The balance sheet items for The Oven Bakery (arranged in alphabetical order) were as follows at August 1.2007. (You are to compute the missing figure for Retained Earnings.)
Accounts Payable | $16,200 | Equipment and Fixtures | $44,500 |
Accounts Receivable | 11,260 | Land | 67,000 |
Building | 84, 000 | Notes Payable | 74,900 |
Capital Stock | 80,000 | Salaries Payable | 8,900 |
Cash | 6.940 | Supplies | 7,000 |
During the next two days, the following transactions occurred:
Aug. 2 Additional capital stock was sold for $25,000. The accounts payable were paid in full. (No payment was made on the notes payable or income taxes payable.)
Aug. 3 Equipment was purchased at a cost of $7,200 to be paid within 10 days. Supplies were purchased for $ 1,250 cash from a restaurant supply center that was going out of business. These supplies would have cost $1,890 if purchased through normal channels.
Instructions
a.Prepare a balance sheet at August 1, 2007.
b.Prepare a balance sheet at August 3, 2007, and a statement of cash flows for August 1-3. Classify the payment of accounts payable and the purchase of supplies as operating activities.
c.Assume the notes payable do not come due for several years. Is The Oven Bakery in a stronger financial position on August 1 or on August 3? Explain briefly.
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