The balance sheet items of Mercer Company as of December 31, 2007.
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Mercer Company Balance Sheet December 31, 2008 |
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Assets |
Amount $ |
Liabilities |
Amount $ |
| Cash | 36,300 | Notes payable | 207,000 |
| Accounts receivable | 56,700 | Account payable | 43,800 |
| Land | 90,000 | Total liabilities | 250,800 |
| Building | 210,000 | Capital stock | 75,000 |
| Office Equipment | 12,400 | Retained earnings | 79,600 |
| Total | 405,000 | Total | 405,000 |
The amount of retained earnings is calculated as the difference between total assets and liabilities plus capital stock:
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Retained earnings = Total assets – (Liabilities + Capital Stock)
= $405,400 – (250,800 + 75,000)
= $79,600
Exercise 2.13, page 68
Goldstar Communications was organized on December 1 of the current year and had the following account balance at December 31, listed in tabular form.
Assets = Liabilities + Owner’s equity
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Maxwell Communications Expanded Accounting EquationDecember 31, 2015 |
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Assets |
= |
Liabilities |
+ | Owner’s equity | |||||||||
| Cash | + |
Office Equipment |
+ | Building | + | Land | = |
Notes Payable |
+ |
Accounts Payable |
+ | Capital stock | |
| Balances $ | 37,000 | 51,250 | 125,000 | 95,000 | 80,000 | 28,250 | 200,000 | ||||||
| Transaction(1) | 35,000 | 35,00 | |||||||||||
| Balances $ | 72,000 | 51,250 | 125,000 | 95,000 | 80,000 | 28,250 | 235,000 | ||||||
| Transaction(2) | -22,500 | 55,000 | 35,000 | 67,500 | |||||||||
| Balances $ | 49,500 | 51,250 | 180,000 | 130,000 | 147,500 | 28,250 | 235,000 | ||||||
| Transaction(3) | 9,500 | 9,500 | |||||||||||
| Balances $ | 49,500 | 60,750 | 180,000 | 130,000 | 147,500 | 37,750 | 235,000 | ||||||
| Transaction(4) | 20,000 | 20,000 | |||||||||||
| Balances $ | 69,500 | 60,750 | 180,000 | 130,000 | 167,500 | 37,750 | 235,000 | ||||||
| Transaction(5) | -22,250 | -22,250 | |||||||||||
| Balances $ | 47,250 | 60,750 | 180,000 | 130,000 | 167,500 | 15,500 | 235,000 | ||||||
Total Assets: $418,00 = Total liabilities + owner’s equity: $418,000
Problem 2.3A, page 70
An inexperienced accountant for Yarnell Company prepared the following income statement for the month of August 2007. Prepare a revised income statement.
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YARNELL COMPANY Revised Income StatementFor the Month Ended August 31, 2007 |
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| Revenues | |
|
Services provided to customer |
$15,000 |
| Expenses | |
|
Expenses required to provide |
|
|
Services to customers |
($7,500) |
| Net income | $7,500 |
Problem 2.5A, page 71
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HERE COME THE CLOWNS! Balance Sheet June 30, 2007 |
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| Assets | Liabilities $ Owners’ Equity | |||
| Cash | $32,520 | Liabilities | ||
| Notes Receivable | 9,500 | Notes payable | $180,000 | |
| Accounts Receivable | 7,450 | Accounts payable | 26,100 | |
| Animals | Salaries payable | 9,750 | ||
| Animals | 189,060 | Total liabilities | 215,850 | |
| Cages | 24,630 | Owner’s Equity: | ||
| Costumes | 31,500 | Capital stock | $310,000 | |
| Props & Equipment | 89,580 | Retained earnings | $27,230 | 337,230 |
| Tents | 63,000 | |||
| Tracks & Wagons | 105,840 | |||
| Total | $553,080 | Total | $553,080 | |
Cash = Total liabilities & Owners’ Equity – Total of Remaining Assets
Cash = $ 553,080 - $520,560
Cash = $32,520 b. After June 30, 2007 there was a loss of the uninsured tent after a fire which cost $14,300.
The disclosure would be done with a note stating:
Note: Events occurring after the financial statement date
On 30 June, 2007, the Tent that had been included in the June 2997 statement of financial position at $14,300 was destroyed by fire. It is an uninsured tent and the loss is considered a full amount of the Tent as a loss. The new balance should reflect the loss by decrease the tent account with the given amount.
The balance sheet would be incorrect if reduced from the Asset aside only. To make it equal the amount would be reduced from the retained earnings. The loss of $14,300 would thus be reduced from the Asset and Liabilities side.
