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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:
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 | ||||||
