Answer:
Vernon Company
Determining the Impact of Transactions, Including Analysis of Cash Flows
Balance Sheet equation is Assets = Liabilities + Equity
a. January 10: Asset increased (Inventory) +$18,000 = Liabilities increased (Accounts Payable) +$18,000 + Equity
b. March 1: Asset increase (Cash) +$45,000 = Liabilities increased (10% Notes Payable) +$45,000 + Equity
Summary:
Assets = $63,000
Liabilities = $63,000
Equity = $0
Explanation:
a) Data and Analysis:
January 10: Inventory $18,000 Accounts Payable $18,000
March 1: Cash $45,000 10% Notes Payable $45,000
b) The fundamental accounting equation, Assets = Liabilities + Equity, divides Vernon's balance sheet into two main sides. On one side are Vernon's assets and on the other side are its liabilities and equity. That is, the two sides of Vernon's balance sheet are always equal, provided the double-entry system of accounting is equally observed.
