Question & Answer: Presented below are the balances, listed in alphabetical order of Green Company at October 1, 2008:…..

Presented below are the balances, listed in alphabetical order of Green Company at October 1, 2008:

Accounts Payable 8100
Accounts Receivable 4000
Cash 7300
Land 15300
Long-term Debt Payable 20700
Machinery 31600
Merchandise Inventory 12200
Notes Payable 2200
Paid-in Capital 39400

Below are the transactions for Green Company for the month of October 2008:

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Question & Answer: Presented below are the balances, listed in alphabetical order of Green Company at October 1, 2008:…..
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a.       Sold inventory to a friend at cost, which was $800. The friend paid in cash.

b.       Borrowed an additional $1300 in notes payable.

c.       Collected $1900 from credit customers.

d.       Paid $2600 of the amount owed on account.

Prepare a balance sheet as of October 31, 2008, considering the beginning balances and incorporating the effects of the October 2008 transactions.

Expert Answer

 

a)    Sold inventory to a friend at cost, which was $800. The friend paid in cash.
This will increase cash by $800 and reduce inventory by $800
b.       Borrowed an additional $1300 in notes payable.
This will increase notes payable by $1300 and increase cash by $1300
c.       Collected $1900 from credit customers.
This will reduce accounts receivable and increase cash
d.       Paid $2600 of the amount owed on account.
This will reduce accounts payable and also will reduce cash
Balance sheet given below after effecting the changes mentioned above:
GREEN COMPANY
Balance Sheet
As of October 31,2008
ASSETS:
Current assets:
A Cash $8,700 (7300+800+1300+1900-2600)
B Accounts Receivable $2,100 (4000-1900)
C Merchandise Inventory $11,400 (12200-800)
D=A+B+C Total Current assets $22,200
Fixed Assets:
E Land $15,300
F Machinery $31,600
G=E+F Total Fixed assets $46,900
H=D+G Total assets $69,100
LIABILITIES
Current Liabilities
I Accounts Payable $5,500 (8100-2600)
J Notes Payable $3,500 (2200+1300)
K=I+J Total current liabilities $9,000
Long Term Liabilities
L Long term debt payable $20,700
M=K+L Total Liabilities $29,700
Share holder equity:
N Paid in capital $39,400
P=M+N Total liabilities and shareholders equity $69,100

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