Question

Sadie Hawkins owns The Education Supply Center, a small store that sells educational supplies. Hawkins recently approached the local bank for a loan to finance a planned expansion of her store. Hawkins prepared the balance sheet shown below and submitted it to one of the bank’s loan officers in support of her loan application. The Educational Supply Center Balance Sheet December 31, 2019 Assets Cash $ 15,400 Accounts Receivable 15,000 Inventory 39,000 Equipment (cost) 25,000 Personal Residence 188,000 Supplies 1,960 Family Auto 20,000 Total Assets $ 304,360 Liabilities and Owner's Equity Accounts Payable $ 15,450 Note Payable on Family Car 11,000 Mortgage on House 92,000 Sadie Hawkins, Capital 185,910 Total Liabilities and Owner's Equity $ 304,360 The following additional information was made available by Hawkins: The inventory has an original cost of $30,900. It is listed on the balance sheet at the estimated selling price. The cash listed on the balance sheet includes $2,700 in Sadie Hawkins' personal account. The remainder of the cash is in the store’s account. The store recently purchased a delivery truck for $29,000, financed through a bank loan. The bank has legal title to the truck. To date, the store has paid $9,000 on the loan. Of the remaining $20,000 liability, $8,600 is current and the remainder long-term. Hawkins did not include the truck or the liability on the balance sheet because neither she nor the business owns it. Depreciation allowable to date is $5,000 on the equipment and $3,000 on the truck. Required: 2. Prepare a corrected balance sheet in accordance with generally accepted accounting principles.

THE EDUCATIONAL SUPPLY CENTER
Balance Sheet
December 31, 2019
Assets
Current assets
Total current assets			$0
Plant and equipment
		0
		0
Total plant and equipment			0
Total assets			$0
Liabilities and owner’s equity
Current liabilities
Total current liabilities			0
Long-term liabilities
Total liabilities			0
Owner’s equity
Total liabilities and owner’s equity			$0

Answer 1

THE EDUCATIONAL SUPPLY CENTER
Balance Sheet
December 31, 2019
Assets
Current Assets
Cash	$12,700
Accounts Receivable	$15,000
Inventory	$30,900
Supplies	$1,960
Total current assets		$60,560
Plant & Equipment
Equipment	$25,000
Less: Accumulated Depreciation	$5,000
Delivery Truck	$20,000
Less: Accumulated Depreciation	$3,000
Total Plant & Equipment		$37,000
Total Assets		$97,560
Liabilities and owner’s equity
Current Liabilities
Accounts Payable	$15,450
Notes Payable	$11,000
Mortgage Payable	$8,600
Total Current Liabilities	$35,050
Long Term Liabilities
Mortgage	$103,400
Total Liabilities		$138,450
Owner's Equity
Sadie Hawkins, Capital		-$40,890
Total Liabilities and owner’s equity		$97,560