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Elements of a Balance Sheet and How to Measure Them

You are an accountant for The Flower Shoppe. Your supervisor has asked you to help her prepare the year-end financial statements. Before you do, she wants to ensure that you understand some main points. Please see Excel attachment.

A. Explain the following:
1. The elements of the balance sheet, their purposes, and how to measure them
2. The elements and purpose of the statement of changes in stockholder's equity

B. Based on the adjusted trial balance and additional information, prepare the following in an Excel file to give to the controller for review:
1. Balance sheet
2. Income statement
3. Statement of retained earnings
4. Statement of cash flows

The following is additional information about the Flower Shoppe that is needed for financial-statement preparation:

Net income for the year ended December 31, 2008 was $10,845.

Changes from the prior year's balances included the following:
a decrease in accounts receivable of $300.
a decrease in inventory of $450.
an increase in accounts payable of $250.
a decrease in accrued expenses of $100.
Land was purchased in April for $3,500.
Cash as of January 1, 2008 was $10,105.

The Flower Shoppe


Solution Preview


Please see attached Excel sheet and read explanations below.

The elements of the balance sheet, their purposes, and how to measure them
Balance sheet is a statement that summarizes the financial position of a company at a particular date by reporting the economic resources (assets), the economic obligations (liabilities) and the residual interest of shareholders (equity).
The elements of balance sheet are:
- Assets: An asset is an economic resource that is acquired or purchased, has money value and that is expected to provide future benefit to the owner.
- Liabilities: Liabilities refer to obligations that result in outflow of economic resources arising out of or during the course of business operations.
- Equity: Equity is the amount of money contributed by the owners and ...

Solution Summary

The following posting helps discuss the elements of a balance sheet and how to measure them.