Answered: duction of its next play. As part of…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter3: Analyzing And Recording Transactions

Section: Chapter Questions

Problem 3TP: Assume that you are the controller of a business that provides legal services to clients. Suppose...

See similar textbooks

Related questions

Question

Helen Berkeley is the founder and manager of Berkeley Playhouse. The business needs to obtain a bank loan to finance the production of its next play. As part of the loan application, Berkeley was asked to prepare a balance sheet for the business. She 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. PROBLEM 2.8A Preparing Financial Statements; Effects of Business Transactions P P LO4 through S B LO6 excel PROBLEM 2.9A Preparing a Balance Sheet; Discussion of Accounting Principles LO4 P excel S A P LO8 BERKELEY PLAYHOUSE BALANCE SHEET SEPTEMBER 30, 2011 Assets Liabilities & Owner’s Equity Cash . . . . . . . . . . . . . . . . . . . . $ 21,900 Liabilities: Accounts Receivable . . . . . . . 132,200 Accounts Payable . . . . . . . . . $ 6,000 Props and Costumes . . . . . . . 3,000 Salaries Payable . . . . . . . . . . 29,200 Theater Building . . . . . . . . . . . 27,000 Total liabilities . . . . . . . . . . $ 35,200 Lighting Equipment . . . . . . . . 9,400 Owner’s equity: Automobile . . . . . . . . . . . . . . . 15,000 Helen Berkeley, Capital . . . . . . . . . . . . . . . . 173,300 Total . . . . . . . . . . . . . . . . . . . . $208,500 Total . . . . . . . . . . . . . . . . . . . . . $208,500 Problem Set A 73 In discussions with Berkeley and by reviewing the accounting records of Berkeley Playhouse, you discover the following facts: 1. The amount of cash, $21,900, includes $15,000 in the company’s bank account, $1,900 on hand in the company’s safe, and $5,000 in Berkeley’s personal savings account. 2. The accounts receivable, listed as $132,200, include $7,200 owed to the business by Artistic Tours. The remaining $125,000 is Berkeley’s estimate of future ticket sales from September 30 through the end of the year (December 31). 3. Berkeley 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 Actors’ 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 company’s liabilities. 4. Berkeley Playhouse rents the theater building from Kievits International at a rate of $3,000 a month. The $27,000 shown in the balance sheet represents the rent paid through September 30 of the current year. Kievits International acquired the building seven years ago at a cost of $135,000. 5. The lighting equipment was purchased on September 26 at a cost of $9,400, but the stage manager says that it isn’t worth a dime. 6. The automobile is Berkeley’s classic 1978 Jaguar, which she purchased two years ago for $9,000. She recently saw a similar car advertised for sale at $15,000. She does not use the car in the business, but it has a personalized license plate that reads “PLAHOUS.” 7. The accounts payable include business debts of $3,900 and the $2,100 balance of Berkeley’s personal Visa card. 8. Salaries payable include $25,000 offered to Mario Dane to play the lead role in a new play opening next December and $4,200 still owed to stagehands for work done through September 30. 9. When Berkeley founded Berkeley Playhouse several years ago, she invested $20,000 in the business. However, Live Theatre, Inc., recently offered to buy her business for $173,300. There fore, she listed this amount as her equity in the above balance sheet. Instructions a. Prepare a corrected balance sheet for Berkeley Playhouse at September 30, 2011. b. For each of the nine numbered items above, explain your reasoning in deciding whether or not to include the items in the balance sheet and in determining the proper dollar valuation.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.