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	$	100,000
Accounts receivable		200,000
Inventory		150,000
Furniture and fixtures (net)		120,000
Total assets	$	570,000
Liabilities and Shareholders’ Equity
Accounts payable (for merchandise)	$	150,000
Notes payable		160,000
Interest payable		4,000
Common stock		110,000
Retained earnings		146,000
Total liabilities and shareholders’ equity	$	570,000

Transactions during 2021 (current year) were as follows:

1.	Sales to customers on account	$	810,000
2.	Cash collected from customers		790,000
3.	Purchase of merchandise on account		500,000
4.	Cash payment to suppliers		510,000
5.	Cost of merchandise sold		450,000
6.	Cash paid for operating expenses		170,000
7.	Cash paid for interest on notes		8,000

Additional Information:

The notes payable are dated June 30, 2020, and are due on June 30, 2022. Interest at 5% is payable annually on June 30. Depreciation on the furniture and fixtures for 2021 is $21,000. The furniture and fixtures originally cost $310,000.

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, 2013
Assets
Current assets:
Cash .............................................................................................................		$202,000
Accounts receivable ..................................................................................		220,000
Inventories ..................................................................................................		200,000
Total current assets ...........................................................................		622,000
Property, plant, and equipment:
Furniture and fixtures ...............................................................................	$310,000
Less: Accumulated depreciation ............................................................	(141,000)
Net property, plant, and equipment ...............................................		169,000
Total assets .....................................................................................		$791,000
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable .....................................................................................		$140,000
Interest payable .........................................................................................		4,000
Note payable ..............................................................................................		160,000
Total current liabilities ......................................................................		304,000
Shareholders’ equity:
Common stock ..........................................................................................	$110,000
Retained earnings ......................................................................................	307,000
Total shareholders’ equity ...............................................................		417,000
Total liabilities and shareholders’ equity		$721,000

Beginning balance in cash                                                                $100,000

+ Cash collected from customers                                                        790,000

– Cash paid to suppliers                                                                    (510,000)

– Cash paid for operating expenses                                                   (170,000)

– Cash paid for interest                                                                       (8,000)

Ending cash balance                                                                         $202,000

Beginning balance in accounts receivable                                         $200,000

+ Credit sales                                                                                      810,000

– Cash collected from customers                                                       (790,000)

Ending balance in accounts receivable                                             $220,000

Beginning balance in inventories                                                      $150,000

+ Purchases                                                                                         500,000

– Cost of merchandise sold                                                               (450,000)

Ending balance in inventories                                                           $200,000

Beginning balance in furniture and fixtures, net                               $120,000

– Depreciation for the year                                                                (21,000)

Ending balance in furniture and fixtures, net                                      $99,000

Beginning balance in accounts payable                                            $150,000

+ Purchases on account                                                                      500,000

– Cash paid to suppliers                                                                    (510,000)

Ending balance in accounts payable                                                 $140,000

Beginning balance in retained earnings                                             $146,000

+ Sales revenue                                                                                   810,000

– Cost of goods sold                                                                          (450,000)

– Operating expenses                                                                        (170,000)

– Depreciation expense                                                                       (21,000)

– Interest expense                                                                                (8,000)

Ending balance in retained earnings                                                  $307,000

Accrued interest on note ($160,000 x 5% x 6/12)                                $4,000