Every contra netted, the current portion split, the intangible placed, the equity tied

Assets, in liquidity order

Every balance on the adjusted trial balance now has a home. Assets first, most liquid at the top, every contra account shown as a deduction from the asset it belongs to:

Tamarack Marina & Storage Inc.
Balance Sheet
At 31 December

Current assets
  Cash                                                47,300
  Accounts receivable                       42,000
    Less: allowance for doubtful accounts    2,700    39,300
  Inventory                                           51,900
  Supplies                                             2,100
  Prepaid insurance                                    6,400
  Total current assets                               147,000
Property, plant and equipment
  Land                                               220,000
  Building                                 480,000
    Less: accumulated amortization         100,000   380,000
  Equipment                                180,000
    Less: accumulated amortization          80,000   100,000
  Total property, plant and equipment                700,000
Intangible assets
  Trademark                                           12,000
Total assets                                         859,000

Receivables are 38,400 + the 3,600 accrued = 42,000, net of the 2,700 allowance the aging demanded. Inventory is at NRV, 51,900, because the write-down was posted. Supplies and prepaid insurance are what remains — 2,100 and 6,400 — not what was on the trial balance before adjustment. Accumulated amortization is 90,000 + 10,000 and 60,000 + 20,000. The trademark is an intangible: its own band, below PP&E, at its 12,000 cost because it is not amortised.

Liabilities: the loan in two pieces

Current liabilities
  Accounts payable                                    29,700
  Salaries payable                                     5,400
  Interest payable                                     1,250
  Income tax payable                                  26,820
  Unearned revenue                                    56,000
  Current portion of bank loan                        25,000
  Total current liabilities                          144,170
Long-term liabilities
  Bank loan payable                                  125,000
Total liabilities                                    269,170
Shareholders’ equity
  Common shares                                      200,000
  Retained earnings                                  389,830
  Total shareholders’ equity                         589,830
Total liabilities and shareholders’ equity           859,000

The trial balance says Bank Loan Payable 150,000. Fact 6 says 25,000 of it is due 30 April — within a year — so the balance sheet shows 25,000 current and 125,000 long-term. No journal entry moves it; the split is presentation, and forgetting it understates current liabilities by 25,000. Unearned revenue is the 56,000 still owed in storage, not the 84,000 received. Income tax payable is the 26,820 accrued, and interest payable the 1,250.

The tie

Retained earnings is the SRE’s 389,830. Liabilities 269,170 + equity 589,830 = 859,000 = total assets. If the two sides differ, look first at retained earnings — using the trial balance’s 258,550 leaves a gap of exactly 131,280, net income less dividends — then at the contra accounts (a contra shown as a liability inflates both sides), then at the loan split.

What the bank reads first

Working capital 147,000 − 144,170 = 2,830; current ratio 147,000 ÷ 144,170 = 1.02. Thin — and the exam question on this sheet is why (L14.3’s exam item). Two current liabilities are unusual: 56,000 of unearned storage revenue, which will be settled by keeping boats in a shed rather than by paying cash, and the 25,000 instalment on a loan the marina has been servicing for years. A ratio of 1.02 on this sheet is not the same thing as a ratio of 1.02 at a company whose current liabilities are all trade payables due in thirty days.