Question

PROBLEM 2.5A Preparing a Balance Sheet Erects of a change in HERE COME THE CLOWNS! is the name of a traveling circus. The ledger accounts of the bust ness at June 30, current year, are listed here in alphabetical order. $216,000 Accounts Payable....... $ 31.320 Notes Payable..... 11.400 Accounts Receivable ...... 8,940 Notes Receivable .. 226,872 Props and Equipment ... 107.496 Cages 29.556 32.676 Retained Earnings ... Capital Stock 360,000 Salaries Payable .. 11.700 Cash Tents ........... 75.600 Costumes 37.800 Trucks & Wagons .... 127,008 Animals Instructions Prepare a balance sheet by using these items and computing the amount of Cash at June 30, current year. Organize your balance sheet similar to the one illustrated in Exhibit 2-10. Include a proper balance sheet heading. b. Assume that late in the evening of June 30, after your balance sheet had been prepared, a fire destroyed one of the tents, which had cost $17.160. The tent was not insured. Explain what changes would be required in your June 30 balance sheet to reflect the loss of this asset

Answer 1

a.

HERE COME THE CLOWNS
BALANCE SHEET
JUNE 30
Assets		Liabilities and Owner's Equity
Cash	27024	Liabilities:
Notes receivable	11400	Notes payable	216000
Accounts receivable	8940	Accounts payable	31320
Animals	226872	Salaries payable	11700
Cages	29556	Total liabilities		259020
Costumes	37800	Owner's Equity:
Props and Equipment	107496	Capital stock	360000
Tents	75600	Retained earnings	32676
Trucks and Wagons	127008	Total owner's equity		392676
Total assets	651696	Total liabilities and owner's equity		651696

b. The book value of tents will have to be reduced by the book value of the tent destroyed in the fire and the loss due to fire recorded thereby reducing the retained earnings.