National Shops, Inc. reported the following amounts on its balance sheet as of December 31, 2019:

[answerhappygod]

nventory $325,000
Notes payable 100,000
Cash 150,000
Common stock 750,000
Net property, plant and equipment 600,000
Accounts receivable 30,000
Accounts payable 45,000
Retained earnings ?
Prepare an income statement for the year ended December 31, 2019.
Answer:
1. Total assets = $1,105,000 = Inventory ($325,000) + Cash ($150,000) + Net property, plant and
equipment ($600,000) + Accounts receivable ($30,000).
2. Liabilities include Accounts payable and Notes payable.
3. Assets = Liabilities + Stockholders' equity = Assets ($1,105,000) = Liabilities $145,000 (Notes
payable + Accounts payable) + Stockholders' equity= $960,000; Stockholders' equity ($960,000)
= Common stock ($750,000) + Retained earnings.
Solve for Retained earnings = $210,000.
4.
National Shops, Inc.
Balance Sheet
At December 31, 2019
Assets
Cash $150,000
Accounts receivable 30,000
Inventory 325,000
Property, plant, and equipment 600,000
Total assets $1,105,000
Liabilities
Accounts payable $45,000
Notes payable 100,000
Total liabilities $145,000
Stockholders' equity
Common stock $750,000
Retained earnings 210,000
Total stockholders' equity 960,000
Total liabilities and stockholders'
equity $1,105,000

5. The balance sheet of National Shops shows that the company is capable of paying its short-
term liabilities. There is cash of $150,000, more than enough to settle the accounts payable of
$45,000. I would recommend that my company grant credit to National Shops.
Difficulty: 3 Hard
Topic: Financial statements-Balance sheet
Learning Objective: 01-01 Recognize the information conveyed in each of the four basic
financial statements and the way that it is used by different decision makers (investors, creditors,
and managers).