Question

The balance sheet of Crane Book Shop at April 30, 2021, is as follows:

CRANE BOOK SHOP Balance Sheet April 30, 2021
Assets				Liabilities and Owner’s Equity
Building		$104,470		Accounts payable		$ 15,280
Accounts receivable		37,560		Equipment		55,280
C. Dryfuss, capital		85,890		Supplies		1,410
Cash		11,990		"Plug"		343,590
Land		51,850
Notes payable		123,800
		$415,560				$415,560

Charles Dryfuss, the owner of the book shop, admits that he is not an accountant. In fact, he couldn't get the balance sheet to balance without "plugging" the numbers (making up numbers to give the desired result). He gives you the following additional information:

1.		A professional real estate appraiser estimated the value of the land at $51,850. The actual cost of the land was $36,880.
2.		Accounts receivable includes amounts due from customers in China for 31,990 yuan, which is about $4,570 Canadian. Dryfuss didn't know how to convert the currency for reporting purposes so he added the 31,990 yuan to the $5,570 due from Canadian customers. He thought it more important to know how much he was owed by each customer in the currency they would likely pay him with anyway.
3.		Dryfuss reasons that equipment is a liability because it will cost him money in the future to maintain these items.
4.		Dryfuss reasons that the note payable must be an asset because getting the loan was good for the business. If he had not obtained the loan, he would not have been able to purchase the land and buildings.
5.		Dryfuss believes that his capital account is also an asset. He has invested in the business, and investments are assets; therefore his capital account is an asset.

(b)

Prepare a corrected balance sheet for Crane Book Shop at April 30. (Hint: The capital account may need to be adjusted in order to balance.)

CRANE BOOK SHOP Balance Sheet                                                           For the Year Ended April 30, 2021Forthe Month Ended April 30, 2021April 30, 2021
Assets
Accounts ReceivableAccounts PayableBuildingCashC. Dryfuss, CapitalC. Dryfuss, DrawingsEquipmentLandNotes PayableSupplies		$
Accounts ReceivableAccounts PayableBuildingCashC. Dryfuss, CapitalC. Dryfuss, DrawingsEquipmentLandNotes PayableSupplies
Accounts ReceivableAccounts PayableBuildingCashC. Dryfuss, CapitalC. Dryfuss, DrawingsEquipmentLandNotes PayableSupplies
Accounts ReceivableAccounts PayableBuildingCashC. Dryfuss, CapitalC. Dryfuss, DrawingsEquipmentLandNotes PayableSupplies
Accounts ReceivableAccounts PayableBuildingCashC. Dryfuss, CapitalC. Dryfuss, DrawingsEquipmentLandNotes PayableSupplies
Accounts ReceivableAccounts PayableBuildingCashC. Dryfuss, CapitalC. Dryfuss, DrawingsEquipmentLandNotes PayableSupplies
Total LiabilitiesTotal AssetsTotal Intangible AssetsOwner's EquityTotal Liabilities and Owner's EquityTotal Owner's EquityIntangible AssetsLiabilitiesTotal Property, Plant and EquipmentProperty, Plant and Equipment		$
Liabilities and Owner's Equity
Owner's EquityTotal Owner's EquityTotal Property, Plant and EquipmentTotal Intangible AssetsTotal Liabilities and Owner's EquityLiabilitiesTotal LiabilitiesTotal AssetsProperty, Plant and EquipmentIntangible Assets
Accounts ReceivableAccounts PayableBuildingCashC. Dryfuss, CapitalC. Dryfuss, DrawingsEquipmentLandNotes PayableSupplies		$
Accounts ReceivableAccounts PayableBuildingCashC. Dryfuss, CapitalC. Dryfuss, DrawingsEquipmentLandNotes PayableSupplies
LiabilitiesTotal Liabilities and Owner's EquityTotal Property, Plant and EquipmentTotal LiabilitiesTotal Owner's EquityIntangible AssetsTotal Intangible AssetsTotal AssetsProperty, Plant and EquipmentOwner's Equity
Total Intangible AssetsTotal Owner's EquityProperty, Plant and EquipmentOwner's EquityIntangible AssetsTotal Liabilities and Owner's EquityLiabilitiesTotal LiabilitiesTotal AssetsTotal Property, Plant and Equipment
Accounts ReceivableAccounts PayableBuildingCashC. Dryfuss, CapitalC. Dryfuss, DrawingsEquipmentLandNotes PayableSupplies
Property, Plant and EquipmentTotal Property, Plant and EquipmentIntangible AssetsTotal LiabilitiesOwner's EquityTotal AssetsTotal Intangible AssetsTotal Liabilities and Owner's EquityLiabilitiesTotal Owner's Equity		$

Answer 1

Crane Book Shop
Balance Sheet as on 30 April,2021
Assets	Amount	Liabilities & Owner's capital	Amount
Tangible Assets:		Owner's Capital:
Building	$104,470	C Derfuss Capital	$81,090
Land	36880	(Adjusted Balance $4800 in Capital)
Equipment	55280
Current Assets:		Liabilities:
Accounts Receivable	10140	Accounts Payable	15280
Cash	11990	Notes Payable	123800
Supplies	1410
	$220,170		$220,170

Notes:

1.Land is listed on the balance sheet under the section for long-term or non-current assets. If the land's market value increases over time, its value on the balance sheet remains at historical cost.

2. Acconuts Receivable need to be adjusted (+$4570-31990) as it is overstated by directly adding yuan currency without converting into canadian dollar.

3.Accounting standards define an asset as something your company owns that can provide future economic benefits. Cash, inventory, accounts receivable, land, buildings, equipment – these are all assets. Liabilities are your company's obligations – either money that must be paid or services that must be performed. Therefore Equipment is an Asset.

4.Liabilities are your company's obligations – either money that must be paid or services that must be performed. So Notes Payable is liability because it is an obligation to payback the loan.

5.Since capital belongs to owner, its the responsibility of business to pay back the capital to the owner when business is winded up. Hence, capital is a liability of business.