Question

Current assets Current liabilities Cash $72,000 Accounts payable $12,000 Accounts receivable 18,000 Interest payable 12,000 Interest receivable 1,000 Inventory 60,000 Total current assets $151,000 Total current liabilities $24,000 Long-term assets Long-term liabilities Equipment (net of depreciation) $128,000 Note payable 100,000 Total long-term assets $128,000 Total long-term liabilities $100,000 Equity Common stock 10,000 Paid-in capital 50,000 Retained earnings 95,000 Total equity $155,000 Total assets 279,000 Total liabilities and equity $279,000

Yes the difference between account payable and accounts receivable is required.

Is accounts payable larger or smaller than accounts receivable? What is the difference? What do the numbers indicate? Explain.

What does "equipment net of depreciation" mean?

Are payables short-term or long-term?

Determine total liabilities.

Determine net short-term assets or liabilities.

Determine the total amount owed by VWV at the end of the year.

How do we know that the above is a corporate (not a sole proprietor) balance sheet?

Answer 1

Question 1:

Accounts payable is the liability which we incurred for purchase of inventory or other trading activity. Accounts receivable is the amount which we are yet to receive from our customers and so it is an asset.

Accounts receivable = 18000

Accounts payable = 12000

Accounts receivable > Accounts payable. It means that what we are yet to receive is more than what we are yet to pay.

Question 2:

Equipment net of depreciation is the purchase value of asset as reduced by the accumulated depreciation of asset for the used years.

Question 3:

Payables to the extent of 24000 are short term and $100,000 are long term.

Question 4:

Total Liabilities = Short term Libility + Long term Liability = $24000 + $100000 = $124,000

Question 5:

Short term assets = $151,000

Short term Liabilities = $24,000

Net Short term assets = $151,000 - $24,000 = $127,000

Question 6:

Total amount owed = Short term Libility + Long term Liability + Equity

= $24000 + $100000 + $10000 = $134,000

Question 7:

Balance sheet above is that of a corporate because only a corporate can issue common stock and will have excess paid in capital unlike sole proprietor.