Andrea Reed is in her fourth year at a business school in Nova Scotia. Recently, Andrea was asked by her brother Nathan to help him prepare a personal balance sheet. Nathan needed the balance sheet because he was applying for a scholarship at a prestigious art school and the school required the information to help it assess Nathan’s financial need. Andrea sat down with Nathan to go over his situation and she obtained the following information:
a. Nathan has $844 in his bank account.
b. Nathan purchased a used car from his uncle three years ago. He paid $4,500 for the car and he thinks he should be able to use it for another two years.
c. Nathan is owed $750 for some decorating he did for a local social group’s recent fundraising party.
d. Nathan owes $2,000 to a local bank for a job training program he took a couple of years ago. He must begin to pay back the money once he accepts a full-time job or in five years, whichever comes first.
e. About six months ago, Nathan bought a computer from a local store. The computer cost $1,200 and he paid the seller $700 at the time he purchased it and he must pay $50 a month until the computer is paid for. Nathan expects he will be able to use the computer for four years.
f. Nathan’s personal property such as furniture, books, jewellery, etc. cost him about $6,000.
a. Use the information provided to prepare a balance sheet for Nathan. Provide an explanation for why you classified each item as you did (asset, liability, equity). The difference between assets and liabilities will give you Nathan’s equity.
b. How do you think the balance sheet would help the art school assess whether
Nathan should receive financial assistance?
c. What additional information do you think the school would want before making a decision to offer financial assistance?