Question
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
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:
December 31, 20X0December 31, 20X1AssetsCash$162,000$41,200Accounts receivable51,00097,500Inventory117,000246,000Prepaid expenses7,20010,200Store fixtures and equipment186,000419,000Total Assets$523,200$813,900Liabilities and Owner's EquityLiabilitiesNotes payable (due in 4 years)$102,000$274,000Accounts payable144,000188,000Salaries payable19,20025,500Total Liabilities$265,200$487,500Owner's EquityBrandon Marchand, Capital258,000326,400Total Liabilities and Owner's Equity$523,200$813,900
Required:
Prepare classified balance sheets for Divine Jewels for December 31, 20X0, and December 31, 20X1. (Ignore depreciation.)
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