The balance sheet

1.A company has provided a list of different elements making part of its balance sheet. Indicate which of the listed items are assets or liabilities.

Assets

Liabilities

a)

Premises valued at 110,000

b)

Bank balance on a current account: 10,000.

c)

Products manufactured by the company: 20,000.

d)

Furniture and office equipment: 6,000.

e)

Raw materials that are used to manufacture finished products: 1,300.

f)

Long term investments in shares of other companies 22.000

g)

Coal supplies in stock: 2,200.

h)

Outstanding balance of a long term mortgage: 20,000.

i)

Taxes to be paid next month: 50,000.

j)

Notes payable, long term: 12.000

k)

Machinery, tools and equipment: 7,100.

l)

Cash: 6,300.

m)

Office computers: 7,900.

n)

Rights to collect money for sales on credit: 10,000.

o)

Debts with suppliers of merchandise 30,000.

p)

Notes receivable 4,000.

q)

Amount borrowed of a credit line 2,500.

r)

Spare part for the machines 5,600.

s)

Debts resulting of a loan with a bank, repayable in 3 years: 50,000.

2.Indicate the effect of the following transactions in the balance sheet equation (Assets = Liabilities + Shareholders' equity). Justify

Increase (+)

Decrease (-)

Assets

(+ or -)

Liabilities

(+ or -)

Shareholders' equity

(+ or -)

1.

Acquisition of furniture on credit.

2.

Payment to a supplier.

3.

Capital increase for cash.

4.

Acquisition of machinery on a cash basis

5.

Acquisition of merchandise by acceptance of a note.

6.

Payment of the value-added tax liabilities to the tax authority.

7.

Repayment of a short term loan

8.

A shareholder has sold his shares to his son.

9.

A customer prepays a deposit to secure an order.

10.

Finished goods were sold on a cash basis, with neither profit nor loss.

3.James Butler invests a small inheritance in setting up a company. Record in the table below the effect of the following transactions in the balance sheet equation (Assets = Liabilities + Shareholders' equity). Prepare the closing balance sheet.

1.James Butler invests 10.000 in cash to create the company.

2.He acquires a small office costing 8.500 cash.

3.Purchase of furniture for 1.500 to a supplier, on credit.

4.He receives a loan of 1.550 from his bank repayable in 3 years.

5.Payment of 450 to suppliers.

6.Purchase of merchandise for 2.500, 1,500 cash and the rest on credit.

Assets

Patrimonio neto

Pasivo

Cash

Merchandise

Furniture

Office

Capital

Long term loan

Capital

1.

2.

3.

4.

5.

6.

Total

4.Draw up a Balance Sheet for The Peach Company using the following closing balances as at 31^st March. Also calculate the amount of the Retained Earnings.

Building451,000

Raw Materials Inventories62,000

Accounts Payable 32,000

Accounts Receivable46,000

Short Term Loan from Bank246,000

Cash2,000

Office Equipment13,000

Unpaid salaries12,000

Customer prepayment14,000

Vehicles30,000

Taxation Payable6,000

Computers39,000

Long Term Investment in Subsidiary50,000

Capital50,000

Bank - current account50,000

Bills payable within 3 months8,000

Finished Goods Inventories65,000

Work In Progress Inventories22,000

Patents15,000

Trade Marks13,000

Manufacturing Equipment254,000