Accounting numbers- just need someone to check my work and correct
The Balance Sheet provides a snapshot of the financial condition of a company at the end of an accounting period. It shows the assets, liabilities, and owner’s equity in the business.
- 1. Identify each of the following as an asset (A), contra asset (C), liability (L), or equity (E). Insert the appropriate letter in each field
A |
cash |
C |
depreciation |
C |
equipment |
A |
inventory |
L |
loan |
E |
paid in capital |
C |
prepaid insurance |
E |
retained earnings |
L |
taxes owed |
A |
utility deposit |
- 2. In early December, Alice and Bob decided to open the Sample Cafe with $15,000 of their own money and $20,000 borrowed from a friend. They have spent $12,000 on equipment and furniture, and purchased $3,000 worth of inventory. Having put down a $2,500 deposit for a location on Main St., they will pay the first month’s rent when they open their doors on January 1st. HINT: Consider the change in each asset account, given the transactions above. Total Assets has been included as a second hint.
Create a balance sheet showing the financial position of the Sample Cafe as of December 31st Use the data above. Remember, Assets must equal Total Liabilities + Equity.
SampleCafeBalanceSheet As of December 31, 20xx |
||||
Assets |
|
|
Liabilities |
|
Cash |
$15,000 |
|
Loans |
$20,000 |
Deposits |
$2,500 |
|
Total Liabilities |
$20,000 |
Furniture & Equip. |
$12,000 |
|
|
|
Depreciation |
$2,500 |
|
Equity |
|
Inventory |
$3,000 |
|
Owner’s Equity |
$15,000 |
|
|
|
Total Equity |
$15,000 |
|
|
|
|
|
Total Assets |
$35,000 |
|
Total Liab. & Equity |
$35,000 |
- 3. The Sample Café nearly broke even in the first month of business. Below is a summary of revenue and expenses for January. Starting with the balance sheet from December 31st, use the results to create an updated balance sheet for January 31st. HINT: Remember, Net Income is added to Owner’s Equity; Net Loss is subtracted from Owner’s Equity. Total Assets has been added as a hint.
Sample Café Income StatementSummaryMonth Ended January31,20xx |
||
Revenue |
$30,000 |
|
Cost of Goods Sold |
$3,500 |
$1,000 from inventory |
Total Expenses |
$27,000 |
Includes equipment depreciation of $200. |
Net Income |
($500) |
|
SampleCafeBalanceSheet As of December 31, 20xx |
||||
Assets |
|
|
Liabilities |
|
Cash |
$30,000 |
|
Loans |
$20,000 |
Deposits |
$2,500 |
|
Total Liabilities |
$20,000 |
Furniture & Equip. |
$0 |
|
|
|
Depreciation |
$1,000 |
|
Equity |
|
Inventory |
$1,000 |
|
Owner’s Equity |
$14,500 |
|
|
|
Total Equity |
$14,500 |
|
|
|
|
|
Total Assets |
$34,500 |
|
Total Liab. & Equity |
$34,500 |
- 4. What is the book value of the equipment at the end of January?
Because furniture and equipment are $12,000 I assume half of that is equipment. With the information above saying that $200 had depreciated $6,000-$200 would be a $5800 value for the equipment.
- 5. Alice and Bob had a small loss for the month. What happened to cash? Explain.
Inventory was $3,000 but in January it was calculated that $3,500 was spent. That means $500 dollars of inventory was not expected giving the loss of $500.
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