After its initial financing and investing activities, the business manufactures its first batch of products. The total cost of this production run is $800,000. No sales have been made yet, but the business is poised to send out its sales force to call on customers. Its balance sheet after the first production run is as follows:
|
Assets |
Liabilities & Owners’ Equity |
||
|
Cash |
$440,000 |
Accounts Payable |
$225,000 |
|
Inventory |
$800,000 |
Short-term Notes Payable |
$500,000 |
|
Property, Plant, & Equipment |
$2,000,000 |
Long-term Notes Payable |
$1,500,000 |
|
Accumulated Depreciation |
($15,000) |
Owners Equity: |
|
|
Cost less Depreciation |
$1,985,000 |
Capital Stock (10,000 shares) |
$1,000,000 |
|
Total Assets |
$3,225,000 |
Total Liabilities & Owners’ Equity |
$3,225,000 |
Explain the changes in the company’s balance sheet, starting with its balance sheet immediately after its initial financing and investing transactions (see the preceding example question).