Problem 1-4 Corrected Balance Sheet

 

Dave is the president of Avon Consulting Inc. Avon began business at the beginning of the cur- rent year. The company’s controller is out of the country on business. Dave needs a copy of the company’s balance sheet for a meeting tomorrow and asks his assistant to obtain the required in- formation from the company’s records. She presents Dave with the following balance sheet. He asks you to review it for accuracy.

 

LO5

 

Avon Consulting Inc.

 

Balance Sheet For the Current Year

 

Assets                                                                   Liabilities and Stockholders’ Equity

 

Accounts payable	$13,000	Accounts receivable	$16,000
Cash	21,000	Capital stock	20,000
Cash dividends paid	16,000	Net income for the year	72,000
Furniture and equipment	43,000	Supplies	9,000

 

Required

 

1.        Prepare a corrected balance sheet.

 

2.        Draft a memo explaining the major differences between the balance sheet Dave’s assistant prepared and the one you prepared.