Final answer:
To prepare Sierra Company’s classified balance sheet, one would categorize and sum the assets, liabilities, and equity as reported in the adjusted trial balance.
Step-by-step explanation:
To prepare Sierra Company’s classified balance sheet using an adjusted trial balance, you would arrange the company’s assets, liabilities, and equity into their respective categories and report them in the following order: current assets, long-term assets, current liabilities, long-term liabilities, and stockholders' equity. Current assets often include items such as cash, accounts receivable, and inventory, while long-term assets may consist of property, plant, and equipment.
Current liabilities are obligations that the company expects to pay within a year, such as accounts payable and short-term loans, while long-term liabilities are debts that are not due within the next year, like long-term loans. Stockholders' equity typically includes common stock and retained earnings. To calculate the merchandise balance, you would sum up all inventory-related accounts. The current account balance includes all current assets minus current liabilities.
While more specifics would be required to provide actual calculations, this outline explains the process for creating a classified balance sheet and how to determine the aforementioned balances within a company’s financial statement.