Question

Cash = $1,505,000; Rent Receivable = $250,000; Prepaid Expenses = $100,000; Building = $10,500,000; Prepaid Insurance = $150,000; Insurance Expense = $350,000; Unearned Revenue = $50,000; Accounts Payable = $100,000; Accrued Liabilities = $45,000; Salaries Expense = $550,000; Shareholders’ Capital = $12,310,000. In addition, the company had the following transactions during Q2 that ended on June 30, 2016: The company’s total rental revenue for Q2 FY2016 was $2,500,000. Of this amount $2,000,000 was collected during Q2 FY2016. $230,000 of the Rent Receivable outstanding at the beginning of the quarter was collected during Q2 FY2016. The company incurred total operating expenses of $850,000 for Q2 FY2016. All these expenses were paid except $50,000. 

What is the total current assets at the beginning of Q2 FY2016? 

What is the total current liabilities at the beginning of Q2 FY2016? 

Present the balance sheet at the end of Q2 2016.

Answer 1

As per the information given, balance sheet as at the beginning of Q2 2016 will be as follows:

Balance Sheet as at the Beginning of Q2 2016

Liabilities	Amount	Assets	Amount
Shareholders’ Capital	12,310,000	Cash	1,505,000
Unearned Revenue	50,000	Rent Receivable	250,000
Accounts Payable	100,000	Prepaid Expenses	100,000
Accrued Liabilities	45,000	Prepaid Insurance	150,000
		Building	10,500,000
	12,505,000		12,505,000

From the above balance sheet total assets as at the beginning of Q2 FY 2016 is calculated as follows:

Particulars	Amount
Cash	1,505,000
Rent Receivable	250,000
Prepaid Expenses	100,000
Prepaid Insurance	150,000
Total	2,005,000

Similarly, total current liabilities as at the beginning of Q2 FY 2016 is calculated as follows:

Particulars	Amount
Unearned Revenue	50,000
Accounts Payable	100,000
Accrued Liabilities	45,000
Total	195,000

Now let us prepare important ledger accounts based on the transactions during the quarter to arrive at the closing balances for preparing balance sheet as at the end of the quarter:

	Rent Receivable A/c
Particulars	Debit	Particulars	Credit
To Balance b/f	250,000	By Cash	2,000,000
To Rent	2,500,000	By Cash	230,000
		By Balance c/f	520,000
	2,750,000		2,750,000

	Cash A/c
Particulars	Debit	Particulars	Credit
To balance b/f	1,505,000	By operating expenses	800,000
To rent receivable	2,000,000	By Balance b/f	2,935,000
To rent receivable	230,000
	3,735,000		3,735,000

	Accounts Payable A/c
Particulars	Debit	Particulars	Credit
To Cash	800,000	By Balance b/f	100,000
To balance b/f	150000	By Operating Expenses	850,000
	950,000		950,000

	P&L A/c
Particulars	Debit	Particulars	Credit
To Operating Expenses	850,000	By Rent	2,500,000
To net profit (transferred to shareholder's equity)	1,650,000
	2,500,000		2,500,000

Based on above balances, Balance Sheet at the end of Q2 2016 will be as follows:

Balance Sheet as at the end of Q2 2016

Liabilities	Amount	Assets	Amount
Shareholders’ Capital (12,310,000+1,650,000)	13,960,000	Cash	2,935,000
Unearned Revenue	50,000	Rent Receivable	520,000
Accounts Payable	150,000	Prepaid Expenses	100,000
Accrued Liabilities	45,000	Prepaid Insurance	150,000
		Building	10,500,000
	14,205,000		14,205,000