Question

The bookkeeper of Outdoor Life Landscaping prepared the company’s balance sheet while the accountant was ill. The balance sheet, shown on the next page, contains numerous errors. In particular, the bookkeeper knew that the balance sheet should balance, so he plugged in the retained earnings amount needed to achieve this balance. The retained earnings is incorrect. All other amounts are correct, but some are out of place or should not be included in this statement. Prepare a corrected balance sheet. OUTDOOR LIFE LANDSCAPING Balance Sheet Month Ended November 30, 2018 Office Supplies Salaries Expense Property Tax Expense Accounts Payable Retained Earnings Total Assets Total Liabilities Common Stock Assets Liabilities Stockholders’ Equity \( 4,600 \) 72,850 600 34,100 2,700 Office Furniture 5,800 24,600 Rent Expense Notes Payable 450 \( 2,000 Dividends Service Revenue 11,000 35,000 \) 72,850 3,000 2,700 11,150 8,000

Short answer

OUTDOOR LIFE LANDSCAPING
Balance Sheet
December 31, 2018
Assets		Liabilities
Cash	$4,600	Accounts Payable	$2,700
Land	34,100	Notes Payable	24,600
Office Supplies	600	Total Liabilities	27,300
Office Furniture	5,800	Stockholders’ Equity
Accounts Receivable	2,000	Common Stock	8,000
		Retained Earnings	11,800
		Total Stockholders’ Equity	19,800
Total Assets	$47,100	Total Liabilities and Stockholders’ Equity	$47,100

Step-by-step solution

Calculation of Retained Earnings

Retained earnings is calculated as follows:

Retained Earnings = Total Liabilities & Stockholders' Equity - Total Liabilities - Common stock

= $47,100 - $27.300 - $8.000

= $11,800

Explanation on Balance Sheet Items

As per the balance sheet, total assets equals $47,100, total liabilities equals $27,300 and total stockholders’ equity equals $19,800.