The balance sheet items for Collier Butcher Shop (arranged in alphabetical order) were as follows at July 1, 2015. (You are to compute the missing figure for Retained Earnings.)

During the next few days, the following transactions occurred:
July 4 Additional capital stock was sold for $30,000. The accounts payable were paid in full. (No payment was made on the notes payable or salaries payable.)
July 5 Equipment was purchased at a cost of $6,000 to be paid within 10 days. Supplies were purchased for $1,000 cash from a restaurant supply center that was going out of business. These supplies would have cost $2,000 if purchased through normal channels.
Instructions
a. Prepare a balance sheet at July 1, 2015.
b. Prepare a balance sheet at July 5, 2015, and a statement of cash flows for July 1-5. Classify the payment of accounts payable and the purchase of supplies as operating activities.
c. Assume the notes payable do not come due for several years. Is Collier Butcher Shop in a stronger financial position on July 1 or on July 5? Explain briefly.

Transcribed Image Text:

7,000 Equipment and Fixtures 8,200 Land 50,000 Accounts Receivable . 1 00,000 Salaries Payable. 4,100 Supplies 7,000