Question

The night manager of Willis Transportation Service, who had no accounting background, prepared the following balance sheet for the company at February 28, 2015. The dollar amounts were taken directly from the company s accounting records and are correct. However, the balance sheet contains a number of errors in its headings, format, and the classification of assets, liabilities, and owners equity. Prepare a corrected balance sheet. Include a proper heading.

Answer 1

Question Completion:

WILLIS TRANSPORT SERVICE

MANAGER'S REPORT

8PM THURSDAY

Assets                                             Owners' Equity

Capital stock                $110,400    Accounts Receivable      $84,000

Retained earnings          74,400    Notes Payable                 345,600

Cash                               94,800     Supplies                             16,800

Building                          96,000     Land                                  84,000

Automobiles                 198,000     Accounts Payable            43,200

Total                           $573,600     Total                             $573,600

Answer:

Willis Transportation Service

WILLIS TRANSPORTATION SERVICE

Balance Sheet

As of February 28, 2015

Assets

Current Assets:

Cash                                    $94,800

Accounts Receivable            84,000    

Supplies                                 16,800  $195,600

Automobiles                        198,000

Building                                 96,000    

Land                                      84,000 $378,000

Total assets                                       $573,600

Liabilities and Equity:

Current Liabilities:

Accounts Payable                               $43,200

Long-term Liabilities:

Notes Payable                                  $345,600

Total liabilities                                   $388,800

Owners' Equity:

Common stock                $110,400    

Retained earnings              74,400  $184,800

Total liabilities and equity               $573,600

Explanation:

a) Data and Analysis:

Assets:

Cash                                      94,800

Accounts Receivable            84,000    

Supplies                                 16,800

Automobiles                        198,000

Building                                 96,000    

Land                                      84,000

Liabilities and Owners' Equity:

Accounts Payable                43,200

Notes Payable                   345,600

Common stock                   110,400    

Retained earnings              74,400    

b) Willis' balance sheet shows the company's assets and the sources through which the assets are financed.  These sources are either liabilities (debts) or owners' equity (common stock or retained earnings).  The balance sheet summarizes the financial position of Willis Transportation Service at a point in time.