Leonard and Michelle have asked you to prepare their statement of changes in net worth for the year ended August \(31,20 \times 3\). They have prepared the following comparative statement of financial condition based upon estimated current values as required by SOP 82-1:

1. Leonard and Michelle's total salaries during the fiscal year ended August \(31,20 \times 3\), were \(\$ 44,300\); farm income was \(\$ 6,700\); personal expenditures were \(\$ 43,500\), interest and dividends received were \(\$ 1,400\).
2. Marketable securities that were purchased in \(20 \mathrm{X} 1\) at a cost of \(\$ 11,000\) and having a current market value of \(\$ 11,000\) on August 31, 20X2, were sold on March 1, 20X3, for \(\$ 10,700\). No additional marketable securities were purchased or sold during the fiscal year.
3. The values of the residence and farm land are based upon year-end appraisals.
4. On August \(31,20 \times 3\), Leonard purchased a used combine at a cost of \(\$ 14,000\). A down payment of \(\$ 4,000\) was made, and a five-year, 10 percent note payable was signed for the \(\$ 10,000\) balance owed. No other farm equipment was purchased or sold during the fiscal year.
5. The cash surrender value of the life insurance policy increased during the fiscal year by \(\$ 1.600\). However, Leonard borrowed \(\$ 4,000\) against the policy on September 1, 20X2. Interest at 15 percent for the first year of this loan was paid when due on August 31, 20X3.
6. Federal income taxes of \(\$ 12,400\) were paid during the \(20 \times 3\) fiscal year.
7. Total mortgage payments made during the year were \(\$ 9,000\), which included payments of principal and interest.

\section*{Required}
Using the comparative statement of financial condition and additional information provided, prepare the statement of changes in net worth for the year ended August 31, 20X3.

Transcribed Image Text:

Leonard and Michelle Statement of Financial Condition August 31, 20X3 and 20X2 Assets 20X3 20X2 Residence Cash Marketable securities Personal effects $ 3,600 $ 6,700 4.900 16,300 94.800 87.500 10.000 10,000 Cash surrender value of life insurance 3.200 5.600 Investment in farm business: Farm land $42.000 Farm equipment 22.400 $32.100 9.000 Note payable on farm equipment (10,000) Net investment in farm 54.400 41,100 Total assets $170,900 $167,200 Liabilities and Net Worth Credit card Income taxes payable $ 2,400 11,400 $ 1.500 12.400 71,000 76.000 Mortgage payable on residence Estimated income taxes on the difference between the estimated current values of assets and liabilities and their tax bases 19,700 16.500 Net worth 66.400 60.800 Total liabilities and net worth $170,900 $167.200