A sinking bond fund refers to money that a company was required to set aside in order to repurchase some of the bonds payable it has in issue, at some point in the future. A sinking bond fund is therefore a non-current asset that should be presented under the heading "Investments". To correct the presentation of this item $12,000 needs to be deducted from the current cash balance and the Sinking Bond Fund should be displayed in the non-current asset section of the Balance Sheet.
The allowance for doubtful debt balance should be shown separately on the Balance Sheet even though it is deducted from the accounts receivable balance to arrive at net accounts receivables.
$5,000 of the mortgage balance should be shown under the current liabilities section of the Balance Sheet as this portion is due to be paid in one year's time. The balance of $70,000 will appear under the non-current liabilities section.
The cost of the equipment $112,000 and the accumulated depreciation of $28,000, figure should both be shown on the face of the classified Balance Sheet, in the non-current assets section.
Now that all of the additional information has been analyzed the corrected classified Balance Sheet for Manuel Congo Company as at 31st July, 2010 can be prepared.
I hope that you found this proposed solution helpful! If you did please share it! Also, feel free to ask any questions or to comment below. Best of luck!
The author holds a Bsc (Hons) Degree in Applied Accounting from Oxford Brookes University, England and enjoys a successful career as an Accounting Supervisor and a private tutor.