Question

Leonard and Michelle have asked you to prepare their statement of changes in net worth for the year ended August 31, 20X3. They have prepared the following comparative statement of financial condition based on estimated current values as required by ASC 274: LEONARD AND MICHELLE Statement of Financial Condition August 31, 20X3 and 20X2 20X3 20X2 Assets Cash $ 4,300 $ 7,400 Marketable securities 5,600 17,700 Residence 96,200 88,900 Personal effects 10,700 10,700 Cash surrender value of life insurance 3,900 6,300 Investment in farm business: Farmland $ 42,700 $ 32,800 Farm equipment 23,800 9,700 Note payable on farm equipment (10,700 ) 0 Net investment in farm 55,800 42,500 Total assets $ 176,500 $ 173,500 Liabilities and Net Worth Credit card $ 3,700 $ 2,200 Income taxes payable 12,100 13,100 Mortgage payable on residence 71,700 77,400 Estimated income taxes on the difference between the estimated current values of assets and liabilities and their tax bases 20,400 17,800 Net worth 68,600 63,000 Total liabilities and net worth $ 176,500 $ 173,500 Additional Information

1. Leonard and Michelle’s total salaries during the fiscal year ended August 31, 20X3, were $45,700; farm income was $7,400; personal expenditures were $44,200; and interest and dividends received were $2,100.

2. Marketable securities purchased in 20X1 at a cost of $11,300 and with a current market value of $11,300 on August 31, 20X2, were sold on March 1, 20X3, for $10,000. No additional marketable securities were purchased or sold during the fiscal year.

3. The values of the residence and farmland are based on year-end appraisals.

4. On August 31, 20X3, Leonard purchased a used combine at a cost of $15,300. He made a $4,700 down payment and signed a five-year, 10 percent note payable for the $10,600 balance owed. No other farm equipment was purchased or sold during the fiscal year.

5. The cash surrender value of the life insurance policy increased during the fiscal year by $2,300. However, Leonard borrowed $4,000 against the policy on September 1, 20X2. Interest at 15 percent for the first year of this loan was paid when due on August 31, 20X3.

6. Federal income taxes of $13,100 were paid during the 20X3 fiscal year.

7. Mortgage payments made during the year totaled $9,700, which included payments of principal and interest. Required: Using the comparative statement of financial condition and additional information provided, prepare the statement of changes in net worth for the year ended August 31, 20X3.

Answer 1