Question

1. At the end of January 2005 (its first month of operations in the dry cleaning business), Botkin Corporation was low on cash and needed a loan. The bank requested a balance sheet as of January 31, 2005. The following information was available:

Accounts Payable                                                                   $          9,000

Account Receivable                                                                            50,000

Buildings                                                                                             170,000

Land                                                                                                    45,000

Stockholders’ Equity (Owner’s Equity)                                               180,000

   Salaries Payable                                                                                 5,000

   Equipment                                                                                           39,000

   Notes Payable                                                                                    130,000

   Cash                                                                                                         ?

Required: Prepare a balance sheet for Botkin Corporation as of January 31, 2005?

2. Which of the following statements are true for financial accounting purposes?

1. Assets = liabilities + Stockholders’ Equity _____________________
2. Stockholders’ Equity = Liabilities + Assets _____________________
3. Liabilities = Assets + Stockholders’ Equity _____________________
4. Liabilities – Stockholders’ Equity = Assets _____________________
5. Stockholders’ Equity = Assets – Liabilities _____________________
6. Liabilities = Assets - Stockholders’ Equity _____________________
7. Assets = Stockholders’ Equity – Liabilities _____________________

3. Which of the following equations is not true?

1. Assets = Liabilities - Stockholders’ Equity ____
2. Assets = Liabilities + Stockholders’ Equity ____
3. Assets – Stockholders’ Equity = Liabilities ____
4. Assets – Liabilities = Stockholders’ Equity ____
5. Assets – Liabilities – Stockholders’ Equity = Zero _____

4. The basic accounting equation for a corporation may be expressed as _____________ = ________________ + ________________
5. Net income is the excess of ______ over ________.
6. ____________ are defined as “probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events.”

Answer 1

Botkin Corporation
Balance Sheet
January 31, 2005
Assets
Cash	20000
Accounts Receivable	50000
Land	45000
Buildings	170000
Equipment	39000
Total assets	324000
Liabilities and Stockholders' Equity
Accounts Payable	9000
Salaries Payable	5000
Notes Payable	130000
Stockholders' Equity	180000
Total liabilities and stockholders' equity	324000

a. Assets = Liabilities + Stockholders' Equity	True
e. Stockholders' Equity = Assets - Liabilities	True
f. Liabilities = Assets - Stockholders' Equity	True

b, c, d, g are not true.

a. Assets = Liabilities - Stockholders' Equity

Not True

b, c, d, e are true.

The basic accounting equation for a corporation may be expressed as Assets = Liabilities + Stockholders' Equity.

Net income is the excess of revenues over expenses.

Liabilities are defined as "probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events."