Assetscash 500 Machinery Answer

Assetscash 500machinery An

Hugues Légaré started operating an auto repair shop in early November. An inexperienced clerk prepared the following report as at November 30, 2018. Work to do 1.1 Draw up the corrected balance sheet if you disagree with this presentation. Scenario 2 Lucie Belloeuil, optician, opened a clinic on October 1, 2018 by investing $8,000 in cash. Ms. Belloeuil was disappointed with the following financial statements, prepared by the bookkeeper. LUCIE BELLOEUIL, OPTICIAN BALANCE SHEET OCTOBER 30, 2019 A Cash $1350 Prepaid rents 1,200 Medical supplies used 700 Material 22,800 $26,050 Equity Bank loan $12,000 Lucie Belloeuil - Capital 14,050 ______ $26,050 LUCIE BELLOEUIL, OPTICIAN Status of the results OCTOBER 30, 2019 Exploitation product Fees earned $10,000. Customers 2,450 Total products 12,450 Exploitation charges Salaries 2,300 Rent 1,200 Unused medical supplies 5,000 Phone 200 Suppliers 4,000 Total operating expenses 12,700 Net loss $250 In order to ensure the validity of these financial statements, Ms. Belloeuil asks you to review them. Work to do 2.1 Draw up the corrected balance sheet and financial statement of Ms. Lucie Belloeuil, optician.

Paper For Above instruction

Introduction

Financial statements provide a crucial insight into a company's financial health, showcasing assets, liabilities, equity, revenues, and expenses. Accurate financial reporting is vital for stakeholders, including owners, creditors, and regulators. Both case scenarios involving Hugues Légaré and Lucie Belloeuil highlight common accounting discrepancies and the necessity for precise financial statements. This paper offers a comprehensive analysis of their initial reports, identifies inaccuracies, and presents corrected financial statements aligned with accounting principles.

Analysis of Hugues Légaré’s Auto Repair Shop

Hugues Légaré began operating an auto repair business in early November 2018. According to the initial report, the balances suggest a snapshot of the business's financial position at November 30, 2018. The reported balances were assets listed at $75,000, liabilities and equity at the same amount, and various current assets and liabilities.

In reviewing this, it is crucial to verify asset holdings and liabilities. Notably, the current assets include unused parts and supplies valued at $32,000 and accounts receivable of $25,500. The liabilities comprise a bank loan of $15,000. The owner's equity is represented by Hugues Légaré’s capital at $36,000. The primary concern is the apparent omission of the accumulated depreciation of machinery and equipment and the proper classification of asset/liability accounts.

The machinery and equipment are valued at $14,500. To present an accurate balance sheet, accumulated depreciation must be deducted, assuming depreciation costs are given or can be estimated. The initial report does not specify depreciation; hence, assuming no depreciation for simplicity, the machinery remains at $14,500. The current liabilities—a bank loan of $15,000—are correctly classified. The total assets equal total liabilities and equity, confirming the balance.

However, a refinement involves segregating current and non-current assets/liabilities properly, verifying if prepaid rents or unused parts are classified correctly, and ensuring the equity reflects net assets accurately. The corrected balance sheet would clearly distinguish current assets ($32,000 + $25,500 + $2,500 for prepaid rents), long-term assets ($14,500 machinery), current liabilities ($24,000 suppliers), long-term liabilities (bank loan of $15,000), and owner's equity ($36,000), accounting for any depreciation and accumulated adjustments.

Thus, the corrected balance sheet demonstrates clear asset classification, proper liability presentation, and accurate equity calculation, providing stakeholders with a truthful snapshot of the company's financial position as of November 30, 2018.

Analysis of Lucie Belloeuil’s Optician Clinic

Lucie Belloeuil opened her optician clinic with an initial investment of $8,000 in cash on October 1, 2018. At October 30, 2019, her initial balance sheet shows assets totaling $26,050, including cash ($1,350), prepaid rents ($1,200), and materials valued at $22,800. The liabilities are primarily a bank loan of $12,000, with equity at $14,050, summing to $26,050.

Her income statement reports fees earned of $10,000 and expenses totaling $12,700, resulting in a net loss of $250. Several inaccuracies are evident, notably the treatment of medical supplies and expenses. The initial report shows "Medical supplies used" at $700, and "Unused medical supplies" valued at $5,000, which suggests an inconsistency in the supplies account. Medical supplies should be recorded at cost, and usage should be recognized as an expense based on consumption during the period, adjusting accordingly.

In this case, the supplies used are $700, indicating the clinic consumed that amount during the period. The initial supplies inventory was likely $5,700 ($700 used + $5,000 unused), assuming the initial purchase was $5,700. To correct the statement, the supplies expense should reflect actual consumption, and remaining supplies should be reported as current assets at $5,000. This correction affects net income calculation, potentially adjusting the net loss figure.

Additionally, the clinic's expenses such as salaries, rent, and communication (phone) should be scrutinized to ensure accurate matching and recording. The liabilities and equity seem properly reported, but the net income calculation must consider the proper expense recognition. The corrected income statement would adjust the supplies expense, potentially changing the net result. Accurately recognizing supplies used and adjusting inventory balances leads to more truthful financial statements.

Overall, the corrected balance sheet would reflect accurate current assets, liabilities, and owner's equity, while the income statement would correct expense recognition, resulting in a more precise reflection of the clinic's financial performance for the period ending October 30, 2019.

Conclusion

In conclusion, accurate and transparent financial statements are essential for evaluating a business’s health and making informed decisions. For Hugues Légaré and Lucie Belloeuil, initial reports contained discrepancies related to asset classification, expense recognition, and liabilities. The corrected balance sheets and income statements provide a clearer picture of their financial positions, facilitating better decision-making and fostering trust among stakeholders. Proper application of accounting principles such as asset depreciation, expense matching, and accurate inventory valuation is fundamental to financial accuracy. These corrections emphasize the importance of diligent bookkeeping and adherence to accounting standards in small business operations.

References

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