Question

The accounting records of Nettle Distribution show the following assets and liabilities as of December 31, 2016 and 2017 December 31 2016 2017 43,516 $6,595 18,519 2,729 114,379 121,835 53,758 0 149,204 37,233 30,800 86,437 Cash Accounts receivable 23,621 3,726 Office supplies Office equipment Trucks Building Land Accounts payable Note payable 44,758 62,100

Answer 1

Answer

• Requirement 1

Balance Sheet
December 31, 2016
Assets		Liabilities
Cash	$43,516	Accounts Payable	$62,100
Accounts receivables	$23,621
Office Supplies	$3,726
Office Equipment	$114,379	Equity
Truck	$44,758	Total Equity	$167,900
Total Assets	$230,000	Total Liabilities & Equity	$230,000

Balance Sheet
December 31, 2017
Assets		Liabilities
Cash	$6,595	Accounts Payable	$30,800
Accounts receivables	$18,519	Notes Payable	$86,437
Office Supplies	$2,729
Office Equipment	$121,835	Equity
Trucks	$53,758
Building	$149,204
Land	$37,233
		Total Equity	$272,636
Total Assets	$389,873	Total Liabilities & Equity	$389,873

• Requirement 2

Net Income = Equity on 31 dec 17 + Drawings – Equity on 31 Dec 16 – Additional investment
= 272636 + 43200 – 167900 – 35000
= $ 112,936 = Net Income

Equity Dec 31, 2016	$167,900
Add: Additional Investment	$35,000
Add: Net Income	$112,936
	$315,836
Less: Withdrawals/Drawings	$43,200
Equity Dec 31, 2017	$272,636

• Requirement 3

Numerator	Denominator	Debt Ratio
Total Liabilities	Total Assets	Debt Ratio
$117,237	$389,873	0.30 or 30.07%