National Shops, Inc. reported the following amounts on its balance sheet as of December 31, 2019:
Posted: Sat Aug 07, 2021 7:14 am
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).
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).