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Chapter 05 - In-Class Exercises

Chapter 05 - In-Class Exercises - Chapter 5 In-Class...

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Chapter # 5 In-Class Exercises Page 1 of 6 Chapter 05 - In-Class Exercises.doc - 05/02/07) Exercise #1 Ajax Company has decided to expand their operations. The bookkeeper recently completed the balance sheet presented below in order to obtain additional funds for expansion. Note that the bookkeeper has made a few errors that you need to correct. Prepare a corrected balance sheet, in correct form, based on the information provided. Assume that the accumulated depreciation balance for the buildings is $140,000 and for the office equipment, $95,000. Marketable securities are classified as trading securities. The allowance for doubtful accounts has a balance of $10,000. The pension obligation is considered a long- term liability. The bank overdraft resulted from a check drawn on an insufficient balance. The vendor will be paid from a different account after year end. Ajax Company Balance Sheet For the Year Ended 2006 Current assets Cash (net of bank overdraft of $30,000) 200,000 $ Accounts receivable (net) 340,000 Inventories 385,000 Marketable securities--at cost (fair value $120,000) 140,000 Property, plant, and equipment Building (net) 570,000 Office equipment (net) 160,000 Land held for future use 175,000 Intangible assets Goodwill (purchased) 80,000 Long-term investment in bonds 90,000 Prepaid expenses 5,000 Current liabilities Accounts payable 105,000 Notes payable (due in 2007) 125,000
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