Identify errors using GAAP; prepare a classified balance sheet; and calculate the current ratio. An inexperienced accountant has put together a balance sheet for Wings and Things Inc. The balances shown are at June 30, 2011. (LO 1, 3, 5)

\section*{Required}

a. Identify the errors in the balance sheet.

b. Using good form, prepare a corrected, classified balance sheet.

c. Calculate the current ratio using the corrected amounts from the balance sheet prepared in \(b\). What does this ratio measure? Discuss the implications of Wings and Things' current ratio.

d. Explain why it is important to properly follow GAAP when preparing financial statements.

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Assets Liabilities and Equity Current Assets: Current Liabilities: Cash $ 27,000 Prepaid insurance $ 2,000 Accounts receivable 6,000 Interest receivable 5,000 Land 30,000 Salaries payable 8,000 Supplies 5,000 Intangible assets 39,000 Operating expenses 2,000 Accounts payable 3,000 Total Current Assets 70,000 Total Current Liabilities 57,000 Salaries payable 46,000 Shareholder's Equity Buildings Equipment 36,000 Retained earnings 40,000 13,000 Common stock 62,000 Intangible assets Total Noncurrent assets 6,000 101,000 Short-term note 10,000 Total Assets $ 171,000 Total Shareholders' Equity Total Liabilities and Equity $ 169,000 112,000