Choose The One Alternative That Best Completes The Statement

Choose the one alternative that best completes the statement

Solve the problem. Prepare a balance sheet for Mullen's Hardware for December 31 of last year. The company assets are cash $15,000, accounts receivable $21,000, and merchandise inventory $95,000. The liabilities are accounts payable $12,000 and wages payable $17,000. The owner's capital is $102,000.

The total assets can be calculated as the sum of all assets: $15,000 + $21,000 + $95,000 = $131,000.

Using the accounting equation (Assets = Liabilities + Owner's Equity), we verify the liabilities and owner's equity:

Total liabilities are accounts payable ($12,000) plus wages payable ($17,000), totaling $29,000.

Owner's capital is $102,000.

Sum of liabilities and owner's equity: $29,000 + $102,000 = $131,000, matching total assets.

Therefore, the correct balance sheet presentation is:

Total assets: $131,000

Total liabilities: $29,000

Total liabilities and owner's equity: $131,000

Paper For Above instruction

The task involves preparing a balance sheet for Mullen's Hardware as of December 31 of the previous year. This financial statement provides a snapshot of the company's financial position by detailing its assets, liabilities, and owner's equity. Using the provided data—cash, accounts receivable, merchandise inventory, accounts payable, wages payable, and owner's capital—the balance sheet succinctly summarizes the company's financial health.

In constructing the balance sheet, the first step is calculating total assets, which sum to $131,000 based on the provided figures: cash ($15,000), accounts receivable ($21,000), and inventory ($95,000). Next, liabilities are totaled, which include accounts payable ($12,000) and wages payable ($17,000), amounting to $29,000. According to the accounting equation, assets equal liabilities plus owner's equity; thus, owner's capital of $102,000 complements total liabilities to reflect total assets ($29,000 + $102,000 = $131,000).

This balance sheet not only confirms the company's assets are adequately funded by liabilities and owner’s investment but also adheres to accounting principles of balance and consistency. Such financial statements are crucial for stakeholders to assess financial stability, liquidity, and operational efficiency of a business.

References

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