1. The amount of cash, $19,400, includes $16,000 in the companys bank account, $2,400 on hand in the companys safe, and $1,000 in Jaffes personal savings account. 2. The accounts receivable, listed as $150,200, include $10,000 owed to the business by Dell, Inc. The remaining $140,200 is Jaffes estimate of future ticket sales from September 30 through the end of the year (December 31). 3. Jaffe explains to you that the props and costumes were purchased several days ago for $18,000. The business paid $3,000 of this amount in cash and issued a note payable to Hams Supply Co. for the remainder of the purchase price ($15,000). As this note is not due until January of next year, it was not included among the companys liabilities. 4. Old Town Playhouse rents the theater building from Time International. The $26,000 shown in the balance sheet represents the rent paid through September 30 of the current year. Time International acquired the building seven years ago at a cost of $180,000. 5. The lighting equipment was purchased on September 26 at a cost of $10,000, but the stage manager says that it isnt worth a dime. 6. The automobile is Jaffes classic 1935 Olds, which he purchased two years ago for $12,000. He recently saw a similar car advertised for sale at $15,000. He does not use the car in the business, but it has a personalized license plate that reads OTPLAY. 7. The accounts payable include business debts of $6,000 and the $1,000 balance of Jaffes personal Visa card. 8. Salaries payable include $30,000 offered to Robin Needelman to play the lead role in a new play opening next December and $2,000 still owed to stagehands for work done through September 30. 9. When Jaffe founded Old Town Playhouse several years ago, he invested $20,000 in the business. However, New Theatre, Inc., recently offered to buy his business for $184,600. Therefore, he listed this amount as his equity in the above balance sheet. Instructions a. Prepare a corrected balance sheet for Old Town Playhouse at September 30, 2011. b. For each of the nine numbered items above, explain your reasoning for deciding whether or not to include the items in the balance sheet and in determining the proper dollar valuation.

No 4: Howard Jaffe is the founder and manager of Old Town Playhouse. The business needs to obtain a bank loan to finance the production of its next play. As part of the loan application, Jaffe was asked to prepare a balance sheet for the business. He prepared the following balance sheet, which is arranged correctly but which contains several errors with respect to such concepts as the business entity and the valuation of assets, liabilities, and owner's equity. OLD TOWN PLAYHOUSE BALANCE SHEET SEPTEMBER 30, 2011 Liabilities & Owner's Equity Cash. $ 19,400 Liabilities: Accounts Receivable 150,200 Accounts Payable Props and Costumes 3,000 Salaries Payable.. 32,000 Theater Building 26,000 Total Liabilities. $ 39,000 Lighting Equipment. 10,000 Owner's Equity: Automobile 15,000 Howard Jaffe, Capital. Total $223,600 Total .. $223,600 Assets $ 7,000 184,600 In discussions with Jaffe and by reviewing the accounting records of Old Town Playhouse, you discover the following facts