Hi I have this question which I have been trying to resolve using the accounting equation i.e. A =L+OE
I have eliminated items that are not meant to be in the balance sheet however it still does not balance. Any help would be appreciated

Helga has opened a fashion boutique in a new shopping centre. She has decided to prepare her own balance sheet after six months of trading to see whether it has been a profitable venture for her. As you are a friend of hers (who knows something about accounting) she has asked you to help her as she realizes that her accounting knowledge is limited to understanding the cash flows which she obtains from her bank statements. Helga has prepared and provides the following “balance sheet” for
her boutique. She has become a bit confused with the figures and thinks that she has made more profit than the balance sheet shows. Helga asks you to take a look at this balance sheet and help her out.

Helga’s Fashions
Balance Sheet
For six months ended December 31, 2009

Assets
Cash 18,000
Cash sales 120,000
Inventory 60,000
Inventory sold (at cost price) 102,000
Prepaid Insurance 2,500
Deposit paid in cash in advance from customer 1,000
Fittings and fixtures 52,000
Less Loan (40,000)
Total Assets $315,500

Less
Liabilities

Amounts owing from credit sales $115,000
Accounts Payable 75,000
Depreciation 3,000
Rent paid 8,000
Rent payable 4,000
Total liabilities $205,000

Equals
Owner’s Equity

Helga’s own capital 100,000
Retained profit/loss 10,000
Owner’s Equity $110,000

Question: Prepare a corrected balance sheet

Assets
Cash 18,000
Accounts Receivable 115,000
Inventory 60,000
Prepaid Insurance 2,500
Total Current Assets 195,500
Fittings and fixtures (this question ignores depreciation) 52,000
Total Assets 247,500

Liabilities

Accounts Payable 75,000
Loan Payable 40,000
Rent Payable 4,000
Customer Deposit 1,000
Total Liabilities 120,000

Owners’ Equity

Share Capital 100,000
Retained Earnings:* 10,000
Total Owner’s equity 110,000
Total Liabilities and owners’ equity 230,000

Hi I have this question which I have been trying to resolve using the accounting equation i.e. A =L+OE
I have eliminated items that are not meant to be in the balance sheet however it still does not balance. Any help would be appreciated

Helga has opened a fashion boutique in a new shopping centre. She has decided to prepare her own balance sheet after six months of trading to see whether it has been a profitable venture for her. As you are a friend of hers (who knows something about accounting) she has asked you to help her as she realizes that her accounting knowledge is limited to understanding the cash flows which she obtains from her bank statements. Helga has prepared and provides the following “balance sheet” for
her boutique. She has become a bit confused with the figures and thinks that she has made more profit than the balance sheet shows. Helga asks you to take a look at this balance sheet and help her out.

Helga’s Fashions
Balance Sheet
For six months ended December 31, 2009

Assets
Cash 18,000
Cash sales 120,000
Inventory 60,000
Inventory sold (at cost price) 102,000
Prepaid Insurance 2,500
Deposit paid in cash in advance from customer 1,000
Fittings and fixtures 52,000
Less Loan (40,000)
Total Assets $315,500

Less
Liabilities

Amounts owing from credit sales $115,000
Accounts Payable 75,000
Depreciation 3,000
Rent paid 8,000
Rent payable 4,000
Total liabilities $205,000

Equals
Owner’s Equity

Helga’s own capital 100,000
Retained profit/loss 10,000
Owner’s Equity $110,000

Answer:

Assets
Cash 18,000
Accounts Receivable 115,000
Inventory 60,000
Prepaid Insurance 2,500
Total Current Assets 195,500
Fittings and fixtures (this question ignores depreciation) 52,000
Total Assets 247,500

Liabilities

Accounts Payable 75,000
Loan Payable 40,000
Rent Payable 4,000
Customer Deposit 1,000
Total Liabilities 120,000

Owners’ Equity

Share Capital 100,000
Retained Earnings:* 10,000
Total Owner’s equity 110,000
Total Liabilities and owners’ equity 230,000

I can't get it to balance either. As far as I can see, there is some missing information, like some things that are left a little "open" as to what is supposed to happen to them. I did it first just taking it at face value, but since it doesn't balance, then I have to assume there's some information you're leaving out which could shed some light on some of this.

I've got everything exactly like you do, with the exception that I took depreciation for accumulated depreciation that would come off the plant assets. I guess I didn't take that "at face value," but it doesn't say depreciation expense OR accumulated depreciation, but since accumulated would be over on the credit side, I could see the "error" of sticking it under liabilities. You're commenting that it's to be ignored for this problem -- but where are you getting that from? (Ignoring it just makes your assets that much bigger.)

What strikes me first is that she may not have updated the current retained earnings with current net income. However, I don't see enough figures to think I could come up with a proper net income. After all, only sales, COGS and rent paid are mentioned. Maybe the depreciation was meant to be an expense as well, but still, that's a little short on expenses. But even accounting for that, I can't make it balance.

So the questions that come to mind... is the rent payable supposed to be added to the amount paid in order to get a rent expense? (That's only important if we try to get some type of net income.) Is the prepaid insurance a correct figure? Etc. Many times these "fix the balance sheet" problems list some additional information and not just the list of numbers.

Please do not double post like that. It's extremely confusing. It's not much fun to go through a problem like this, answer it, just to discover someone else has answered the same question elsewhere. I'm just glad it was me and I recognized the question. I've merged this in with your other thread.