Question

At September 1, the balance sheet accounts for Debbie’s Restaurant were as follows:

Account payable	$ 3,800	Land	$ 33,000
Account Receivable	1,600	Debbie Capital	??
Building	68,000	Notes Payable	48,000
Cash	10,000	Furniture	18,700
Supplies	6,600

The following transactions occurred during the next two days:

Debbie invested an additional $22,000 cash in the business. The accounts payable were paid in full. (No payment was made on the notes payable.)

Required:

Prepare a balance sheet at September 3, 2015.

Answer 1

• Before Balance Sheet at 3 Sept 2015 can be prepared, few things are to be calculated.
• First, we need the Debbie’s Capital balance on 1 Sept, which is missing.

This can be done through Accounting Equation.

We know that Accounting Equation says Assets = Liabilities + Capital,

Hence, Capital = Assets – Liabilities

	Cash	$                10,000
	Supplies	$                   6,600
	Account Receivable	$                   1,600
	Land	$                33,000
	Building	$                68,000
	Furniture	$                18,700
A	Total Assets	$              137,900
	Account payable	$                   3,800
	Notes Payable	$                48,000
B	Total Liabilities	$                51,800
C = A - B	Debbie Capital	$                86,100

• Now, once we know Debbie’s Capital balance, we have to calculate the ending balances after those transactions.

	Balance on 1 Sept 2015	Additional Investments	Payment to account payable	Balances on 3 Sept 2015
Cash	$                10,000	$               22,000	$               (3,800)	$          28,200
Supplies	$                   6,600			$            6,600
Account Receivable	$                   1,600			$            1,600
Land	$                33,000			$          33,000
Building	$                68,000			$          68,000
Furniture	$                18,700			$          18,700
Account payable	$                   3,800		$               (3,800)	$                   -
Notes Payable	$                48,000			$          48,000
Debbie Capital	$                86,100	$               22,000		$       108,100

• Final Answer: Balance Sheet, as at 3 Sept 2015

ASSETS
Current Assets:
Cash	$              28,200
Supplies	$                6,600
Account Receivable	$                1,600
Total Current Assets		$         36,400
Property Plant & Equipment:
Land	$              33,000
Furniture	$              18,700
Building	$              68,000
Total Property Plant Equipment		$       119,700
Total Asset		$       156,100
LIABILITIES
Account payable	$                       -
Notes Payable	$              48,000
Total Liabilities		$         48,000
OWNER'S EQUITY
Debbie Capital		$       108,100
Total Liabilities & Equity		$       156,100