Question

E В F Valentin, Corporation a well known T shirt company is developing its financial statements for the current year. 1 The 2 following amounts were correct on 12/31, current cash $48,000; short term Liabilities Assets 3 investments $10,000; equipment, $72,060; net accounts receivable, $3,686; Current Liabilities Current Assets inventory, $1,850; prepaid rent, $1,120 accumulated depreciation on 5 equipment $49,893; income taxes payable, $131; Short term notes payable, 6 $3,200; accounts payable, $5,880; retained earnings, $72,612; common stock 7 1,000 shares outstanding, par value $1 with a market value of $5.00 8 9 $0 $0 Total Current Assets Total current liabilities 10 11 You have been hired by Valentin, Corp as my newest accountant in the business office. I need you to 1. create a balance sheet and 2. I need you to help me explain to my non-accounting managers, what is the net book value of the equipment and what that means. Stockholders' Equity Non-Current Assets 12 13 14 15 $0 $0 total stockholders' Equity 16 $0 Total Assets Total Liabilities and SE 17 18 19

Answer 1

Assets		Liabilities
Current assets		Current liabilities
Cash	48,000	short term notes payable	3,200
Short term investment	10,000	Account payable	5,880
net account receivable	3,686	Income taxes payable	131
Inventory	1,850
Prepaid rent	1,120
Total current assets	64,656	Total current liabilities	9,211
Non current assets		Stockholders equity
Equipment 72,060		Common stock	1,000
Acc. Depreciation 49,893	22,167	Retained earnings	72,612
		Share premium	4,000
		Total stockholders equity	77,612
Total assets	86,823	Total liabilities	86,823

1, created the balance sheet as drafted above,

2, net book value of the equipment means the carrying current value of the equipment, which is derived by deducting the depreciation from the cost of the asset. Depreciation is the wear and tear of the asset that happened because of its use in the business. Equipment is shown in the balance sheet at its book value only.

It may also be disclosed as accumulated depreciation under current liabilities, and equipment under non current assets at its historical cost. alternately it can be disclosed as it is done above.