Activity 2 - Balance Sheet Purpose: 1. Understand the information provided by the balance sheet. 2. Identify asset, liability, and stockholders' equity accounts reported on the balance sheet. 3. Understand the accounting equation. Cool Lope - Tropical Smoothies and Shaved Ice Cool Lope, Inc. Balance Sheet December 31, 20X3 and 20X2 20X320X2 20X320X2 Assets Liabilities and stockholders' equity Current assets Current liabilities Cash and cash equivalents $3,179 $2,752 $1,038 $235 Accounts payable Short-term debt $1,828 $3.000 Accounts receivable $296 $3,000 Inventories $7,041 $4,638 Total current liabilities $5,752 $4,828 Prepaid expenses and other assets $212 $159 Long-term debt $8.976 $5.531 $10,359 Total current assets $10,728 $6,070 Total liabilities $14,728 Property, Plant, and Equipment Stockholders' equity Equipment $14,561 $12,769 $6,000 $6,000 Common stock, par value $1, authorized 1,000,000 shares; issued, 5,000 shares in 2016 Retained earings $3.911 $2.080 $750 $500 Less accumulated depreciation and amortization Total stockholders' equity $9.911 $8.080 Net property, plant, and equipment $13,811 $12,269 $24.639 $18.439 Total liabilities and stockholders' equity Trademarks $100 $100 Total Assets $24,639 $24,639 $18,439 The balance sheet reports assets and the amount of financing from liabilities and stockholders equity as of a specific date. This relationship represents the accounting equation, write the formula in the box below: Assets are items of value that a corporation owns or has a right to use. Typical asset accounts include cash, accounts receivable, inventory, equipment, buildings, and land. Liabilities are amounts owed to creditors, the amount of debt owed to third parties. Typical liability accounts include accounts payable, wages payable, notes payable, and bonds payable. Stockholders' equity is the portion of assets the owners own free and clear. Stockholders' equity may also be referred to as shareholders' equity or owners' equity. Typical stockholders equity accounts include: 1. Identify the 20x3 accounting equation amounts for Cool Lope, Inc. using the information above. Assets = Liabilities + Stockholders' Equity 2. Assets can either be financed with _or 3. Will the accounting equation hold true for every corporation? (Yes/No / Can't tell) Why? 4. Cool Lope, Inc. is primarily financed with (liabilities / stockholders' equity). How can you tell? 5. What is the definition of a current asset? 6. The following is a current asset (inventory / delivery truck /taxes payable). 7. What is the Definition of a Current Liability? 8. The following is a current liability (bond / accounts payable / accounts receivables). 9. An example of a long-term assets is (common stock / equipment / building / prepaid expenses). 10. What is the definition of retained earning? Now: Examine the annual report for the company you have selected for your "Financial Statement Analysis Report," and respond to the following questions using the most recent balance sheet provided. 1. What is the total for assets? Liabilities? Owners' equity? 2. What is the amount of accounts receivables? 3. What is the amount of inventory? What inventory valuation method (LIFO / FIFO / Average cost) do they use? 4. What is the total for current assets? Long-term assets? 5. What current asset has the largest balance? What Long-term asset has the largest balance? 6. What is the total for current liability ? Long-term liability? 7. What is total stockholders' equity? What is the amount of retained earnings? 8. Assets are financed by either liabilities (debt) or stockholders' equity. Which is larger debt of stockholders or equity for your company
