Question

The trial balance of Bellemy Fashion Center contained the following accounts at November 30, the end of the company’s fiscal year.

repare a classified balance sheet as of November 30, 2014. (List current assets in order of liquidity.)

please help me to fix this thanks!!

Answer 1

Concepts and reason

Balance Sheet:

Balance sheet is prepared to forecast the assets, liabilities and stockholders’ equity of a company for a period of time. It is prepared to estimate the financial position of the company. The asset side of balance sheet includes current assets and fixed assets. The liability side of the balance sheet includes current liabilities, long-term liabilities and equity.

Income statement:

The income statement helps to know the after-tax income of a company. It helps to know whether there is profit or loss during a period and indicates about the performance of the company. There is reporting of expenses and revenues in the income statement of the company which help in the determination of the net income or loss during the period.

Statement of retained earnings:

In the statement of retained earnings the net income or loss is for the current period is added to the opening balance of retained earnings. Dividend payment to the common stock holders is deducted in the statement of retained earnings. After making the above adjustments to the opening balance of retained earnings the balance obtained at the end is the closing balance of the retained earnings.

Fundamentals

Trial balance:

Trial balance represents the list of accounts and balances in which adjustments relating to the accounts are shown. To prepare adjusted trial balance the adjusting entries are required to be recorded and then should be posted to the ledger.

Property, plant, and equipment:

Property, plant and equipment are tangible assets that have physical substance. For example: Equipments, Machinery, and Buildings etc. The plant assets are long lived assets as the useful life of the assets is more than one year.

Accumulated Depreciation:

The accumulated depreciation method represents the amount of the cost of the asset which is charged as expense. The balance in the accumulated depreciation shows the amount of depreciation charged in the estimated useful life of asset. The accumulated depreciation is recorded by debiting depreciation expense and crediting accumulated depreciation.

Current assets:

The current assets are shown in the balance sheet of the company. The assets which in a year is expected to be turned into cash are the current assets. Such assets include cash, inventory, accounts receivable, prepaid expenses etc.

Accounts receivable:

Accounts receivable is a current asset for the company. It represents the amount which is required to be collected by the company from its customers when the goods are sold on credit to the customers. Accounts receivable are referred to as person from whom cash is receivable for credit sales made and it is expected that it will be received within one year from the date and thus are referred to as current assets.

Inventory:

Inventory represents the inventory purchased by a firm for re-sale, which has not been sold as on the date of the balance sheet. The inventory is disclosed in assets side of the balance sheet under the head Current Assets. Inventory is also disclosed in the credit side of the trading account of the firm.

Cash:

Cash is considered as a current asset for the company. It is reported in the assets section of the balance sheet. It is a real account. When there is inflow of cash then there is increase in the balance of the current assets. When there is outflow of cash then there is decrease in the balance of current assets.

Current liabilities:

The current liabilities are shown in the balance sheet of the company. The liabilities which are to be paid by the company in one year cash are the current liabilities. Such liabilities include salaries payable, interest payable, accounts payable, short term debt etc.

Notes Payable:

There is issuing of notes payable when the loans are taken from bank. The acquisition of the equipment which is costly or inventory purchases also result in issuance of notes payable. The notes payable are considered as current liability for the company.

Accounts Payable:

Accounts payable is a current liability for the company. It represents the amount which is required to be paid by the company to the suppliers when the goods are purchased on credit from the suppliers.

Long-term liabilities:

The long-term liabilities are shown in the balance sheet of the company. The liabilities which are to be paid by the company after one year are the long-term liabilities. Such liabilities include debentures, bonds payable etc.

Shareholders’ equity:

The shareholders’ equity section of balance sheet presents the amount of the total stockholders’ equity when the balance sheet is prepared. In the stockholders’ equity section of the balance sheet the total stockholders’ equity is computed by adding the capital stock, additional paid in capital and retained earnings.

Sales:

Sales refer to the amount which is earned by a company by selling or providing the products and services of the company to the customers. It is reported in the income statement of the company. The net sales revenue is calculated by reducing the sales returns, sales allowances and sales discount from the gross sales revenue.

Sales returns and allowances:

When some inventory is returned to the company then it is referred to as sales returns and it is required to deduct sales returns while computing the net sales. When the customer gets some reduction in the amount to be paid to the company because of the defective inventory then it is referred to as sales allowance and is required to be deducted from the total sales.

Cost of goods sold:

The cost of goods sold shows the total manufacturing costs incurred in a period that is direct materials cost, direct labor cost and manufacturing overhead cost of goods sold.

Gross Profit:

Gross Profit is the profit which a company earns after reducing the costs that are related to the production and sell of its products. Gross profit is computed by deducting the cost of goods sold from sales revenue.

Operating income:

The operating income refers to the income which is generated through the business operations. The operating expenses are deducted from the gross margin to compute the operating income of the company. It refers to the income which a company generates from its core or main operations.

Operating expenses:

The operating expenses are the expenses which a company incurs so that it can continue its main and core activities. The operating expenses have no direct relation with the production of the company but a company incurs operating expenses for its day to day operations. The example of operating expenses includes rent, depreciation, sales commission etc. The operating expenses include selling expenses, administrative expense and it does not consider the finance related costs like interest expense, bank charges etc.

Net Income:

The net income or net loss is computed by deducting the operating expenses from the gross profit. Net income is considered as of most importance by the investors in financial statements of any year. The reason being the net income represents the increase in the investors’ wealth resulting from the profitable activities performed by the company.

Retained Earnings:

Retained earnings are part of the earnings of the company which are not paid as dividend to the shareholders of the company. These earnings are kept aside by the company for the repayment of its debts, investment purposes and meeting out uncertainties.

Prepare the income statement of the company.

Following schedule shows the income statement of the company:

The net loss of the company is $6,060.

Following schedule shows the calculation:

Prepare the statement of retained earnings.

Following schedule shows the statement of retained earnings:

The balance of retained earnings on November 30, 2014 is $5,580.

Following schedule shows the calculation:

Prepare the balance sheet of the company.

Following schedule shows the balance sheet of the company:

Following schedule shows the calculation:

Ans:

The total of the assets section of the balance sheet is $220,890 and the total of the liabilities and equity section of the balance sheet is $220,890.