Question

Valley Technology Balance Sheet As of March 11, 2019 (amounts in thousands)
Cash	9,700	Accounts Payable	1,500
Accounts Receivable	4,500	Debt	2,900
Inventory	3,800	Other Liabilities	800
Property Plant & Equipment	16,400	Total Liabilities	5,200
Other Assets	1,700	Paid-In Capital	7,300
		Retained Earnings	23,600
		Total Equity	30,900
Total Assets	36,100	Total Liabilities & Equity	36,100

Use T-accounts to record the transactions below, which occur on March 12, 2019, close the T-accounts, and construct a balance sheet to answer the question.

1. Sell product for $30,000 in cash with historical cost of $24,000
2. Sell, deliver, and receive payment of $40,000 for service
3. Consume good or service and pay expense of $2,000

What is the final amount in Total Liabilities & Equity?

Answer 1

Prepare journal entries as follows:

		Amount in thousands)
Transaction	Account name	Debit	Credit
1	Cash	$30
	Sales revenue		$30
2	Cash	$40
	Service revenue		$40
3	Expense	$2
	Cash		$2

__________________________________________________________________

Prepare T-accounts as follows:

Cash
Begn. Bal.	$9,700
(1)	$30	(3)	$2
(2)	$40
End. Bal.	$9,768
Sales revenue
		(1)	$30
		End. Bal.	$30
Service revenue
		(2)	$40
		End. Bal.	$40
Expense
(3)	$2
End. Bal.	$2

_______________________________________________________

Prepare the Balance sheet as follows:

Valley Technology
Balance Sheet
As of March 12, 2019
(amount in thousands)
Cash	$9,768	Accounts payable	$1,500
Accounts receivable	$4,500	Debt	$2,900
Inventory (3800-24)	$3,776	Other Liabilities	$800
Property, plant, equipment	$16,400	Total Liabilities	$5,200
Other Assets	$1,700
		Paid-in capital	$7,300
		Retained Earnings	$23,644
Total Assets	$36,144	Total Liabilities and Equity	$36,144

Compute retained earnings as follows:

Ending balance = Opening balance + service revenue + profit from product sale - expense

= $23,600 + $40 + ($30 - $24) - $2

= $23,644