The accounting records of Carmen Creek Gourmet Meats show the following assets and liabilities as of the end of 2020 and 2019:

During 2020, Carmen Munch, the owner, purchased a small office building and moved the business from rented quarters to the new building. The building and the land it occupies cost $650,000. The business paid $130,000 in cash and a note payable was signed for the balance. Munch had to invest an additional $50,000 to enable it to pay the $130,000. The business earned a profit during 2020, which enabled Munch to withdraw $2,000 per month from the business for personal use.

Required

1. Prepare balance sheets for the business as of the end of 2019 and the end of 2020.

2. Prepare a calculation to show how much profit was earned by the business during 2020.

Analysis Component: Assets increased from $279,000 at December 31, 2019, to $936,000 at December 31, 2020. Using numbers wherever possible, explain how these assets were financed.

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December 31 2020 2019 $ 20,000 $ 28,000 Cash. 60,000 Accounts receivable 50,000 Office supplies. 25,000 20,000 Office equipment. 120,000 120,000 61,000 Machinery. 61,000 Land. 130,000 Building. Accounts payable.. Notes payable. 520,000 30,000 10,000 ...... 520,000 ..........