have prepared, what are the total current assets for Country Cooking Prepared Meals?