Problem

Preparing and Evaluating a Balance SheetListed below in random order are the items to be i...

Preparing and Evaluating a Balance Sheet

Listed below in random order are the items to be included in the balance sheet of Rocky Mountain Lodge at December 31, 2015:

Equipment

$ 39,200

Buildings

$500,000

Land

425,000

Capital Stock

135,000

Accounts Payable

54,800

Cash

31,400

Accounts Receivable

10,600

Furnishings

58,700

Salaries Payable

33,500

Snowmobiles

15,400

Interest Payable

12,000

Notes Payable

620,000

 

 

Retained Earnings

?

Instructions

a. Prepare a balance sheet at December 31, 2015. Include a proper heading and organize your balance sheet similar to Exhibit 2–9. You will need to compute the amount to be shown for Retained Earnings.

EXHIBIT 2–9

Balance Sheet, Jan. 31

Assets

Liabilities&Owners’ Equity

Cash

$ 18,000

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

2,200

$ 82,200

Total

$119,200

Total

 

$119,200


b. Assume that no payment is due on the notes payable until 2017. Does this balance sheet indicate that the company is in a strong financial position as of December 31, 2015? Explain briefly.

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