Starting with the financial condition of the business at the beginning of the year (see “Seeing
Both Sides of Business Transactions” earlier in this chapter) and the changes caused by its profit making activities during the year (see “Concentrating on the Composite Effect of Profit and Loss” earlier in this chapter), what is its financial condition at the end of the year, ignoring other transactions that occurred during the year? To help you work this problem, the company’s financial condition at the start of the year is repeated here.
|
Condensed Balance Sheet |
||||
|
Cash |
$250,000 |
|
Operating liabilities |
$350,000 |
|
Receivables |
$300,000 |
|
Interest-bearing liabilities |
$500,000 |
|
Inventory |
$400,000 |
|
Owners’ invested capital |
$250,000 |
|
PP&E, net |
$550,000 |
|
Owners’ retained earnings |
$400,000 |
|
Assets |
$1,500,000 |
= |
Liabilities and Owners’ Equity |
$1,500,000 |
|
Condensed Balance Sheet |
||
|
Cash |
|
Operating liabilities |
|
Receivables |
|
Interest-bearing liabilities |
|
Inventory |
|
Owners’ invested capital |
|
PP&E, net |
|
Owners’ retained earnings |
|
Assets |
= |
Liabilities and Owners’ Equity |