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16 April, 03:43

Prepare a December 31, 2020, balance sheet for Long Print Shop from the following: cash, $50,000; accounts payable, $38,000; merchandise inventory, $14,000; Joe Ryan, capital, $46,000; and equipment, $20,000.

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  1. 16 April, 05:19
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    Long Print Shop

    Balance sheet for the year ended December 31, 2020

    Amount in $ Amount in $

    Assets

    Non-current asset

    Equipment 20,000

    Current assets

    Merchandise inventory 14,000

    Cash 50,000

    Total current asset 64,000

    Total assets 84,000

    Liabiities

    Accounts payable 38,000

    Total liabilities 38,000

    Equity

    Capital 46,000

    Total equity 46,000

    Total liabilities and equity 84,000

    Explanation:

    The accounting equation shows the relationship between the elements of a balance sheet which are assets liabilities and equity. This may be expressed mathematically as

    Assets = Liabilities + Equity

    While assets include fixed assets, cash, inventories, account receivables etc, liabilities include accounts payable, loans payable, accrued expenses etc.

    Equity which represents the amount owed to the owners of the business includes retained earnings (which is the accumulation of the net income/loss over the years less dividends paid) and common shares.
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