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Homework answers / question archive / Financial Statement Construction Exercise Green Corporation is a fictitious retail garden nursery
Financial Statement Construction Exercise
Green Corporation is a fictitious retail garden nursery. You have been provided the December 31, 2019 balance sheet for Green Corporation, as well as a narrative of transactions that occurred during 2020.
Using this information, prepare a December 31, 2020 balance sheet, and an income statement and indirect method statement of cash flows for the year ended December 31, 2020. Note that you will need to make some adjusting entries to account for what occurred with the passage of time (such as the part of the insurance policy being used up by year's end). Use the appropriate spreadsheet tabs to input your work. While not required, I recommend starting this exercise by filling in the pre-fab t-accounts in the "T-accounts" tab.
For this case, it will suffice for you to turn in your completed Excel spreadsheet.
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Green Corporation |
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Balance Sheet |
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December 31, 2019 |
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Assets |
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Current |
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Cash |
3,000 |
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Accounts Receivable |
2,000 |
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Inventory |
10,000 |
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Total Current Assets |
15,000 |
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Property and Equipment (net of $30,000 accumulated depreciation) |
50,000 |
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Total Assets |
65,000 |
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Liabilities and Shareholders' Equity |
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Current |
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Accounts Payable |
26,000 |
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Salary Payable |
4,000 |
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Total Current Liabilities |
30,000 |
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10% Long-Term Note Payable |
20,000 |
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Total Liabilities |
50,000 |
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Common Stock |
10,000 |
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Retained Earnings |
5,000 |
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Total Liabilities and Shareholders' Equity |
65,000 |
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Relevant information for 2019 |
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1. On June 30, 2020, Green Corp. paid $2,000 in cash for a 2-year fire insurance policy covering the period June 30, 2020 to June 30, 2022. |
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2. On November 1, 2020, Green Company made the decision to expand into a new location and entered into a one-year rental contract covering the period November 1, 2020 to November 1, 2021. Under the new rent contract, Green agreed to pay $10,000 rent on the first day of each month. (Hint: Assume that Green Company complied with this agreement and paid the $10,000 in cash on the first day of each month.) |
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3. Green paid $50,000 in cash to purchase new equipment. |
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4. Equipment with a historical cost of $15,000 and accumulated depreciation of $3,000 was sold for $14,000 in cash. |
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5. Depreciation was $5,000 for the year. |
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6. Green made merchandising sales of $250,000 during the year. All sales were on account (i.e., credit sales). |
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7. Collections of accounts receivable totaled $231,000 cash for the year. |
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8. Purchases of inventory totaled $113,000 for the year. All purchases were on account (on credit). |
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9. The company counted inventory at year-end and determined the ending inventory balance to be $5,000. |
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10. Payments to suppliers for purchases on account totaled $111,000 in cash. |
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11. On December 31, 2020, Green repaid the 10% note, along with accrued interest, by paying the bank $22,000 cash. |
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12. On December 31, 2020, Green issued a new 8% note. Proceeds from the note were $11,000. |
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13. Also on December 31, 2020, Green issued 5,000 shares of common equity. Each share yielded $5 in proceeds. |
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14. $23,000 in cash was paid during the year for salaries to employees, and the ending balance in salaries payable on Dec. 31, 2020 was $2,000. |
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15. Cash payments for other operating expenses totaled $500. |
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16. Green paid dividends of $3,000 during the year. |
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17. Green operates in a tax-free jurisdiction. (Are they lucky or what?) |
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