Problem

Preparing a Balance Sheet; Effects of a Change in AssetsHERE COME THE CLOWNS! is the name...

Preparing a Balance Sheet; Effects of a Change in Assets

HERE COME THE CLOWNS! is the name of a traveling circus. The ledger accounts of the business at June 30, 2015, are listed here in alphabetical order:

Accounts Payable

$ 26,100

Notes Payable

$180,000

Accounts Receivable

7,450

Notes Receivable

9,500

Animals

189,060

Props and Equipment

89,580

Cages

24,630

Retained Earnings

27,230

Capital Stock

300,000

Salaries Payable

9,750

Cash

?

Tents

63,000

Costumes

31,500

Trucks&Wagons

105,840

Instructions

a. Prepare a balance sheet by using these items and computing the amount of Cash at June 30, 2015. Organize your balance sheet similar to the one illustrated in Exhibit 2–10 . Include a proper balance sheet heading.

EXHIBIT 2–10

Balance Sheet, Jan. 31

OVERNIGHT AUTO SERVICE BALANCE SHEET JANUARY 31, 2015

Assets

 

Liabilities&Owners’ Equity

Cash

$ 16,600

Liabilities:

 

 

Accounts Receivable

1,200

Notes Payable

$ 30,000

 

Tools and Equipment

12,000

Accounts Payable

7,000

 

Building

36,000

Total liabilities

$ 37,000

 

Land

52,000

Owners’ equity:

 

 

 

 

Capital Stock

$ 80,000

 

 

 

Retained Earnings

800

80,800

Total

$117,800

Total

 

$117,800


b. Assume that late in the evening of June 30, after your balance sheet had been prepared, a fire destroyed one of the tents, which had cost $14,300. The tent was not insured. Explain what changes would be required in your June 30 balance sheet to reflect the loss of this asset.

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