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Prepare a corrected balance sheet for Spencer Playhouse at September 30, 2015

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Anita Spencer is the founder and manager of Spencer Playhouse. The business needs to obtain a;bank loan to finance the production of its next play. As part of the loan application, Anita Spencer;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;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 Anita Spencer, Capital...... 173,300;Total................... $208,500 Total..................... $208,500;In discussions with Anita Spencer and by reviewing the accounting records of Spencer;Playhouse, you determine 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 Anita Spencer?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 Anita Spencer?s estimate of future ticket sales from September;30 through the end of the year (December 31).;3. Anita Spencer 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. Spencer 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 Anita Spencer?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 Anita Spencer?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 Anita Spencer founded Spencer Playhouse several years ago, she invested $20,000 in;the business. However, Live Theatre, Inc., recently offered to buy her business for $173,300.;Therefore, she listed this amount as her equity in the above balance sheet.;Instructions;a. Prepare a corrected balance sheet for Spencer Playhouse at September 30, 2015.;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

 

Paper#24443 | Written in 18-Jul-2015

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