Brandon Marchand is the owner of Divine Jewels, a store specializing in gold, platinum, and special stones. During the past year, in response to increased demand, Brandon doubled his selling space by expanding into the vacant building space next door to his store. This expansion has been expensive because of the need to increase inventory and to purchase new store fixtures and equipment, including carpeting and state-of-the-art built-in fixtures. Brandon notes that the company’s cash position has decreased and he is worried about future demands on cash to finance the growth. Brandon presents you with a statement showing the assets, liabilities, and his equity for year-end 20X0 and 20X1, and asks your opinion on the company’s ability to pay for the recent expansion. He did not have income and expense data available at the time. He commented that he had not made any new investment in the business in the past two years and was not financially able to do so presently. The information presented is shown below:

INSTRUCTIONS
1. Prepare classified balance sheets for Divine Jewels for December 31, 20X0, and December 31, 20X1. (Ignore depreciation.)
2. Based on the information presented in the classified balance sheets, what is your opinion of Divine Jewels’ ability to pay its current bills in a timely manner?
3. What is the advantage of a classified balance sheet over a balance sheet that is not classified?

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Assets Cash Accounts Receivable Inventory Prepaid Expenses Store Fixtures and Equipment Total Assets Liabilities and Owner's Equity Liabilities Notes Payable (due in 4 years) Accounts Payable Salaries Payable Total Liabilities Owner's Equity Brandon Marchand, Capital Total Liabilities and Owner's Equity December 31, 20X0 $ 150,000 45,000 105,000 6,000 180,000 $ 90,000 132,000 18,000 $486,000 $240,000 246,000 $486,000 December 31, 20X1 $ 40,000 91,500 234,000 9,000 395,000 $ 250,000 176,000 19,500 $769,500 $445,500 324,000 $769,500