Arrange the following items in the correct order as they would appear on a balance sheet and calculate the total for each category.

Steps to Solve

1. Identify Asset Accounts The first step is to identify which items are assets. In this case, we have:

• Cash: $25,000

• Equipment: $50,000

  Total assets can be calculated as follows: $$ \text{Total Assets} = \text{Cash} + \text{Equipment} = 25,000 + 50,000 = 75,000 $$

2. Identify Liability Accounts Next, we need to identify the liabilities. The items listed are:

• Loans Payable: $30,000

  The total liabilities are given as: $$ \text{Total Liabilities} = 30,000 $$

3. Identify Equity Accounts Now, determine the equity accounts. The items are:

• Owner's Capital: $40,000

• Retained Earnings: (not provided but can be derived since Total Equity is given as $60,000)

  To find retained earnings, we can rearrange the total equity equation: $$ \text{Total Equity} = \text{Owner's Capital} + \text{Retained Earnings} $$ Thus, $$ \text{Retained Earnings} = \text{Total Equity} - \text{Owner's Capital} = 60,000 - 40,000 = 20,000 $$

4. Complete the Balance Sheet Now, we can organize the balance sheet with the totals calculated:

• Assets:

  • Cash: $25,000
  • Equipment: $50,000
  • Total Assets: $75,000

• Liabilities:

  • Loans Payable: $30,000
  • Total Liabilities: $30,000

• Equity:

  • Owner’s Capital: $40,000
  • Retained Earnings: $20,000
  • Total Equity: $60,000

5. Final Arrangement of the Balance Sheet We can put everything in a formal balance sheet format, ensuring that:
   • The total assets equal the total liabilities plus equity: $$ \text{Total Assets} = \text{Total Liabilities} + \text{Total Equity} $$ $$ 75,000 = 30,000 + 60,000 $$