The balance sheet items for The Oven Bakery (arranged in alphabetical order) were as follows at

August 1, 2011. (You are to compute the missing figure for Retained Earnings.)

During the next two days, the following transactions occurred:
Aug. 2 Additional capital stock was sold for $25,000. The accounts payable were paid in full.
(No payment was made on the notes payable or salaries payable.)
Aug. 3 Equipment was purchased at a cost of $7,200 to be paid within 10 days. Supplies were purchased for $1,250 cash from a restaurant supply center that was going out of business. These supplies would have cost $1,890 if purchased through normal channels.
Instructions
a. Prepare a balance sheet at August 1, 2011.
b. Prepare a balance sheet at August 3, 2011, and a statement of cash flows for August 1–3. Classify the payment of accounts payable and the purchase of supplies as operating activities.
c. Assume the notes payable do not come due for several years. Is The Oven Bakery in a stronger financial position on August 1 or on August 3? Explainbriefly.

Transcribed Image Text:

Accounts Payable. Accounts Receivable Building Capital Stock Cash $16,200 Equipment and Fixtures 11,260 Land 84,000 Notes Payable 80,000 Salaries Payable $44,500 67,000 74,900 8,900 7,000 .. . 6,940 Supplies