Book 1 - Chapter 15

15-1.

David Running-Elk, M.D.
Balance Sheet
July 31, 2008
Assets		Liabilities
Cash	$ 8,500		Accounts payable Cash	$ 1,100
Accounts receivable	3,100		Unearned fees revenue	500
Supplies	700		Note payable	9,000
Prepaid insurance	750		Total liabilities	10,600
Equipment	35,000
		Owner’s Equity
			David Running-Elk, Capital	37,450
Total assets			Total liabilities and owner’s equity

Notes
	Owner’s equity is verified as $48,050 total assets – $10,600 total liabilities = $37,450.
	$ signs are generally used at the top of a column and at the total of the column.
	Always double check to be sure that the title is correctly written and especially that the date is correct.

LG	15-2. To prepare this balance sheet, you have to calculate the following:
	Supplies: This is $1,000 (March 31 balance) + $7,000 purchased – $4,000 used = $4,000 (April 30 balance).
	Accounts Receivable: To calculate this, we need to know the total assets. Because the balance sheet is based on the accounting equation A = L + OE, we know that total assets equal the total liabilities and owner’s equity of $41,000. If total assets are $41,000, we can subtract $25,000 for cash, $4,000 for supplies, and $10,000 for equipment. What is left must be accounts receivable of $2,000.
	Don Chen, Capital: If total liabilities and owner’s equity equal $41,000 and we know the only liability is accounts payable of $12,000, then Don Chen, Capital must be $41,000 – $12,000 = $29,000.

Fulton Avenue Company
Balance Sheet
April 30, 2008
Assets		Liabilities
Cash	$25,000		Accounts payable	$12,000
Accounts receivable	2,000	Owner’s Equity
Supplies	4,000	Owner’s Equity
Equipment	10,000		Don Chen, Capital	29,000
Total assets			Total liabilities and owner’s equity

Format note: Because there is only one liability, we do not have to write “total liabilities” and repeat the number.

Learning Goal 15

SOLUTIONS

Learning Goal 15: Identify and Prepare a Balance Sheet

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Worthy & James Publishing is a provider of basic accounting books covering fundamental accounting principles, business accounting, and business math. Topics in financial accounting and business accounting covered include the balance sheet, the income statement, financial ratios, and bank reconciliation.