Question

The following is the balance sheet of Korver Supply Company at December 31, 2015.

KORVER SUPPLY COMPANY
Balance Sheet
At December 31, 2015
Assets
Cash	$	125,000
Accounts receivable		250,000
Inventories		200,000
Furniture and fixtures, net		145,000
Total assets	$	720,000
Liabilities and Shareholders’ Equity
Accounts payable (for merchandise)	$	200,000
Note payable		210,000
Interest payable		8,400
Common stock		100,000
Retained earnings		201,600
Total liabilities and shareholders' equity	$	720,000

Transactions during 2016 were as follows:

1.	Sales to customers on account	$	860,000
2.	Cash collected from customers		840,000
3.	Purchase of merchandise on account		550,000
4.	Cash payment to suppliers		560,000
5.	Cost of merchandise sold		500,000
6.	Cash paid for operating expenses		220,000
7.	Cash paid for interest on note		16,800

The note payable is dated June 30, 2015 and is due on June 30, 2017. Interest at 8% is payable annually on June 30. Depreciation on the furniture and fixtures for the year is $26,000. The furniture and fixtures originally cost $360,000.

Required:

Prepare a classified balance sheet at December 31, 2016 (ignore income taxes).

Answer 1

KORVER SUPPLY COMPANY

BALANCE SHEET

AT DECEMBER 31 2015

Assets:
Current Assets:
Cash		168200
Account receivable		270000
Inventories		250000
Total current asset		688200
Property, plant & Equipment
Furniture & Fixtures	360000
Accumulated Depreciation	171000
Net property, plant & equipment		189000
Total Assets		877200
Liabilities & Shareholders’ equity:
Current Liabilities:
Accounts Payable		190000
Interest Payable		8400
Notes payable		210000
Total Current Liabilities		408400
Shareholders’ equity
Common stock	100000
Retained earnings	298800
Total Shareholders’ equity		398800
Total Liabilities & Shareholders’ equity		877200

Beginning balance in cash	125000
Add: Cash collected from customers	840000
Deduct: Cash paid to suppliers	560000
Deduct: Cash paid for operating expenses	220000
Deduct: Cash paid for interest	16800
Ending cash balance	168200
Beginning balance in accounts receivable	250000
Add: Credit sales	860000
Deduct: Cash collected from customers	840000
Ending balance in accounts receivable	270000
Beginning balance in inventories	200000
Add: Purchases	550000
Deduct: Cost of merchandise sold	500000
Ending balance in inventories	250000
Beginning balance in furniture and fixtures, net	145000
– Depreciation for the year	26000
Ending balance in furniture and fixtures, net	119000
Beginning balance in accounts payable	200000
Add: Purchases on account	550000
Deduct: Cash paid to suppliers	560000
Ending balance in accounts payable	190000
Beginning balance in retained earnings	201600
Add: Sales revenue	860000
Deduct: Cost of goods sold	500000
Deduct: Operating expenses	220000
Deduct: Depreciation expense	26000
Deduct: Interest expense	16800
Ending balance in retained earnings	298800
Accrued interest on note ($210000 x 8% x 6 /12)	8400