Question

The following is the balance sheet of Korver Supply Company at December 31, 2020 (prior year).

KORVER SUPPLY COMPANY
Balance Sheet
At December 31, 2020
Assets
Cash	$	120,000
Accounts receivable		330,000
Inventory		280,000
Furniture and fixtures (net)		150,000
Total assets	$	880,000
Liabilities and Shareholders’ Equity
Accounts payable (for merchandise)	$	260,000
Notes payable		270,000
Interest payable		10,800
Common stock		110,000
Retained earnings		229,200
Total liabilities and shareholders’ equity	$	880,000

Transactions during 2021 (current year) were as follows:

1.	Sales to customers on account	$	990,000
2.	Cash collected from customers		970,000
3.	Purchase of merchandise on account		510,000
4.	Cash payment to suppliers		520,000
5.	Cost of merchandise sold		460,000
6.	Cash paid for operating expenses		350,000
7.	Cash paid for interest on notes		21,600

Additional Information:

The notes payable are dated June 30, 2020, and are due on June 30, 2022. Interest at 8% is payable annually on June 30. Depreciation on the furniture and fixtures for 2021 is $39,000. The furniture and fixtures originally cost $490,000.

Required:
Prepare a classified balance sheet at December 31, 2021, by updating ending balances from 2020 for transactions during 2021 and the additional information. The cost of furniture and fixtures and their accumulated depreciation are shown separately. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

KORVER SUPPLY COMPANY
BALANCE SHEET
At December 31, 2020
Assets
Current assets:
Cash (1)	$            198,400.00
Accounts receivable (2)	$            350,000.00
Inventories (4)	$            330,000.00
Total current assets	$            878,400.00
Property, plant, and equipment:
Furniture and fixtures	$            490,000.00
Less: Accumulated depreciation	$           (379,000.00)
Net property, plant, and equipment (3)	$            111,000.00
Total assets	$            989,400.00
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable (for merchandise) (5)	$            250,000.00
Note payable	$            270,000.00
Interest payable	$              10,800.00
Total current liabilities	$            530,800.00
Shareholders’ equity:
Common stock	$            110,000.00
Retained earnings (6)	$            348,600.00
Total shareholders’ equity	$            458,600.00
Total liabilities and shareholders’ equity	$            989,400.00
Working Notes:-
1)
Beginning balance in cash	$            120,000.00
+ Cash collected from customers	$            970,000.00
– Cash paid to suppliers	$           (520,000.00)
– Cash paid for operating expenses	$           (350,000.00)
– Cash paid for interest	$             (21,600.00)
Ending cash balance	$            198,400.00
2)
Beginning balance in accounts receivable	$            330,000.00
+ Credit sales	$            990,000.00
– Cash collected from customers	$           (970,000.00)
Ending balance in accounts receivable	$            350,000.00
3)
Beginning balance in furniture and fixtures, net	$            150,000.00
– Depreciation for the year	$             (39,000.00)
Ending balance in furniture and fixtures, net	$            111,000.00
4)
Beginning balance in inventories	$            280,000.00
+ Purchases	$            510,000.00
– Cost of merchandise sold	$           (460,000.00)
Ending balance in inventories	$            330,000.00
5)
Beginning balance in accounts payable	$            260,000.00
+ Purchases on account	$            510,000.00
– Cash paid to suppliers	$           (520,000.00)
Ending balance in accounts payable	$            250,000.00
6)
Beginning balance in retained earnings	$            229,200.00
+ Sales revenue	$            990,000.00
– Cost of goods sold	$           (460,000.00)
– Operating expenses	$           (350,000.00)
– Depreciation expense	$             (39,000.00)
– Interest expense	$             (21,600.00)
Ending balance in retained earnings	$            348,600.00