Question

7 Balance sheet preparation  Adam and Arin Adams have collected their personal asset and liability information and have asked you to put together a balance sheet as of December 31, 2015. The following information is received from the Adams family.

1. Cash	$ 300	Retirement funds, IRA	$ 2,000
   Checking	3,000	2014 Sebring	15,000
   Savings	1,200	2010 Jeep	8,000
   IBM stock	2,000	Money market funds	1,200
   Auto loan	8,000	Jewelry and artwork	3,000
   Mortgage	100,000	Net worth	76,500
   Medical bills payable	250	Household furnishings	4,200
   Utility bills payable	150	Credit card balance	2,000
   Real estate	150,000	Personal loan	3,000

   1. Create a personal balance sheet as of December 31, 2015. It should be similar to a corporate balance sheet.

   2. What must the total assets of the Adams family be equal to by December 31, 2015?

   3. What was their net working capital (NWC) for the year? (Hint: NWC is the difference between total liquid assets and total current liabilities.

Answer 1

Balance sheet is one of the financial statement in which the financial position of assets and liabilities are reflected as on particular date.
a.
Adam and Arin Adams
Balance Sheet
As on 31st December 2015
Assets		Liabilities and net worth
Liquid assets		Current liabilities
Cash	$300	Utility Bills	$150
Checking	$3,000	Medical Bills	$250
Savings	$1,200	Credit card balance	$2,000
Money market funds	$1,200	Total current liabilities	$2,400
Total liquid assets	$5,700
		Long term liabilities
Investments		Mortgage	$100,000
IBM Stock	$2,000	Auto Loan	$8,000
Retirement funds, IRA	$2,000	Personal Loan	$3,000
Total investments	$4,000	Total long term liabilities	$111,000
Real estate	$150,000	Total liabilities
Personal property
2015 Sebring	$15,000	Total net worth	$76,500
2010 Jeep	$8,000
Household furnishings	$4,200
Jewelry and artwork	$3,000
Total personal property	$30,200
Total assets	$189,900	Total liabilities and net worth	$189,900
b.
The total assets is equal to the total liabilities plus the net worth of the family.
As on 31st December 2015, the total assets is equal to $189,900
c.
Net working capital = Total liquid assets -Total current liabilities
Net working capital	5700-2400
Net working capital	$3,300