Balance Sheet summarizes the assets, the liabilities, and the Shareholder’s equity of a company at a given date. It is also known as the statement of financial status of the business.
To prepare: Balance sheet of the MLM Company for the year ended December 31, 2018.
Explanation of Solution
Prepare a balance sheet of MLM Company for the year ended December 31, 2018.
MLM Company | ||
Balance sheet | ||
For the year ended December 31, 2018 | ||
Amount in $ | Amount in $ | |
Assets: | ||
Current assets: | ||
Cash (1) | 167,000 | |
Inventories | 100,000 | |
Prepaid rent | 3,000 | |
Total current assets: | 576,000 | |
Property, plant and equipment: | ||
Equipment and furniture | 40,000 | |
Less: accumulated |
4,000 | |
Net property , plant and equipment: | 36,000 | |
Total assets | 306,000 | |
Liabilities and shareholder's equity | ||
Current liabilities: | ||
Accounts payable (2) | 21,000 | |
Interest payable (3) | 9,000 | |
Loan payable (4) | 100,000 | |
Total current liabilities | 130,000 | |
Long term liabilities | ||
Shareholders' equity | ||
Common stock (5) | 100,000 | |
76,000 | ||
Total shareholders' equity | 176,000 | |
Total liabilities and shareholders’ equity | 306,000 |
Table (1)
Working notes:
- 1. Compute cash balance as on December 31, 2018.
- 2. Compute accounts payable for the year ended December 31, 2018.
- 3. Compute interest payable
- 4. The bank loan repayable on 31 March 2019, which means loan repayable within the accounting year. Hence, bank loan is reported as current liability.
- 5. 100,000 shares of no par common stock are authorized, of which 20,000 shares were issued and are outstanding. Thus, 20,000 shares are issued for $100,000.
- 6. Net income for the year was $76,000.
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Chapter 3 Solutions
SPICELAND GEN CMB LL INTRM ACCTG; CNCT
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