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Chapter 1: Q44PGA (page 45)

The bookkeeper of Outdoor Life Landscaping prepared the company’s balance sheet while the accountant was ill. The balance sheet, shown on the next page, contains numerous errors. In particular, the bookkeeper knew that the balance sheet should balance, so he plugged in the retained earnings amount needed to achieve this balance. The retained earnings is incorrect. All other amounts are correct, but some are out of place or should not be included in this statement. Prepare a corrected balance sheet. OUTDOOR LIFE LANDSCAPING Balance Sheet Month Ended November 30, 2018 Office Supplies Salaries Expense Property Tax Expense Accounts Payable Retained Earnings Total Assets Total Liabilities Common Stock Assets Liabilities Stockholders’ Equity \( 4,600 \) 72,850 600 34,100 2,700 Office Furniture 5,800 24,600 Rent Expense Notes Payable 450 \( 2,000 Dividends Service Revenue 11,000 35,000 \) 72,850 3,000 2,700 11,150 8,000

Short Answer

Expert verified

OUTDOOR LIFE LANDSCAPING

Balance Sheet

December 31, 2018

Assets
Liabilities

Cash

$4,600

Accounts Payable

$2,700

Land

34,100

Notes Payable

24,600

Office Supplies

600

Total Liabilities

27,300

Office Furniture

5,800

Stockholders’ Equity

Accounts Receivable

2,000

Common Stock

8,000

Retained Earnings

11,800

Total Stockholders’ Equity

19,800

Total Assets

$47,100

Total Liabilities and Stockholders’ Equity

$47,100

Step by step solution

01

Calculation of Retained Earnings

Retained earnings is calculated as follows:

Retained Earnings = Total Liabilities & Stockholders' Equity - Total Liabilities - Common stock

= $47,100 - $27.300 - $8.000

= $11,800

02

Explanation on Balance Sheet Items

As per the balance sheet, total assets equals $47,100, total liabilities equals $27,300 and total stockholders’ equity equals $19,800.

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Most popular questions from this chapter

Prepare the balance sheet for Damon Design Studio as of December 31, 2018

Wizco Advertising’s balance sheet data at May 31, 2018, and June 30, 2018, follow:

May 31, 2018 June 30, 2018

Total Assets \( 122,000 \) 287,000

Total Liabilities 66,000 144,000

For each of the following situations that occurred in June, 2018 with regard to

common stock and dividends of a corporation, compute the amount of net income or

net loss during June 2018.

a. The company issued \(10,000 of common stock and paid no dividends.

b. The company issued no common stock. It paid cash dividends of \)3,000.

c. The company issued \(12,500 of common stock and paid cash dividends of

\)30,000.

Centerpiece Arrangements has just completed operations for the year ended December 31, 2018. This is the third year of operations for the company. The following data have been assembled for the business: Insurance Expense \( 4,500 Salaries Expense \) 46,000 Service Revenue 70,000 Accounts Payable 17,600 Utilities Expense 1,400 Office Supplies 1,700 Rent Expense 16,000 Dividends 4,800 Common Stock 9,000 Accounts Receivable 8,000 Cash 7,200 Equipment 12,100 Retained Earnings, January 1, 2018 5,100

Preparing the balance sheet

Prepare the balance sheet of Centerpiece Arrangements as of December 31, 2018.

Identifying users of accounting information

For each of the users of accounting information, identify whether the user is an external decision maker (E) or an internal decision maker (I):

a. customer

b. company manager

c. Internal Revenue Service

d. lender

e. investor

f. controller

g. cost accountant

h. SEC

Pretty Pictures works weddings and prom-type parties. The balance of Retained Earnings was \(20,000 at December 31, 2017. At December 31, 2018, the business’s accounting records show these balances: Insurance Expense \) 6,000 Accounts Receivable $ 5,000 Cash 42,000 Notes Payable 10,000 Accounts Payable 13,000 Retained Earnings, Dec. 31, 2018 ? Advertising Expense 4,500 Salaries Expense 30,000 Service Revenue 115,000 Equipment 85,500 Dividends 13,000 Common Stock 28,000 Prepare the following financial statements for Pretty Pictures for the year ended December 31, 2018: a. Income statement. b. Statement of retained earnings. c. Balance sheet.
See all solutions

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