Question

b. A . MED C assets in any order.) Include a proper heading for your balance sheet. Assume that on September 30, immediately after this balance sheet was prepared, a tornado completely destroyed one of the barns. This barn had a cost of $13,700 and was not insured against this type of disaster. Explain what changes would be required in your September 30 balance sheet to reflect the loss of this barn. The balance sheet items for The Oven Bakery (arranged in alphabetical order) were as follows at August 1, 2011. (You are to compute the missing figure for Retained Earnings.) LOS PROBLEM 2.7A Preparing a Balance L04 Sheet and Statement of Cash Flows; Effects of Business LOG Transactions Accounts Payable........... Accounts Receivable Building Capital Stock ............... Cash.. $16,200 11,260 84,000 80,000 6,940 Equipment and Fixtures ...... Land Notes Payable ....... Salaries Payable Supplies ........ $44,500 67,000 74,900 8,900 7,000 During the next two days, the following transactions occurred: Aug. 2 Additional capital stock was sold for $25,000. The accounts payable were paid in full. (No payment was made on the notes payable or salaries payable.)

What is the missing value for retained earnings?

Answer 1

Solution

The Oven Bakery

Determination of missing value for retained earnings:

The Oven Bakery
Balance Sheet at August 3, 2011
Assets		Liabilities
Cash	$15,740	Salaries Payable	$8,900
Accounts Receivable	$11,260	Notes Payable	$74,900
Supplies	$7,000	Capital Stock	$105,000
Land	$67,000	Retained Earnings (balancing figure)	$40,700
Buildings	$84,000
Equipment and Fixtures	$44,500
	$229,500		$229,500

Computations;

Cash balance-

Beginning balance = $6,940

Add: issue of capital stock = $25,000

Total = 31,940

Less: accounts payable paid = $16,200

Ending balance of cash = $15,740

Capital stock balance –

Beginning balance = $80,000

New issue = $25,000
ending balance = $105,000

Balance sheet at August 1^st 2011

The Oven Bakery
Balance Sheet at August 3, 2011
Assets		Liabilities
Cash	$6,940	Accounts Payable	$16,200
Accounts Receivable	$11,260	Salaries Payable	$8,900
Supplies	$7,000	Notes Payable	$74,900
Land	$67,000	Capital Stock	$80,000
Buildings	$84,000	Retained Earnings (balancing figure)	$40,700
Equipment and Fixtures	$44,500
	$220,700		$220,700

Note: the balance sheets for two dates, August 1 and August 3 have been made to reflect with and without effects of the transactions on the two days of August 2 and August 3. The retained earnings balance, $40,700 is same for balance sheets for two dates.