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Chapter 1: Problem 17

From the following list of selected items taken from the records of Ishmael Appliance Service as of a specific date, identify those that would appear on the balance sheet: 1\. Supplies 6\. Fees Earned 2\. Wages Expense 7\. Supplies Expense 3\. Cash 8\. Accounts Payable 4\. Land 9\. Melinda Elder, Capital 5\. Utilities Expense 10\. Wages Payable

Short Answer

Expert verified
Items that appear on the balance sheet are Supplies, Cash, Land, Accounts Payable, Wages Payable, and Melinda Elder, Capital.

Step by step solution

01

Understand the Balance Sheet

The balance sheet is a financial statement that presents the financial position of a company at a specific point in time. It consists of three main components: assets, liabilities, and equity. Therefore, we need to identify items from the list that fall into these categories.
02

Identify Assets

Assets are resources owned by a company that have economic value. From the list, identify items that would be classified as assets. In this case, Supplies \(1\), Cash \(3\), and Land \(4\) are assets as they represent value owned by the company.
03

Identify Liabilities

Liabilities are obligations that the company needs to settle in the future. From the list, Accounts Payable \(8\) and Wages Payable \(10\) are liabilities as they represent amounts the company owes.
04

Identify Owner's Equity

Owner's equity represents the owner's claims after all liabilities have been settled. From the list, Melinda Elder, Capital \(9\) represents owner's equity, as it is the capital invested by the owner into the business.
05

Exclude Non-Balance Sheet Items

Items like Fees Earned \(6\), Wages Expense \(2\), Supplies Expense \(7\), and Utilities Expense \(5\) do not appear on the balance sheet as they are part of the income statement, representing revenues and expenses.

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Key Concepts

These are the key concepts you need to understand to accurately answer the question.

Assets
Assets are vital components of any balance sheet. They represent the valuable resources owned by a company, which are expected to provide future economic benefits. It's like having valuable possessions that contribute to the overall wealth of the business. In the context of a balance sheet, assets can be short-term, known as current assets, or long-term, referred to as non-current assets. Some examples include:
  • Cash: Ready money available for immediate spending and investment.
  • Supplies: Goods that are intended for use within the company, like office supplies.
  • Land: Physical terrain or property owned by the business.
Each of these assets has specific roles in facilitating the operations and growth of the company. They signify ownership and control over economic resources, which are expected to yield benefits in the future.
Liabilities
In financial terms, liabilities represent the debts or financial obligations a company holds. They show what the business owes to others, making them a critical component of the balance sheet that reflects the company's financial position.
  • Accounts Payable: Money that the company needs to pay to suppliers for goods and services received.
  • Wages Payable: Salary amounts owed to employees that are yet to be paid.
Liabilities give insight into the company's future commitments and financial health. Managing them effectively is crucial for maintaining a favorable balance between debt and equity, ensuring the business can honor its obligations as they become due.
Owner's Equity
Owner's equity, also known as the owner's net worth, represents the owner's stake in the business. It is what remains after all liabilities are settled from the company's assets. Essentially, it measures the value that the owner can claim over the company.
  • Capital: Funds that the owner, like Melinda Elder, invests into the business, which is expected to generate returns and growth.
Owner's equity is a critical part of the balance sheet because it provides a snapshot of what the business is worth to the owner. It acts as a buffer that can absorb business losses or discrepancies between assets and liabilities, thus providing stability to the company's financial structure.

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Most popular questions from this chapter

Indicate whether each of the following is identified with (1) an asset, (2) a liability, or (3) owner's equity: a. wages expense d. land b. accounts payable e. fees eamed c. cash f. supplies

The income statement of a proprietorship for the month of October indicates a net income of \(\$ 158,250\). During the same period, the owner withdrew \(\$ 180,000\) in cash from the business for personal use. Would it be correct to say that the business incurred a net loss of \(\$ 21,750\) during the month? Discuss.

Financial information related to Madras Company, a proprietorship, for the month ended April 30,2006 , is as follows: \(\begin{array}{lr}\text { Net income for April } & \$ 73,000 \\ \text { Leo Perkins's withdrawals during April } & 12,000 \\ \text { Leo Perkins, capital, April 1, 2006 } & 297,200\end{array}\) Prepare a statement of owner's equity for the month ended April \(30,2006 .\)

Financial information related to Madras Company, a proprietorship, for the month ended April 30,2006 , is as follows: \(\begin{array}{lr}\text { Net income for April } & \$ 73,000 \\ \text { Leo Perkins's withdrawals during April } & 12,000 \\ \text { Leo Perkins, capital, April 1, 2006 } & 297,200\end{array}\) Prepare a statement of owner's equity for the month ended April \(30,2006 .\)

The following selected transactions were completed by Salvo Delivery Service during February: 1\. Received cash from owner as additional investment, \(\$ 35,000\). 2\. Received cash for providing delivery services, \(\$ 15,000\). 3\. Paid creditors on account, \(\$ 1,800\). 4\. Billed customers for delivery services on account, \(\$ 11,250\). 5\. Paid advertising expense, \(\$ 750\). 6\. Purchased supplies for cash, \(\$ 800\). 7\. Paid rent for February, \(\$ 2,000\). 8\. Received cash from customers on account, \(\$ 6,740\). 9\. Determined that the cost of supplies on hand was \(\$ 135\); therefore, \(\$ 665\) of supplies had been used during the month. 10\. Paid cash to owner for personal use, \(\$ 1,000\). Indicate the effect of each transaction on the accounting equation by listing the numbers identifying the transactions, (1) through (10), in a vertical column, and inserting at the right of each number the appropriate letter from the following list: a. Increase in an asset, decrease in another asset. b. Increase in an asset, increase in a liability. c. Increase in an asset, increase in owner's equity. d. Decrease in an asset, decrease in a liability. e. Decrease in an asset, decrease in owner's equity.
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