Question

The following is the balance sheet of Korver Supply Company at December 31, 2017. KORVER SUPPLY COMPANY Balance Sheet At December 31, 2017

Assets

Cash $ 120,000

Accounts receivable 300,000

Inventories 200,000

Furniture and fixtures, net 150,000

                                                                                         Total assets $ 770,000

Liabilities and Shareholders’ Equity

Accounts payable (for merchandise) $ 190,000

Note payable 200,000

Interest payable 6,000

Common stock 100,000

Retained earnings 274,000

                                                                            Total liabilities and shareholders' equity$ 770,000

Transactions during 2018 were as follows:

1. Sales to customers on account $ 800,000

2. Cash collected from customers 780,000

3. Purchase of merchandise on account 550,000

4. Cash payment to suppliers 560,000

5. Cost of merchandise sold 500,000

6. Cash paid for operating expenses 160,000

7. Cash paid for interest on note 12,000

The note payable is dated June 30, 2017 and is due on June 30, 2019. Interest at 6% is payable annually on June 30. Depreciation on the furniture and fixtures for the year is $20,000. The furniture and fixtures originally cost $300,000.

Required: Prepare a classified balance sheet at December 31, 2018 (ignore income taxes).

Answer 1

KORVER SUPPLY COMPANY
Balance Sheet
As on 31 December, 2018
Asstes			Amt.($)
Cash			168,000
Accounts Recievable			320,000
Inventories			250,000
Furniture and Fixtures			130,000
Total			$     868,000
Liabilities			Amt.($)
Note Payable			200,000
Accounts Payable			180,000
Interest Payable			6,000
Common Stock			100,000
Retained Earning			382,000
Total			$     868,000

Working Notes:
KORVER SUPPLY COMPANY
Income Statement
As on 31 December, 2018
Particulars			Amt.($)
Sales			800,000
Less: Cost of Goods Sold			(500,000)
Operating expenses			(160,000)
Interest expense			(12,000)
Depreciation			(20,000)
Net Income			$   108,000
KORVER SUPPLY COMPANY
Statement of Retained Earning
As on 31 December, 2018
Particulars			Amt.($)
Opening Balance			274,000
Add: Net Income			108,000
Closing Balance			$   382,000
Account Recievable T-Account
Opening Balance			300,000
Add: Sales on account			800,000
Less: Cash Received from customers			(780,000)
				Closing balance			320,000
Accounts Payable T-Account
Opening Balance			190,000
Add: Merchandis Purchase			550,000
Less: Cash Received from customers			(560,000)
				Closing balance			180,000
Cash T-Account
Opening Balance			120,000
Add: Cash Collected			780,000
			900,000
Less:
Cash Payment to supplier			(560,000)
Cash paid for operating expense			(160,000)
Interest paid			(12,000)
Closing Balance			168,000