Problem 2-2

Prepare a balance sheet as of June 30, for the J.L. Gregory Company, using the following data:

Accounts payable $241,000 Cash $89,000

Accounts receivable 505,000 Equipment (at cost) 761,000
Accrued expenses 107,000 Estimate tax liability 125,000
Accumulated depreciation on
buildings 538,000 Inventories 513,000
Accumulated depreciation on Investment in the
equipment 386,000 Peerless Company 320,000
Bonds payable 700,000 Land (at cost) 230,000
Buildings (at cost) 1,120,000 Marketable securities 379,000
Capital Stock 1,000,000 Notes payable 200,000
Retained earnings ?

J.L. GREGORY COMPANY

Balance Sheet
As of June 30
Assets Liabilities and Owners' Equity
Current assets: Current liabilities
Cash $89,000 Accounts payable $241,000
Marketable Securities $379,000 Tax Payable $125,000
Accounts Receivable $505,000 Accured expenses $107,000
Inventories $513,000

Total current assets $1,486,000 Total current liabilities

Property, plant and equipment Long-term debt

Land $230,000 Notes Payable
Building & Equipment at cost $1,881,000 Bonds Payable
Less: Accumulated
depreciation on buildings &
equipment $924,000 $957,000

Net property, plant and equipment Total Liabilities

Other assets Owners' Equity

Investment $320,000 Captital Stock $1,000,000
Retained Earnings $620,000
 Total Owners Equity

Total Assets $2,993,000 Total liabilities and owners' equity

 $473,000

$200,000
$700,000

$1,373,000
$1,620,000

$2,993,000
Problem 2-5

The January 1 balance sheet of the Marvin Company, an unincorporated business, is as follows:

MARVIN COMPANY
Balance Sheet
As of January 1
Assets Liabilities and Owners' Equity
Cash $25,000 Notes Payable $20,000
Inventory 50,000 Capital 55,000
Total $75,000 Total $75,000

The following transactions took place in January:

Jan. 4 Merchandise was sold for $12,000 cash that had cost $7,000.
6 To increase inventory, Marvin placed an order with Star Company for merchandise that would cost $7,000.
8 Marvin received the merchandise ordered from Star and agreed to pay the $7,000 in 30 days.
11 Merchandise costing $1,500 was sold for $2,500 in cash.
16 Merchandise costing $2,000 was sold for $3,4000 on 30-day open account.
26 Marvin paid employees for the month $4,200 in cash.
29 Purchased land for $20,000 in cash.
31 Marvin purchased a two-year insurance policy for $2,800 in cash.

Required:

Describe the impact of each transaction on the balance sheet, and prepare a new balance sheet as of
January 31.

Jan. 4 Increase cash $12,000; Decrease inventory $7,000; Increase Retained Earnings $5,000
6 No effect
8 Increase inventory $7,000; Increase Notes Payable 7,000
11 Increase cash $2,500; Decrease inventory $1,500; Increase Reatined Earnings 1,000
16 Decrease inventory $2,000; Increase Accounts Receivable $3,400; Increase Retained Earnings $1,400
26 Decrease cash and Retained Earnings $4,200 [does not included in liabilities because it has already been paid out] **(Morah, 2018)
29 Decrease Cash $20,000; Increase Land $20,000
31 Decrease cash $2,800; Increase prepaid insurance $2,800

MARVIN COMPANY
Balance Sheet
As of January 1
Assets Liabilities and Owners' Equity
Current assets: Current liabilities:
Cash $12,500 Accounts Payable $7,000
Inventory $46,500
Accounts Receivable $3,400
Prepaid Expenses $2,800

Total current assets $65,200 Total current liabilities $7,000

Property, plant and equipment Long-term debt

Land $20,000 Notes Payable $20,000

Net property, plant and equipment $20,000 Total liabilites $27,000

Owners' Equity
Capital $55,000
Retained Earnings $3,200
Total owners' equity $58,200

Total Assets $85,200.00 Total liabilites and owners' equity $85,200

References
Morah, C. (2018, June 15). Which transactions affect retained earnings? Retrieved November 4, 2018, from
https://www.investopedia.com/ask/answers/10/retained-earnings-statement.asp