Ch. 7: The Balance Sheet For: Dr. Landrum By: James Esch MNA 4325 What is a Balance Sheet? A balance sheet is a snapshot of one point in time. A balance sheet includes: Assets Liabilities Equity Assets = Liabilities + Equity The Balance Sheet Current Assets:
For: Dr. Landrum
By: James Esch
Cash $ 30,000
Accounts Receivable 90,000
Total Current Assets 220,000
Total Assets $300,000
Payroll Taxes: $10,000
Accounts Payable: 70,000
Total Current Liabilities $80,000
Loan payable to bank 20,000
Total Long-Term Debt 20,000
Total Liabilities $100,000
Equity = Total Assets – Total Liabilities
Working capital is the current assets less the current liabilities.
Finding the working capital:
Current assets $207,000
Subtract current liabilities $156,788
Excess of current assets over current liabilities $ 50,212
1. A balance sheet provides information to a reader that is not available from an income statement or operating report.
2. Part of a balance sheet lists current assets, which are items that are cash or will turn into cash within 12 months.
3. The balance sheet of a company provides an estimate of what its real estate and equipment would sell for at an auction.
False, property and equipment are listed at their cost less depreciation
4. The interest that will be paid in the future on loans from banks is listed on the balance sheet as a liability
False, future interest is not a liability until the future is present
1. Classify the following by making a check under the proper heading…
2. When George, who built golf courses, bought his Automatic Sand-Trap Machine for $100,000, he paid $20,000 of his own money and borrowed $80,000 from the Easymoney Bank. He borrowed the money on January 1 of year 1 and was to repay it in annual payments of $16,000 principal plus interest (10%), due on December 31. He made all payments before the due date. Determine how this liability should be divided between current and long-term liability on George’s balance sheet at the end of the second year.
Beginning balance of loan $80,000
Subtract payments made 32,000
Subtract current portion 16,000
Long-term liability $32,000