Question

Prepare Balance Sheet Jennifer Grant is a realtor. She buys and sells properties on her own account, and she also earns commissions as a real estate agent for buyers and sellers. Her business was organized on November 24,20X1, as a sole proprietorship. Grant also owns her own personal residence. Consider the following on November 30,20X1 : Grant owes $85,000 on a mortgage on some undeveloped land, which her business acquired for a total price of $170,000.

Answer 1

Jennifer Grant's balance sheet as of November 30, 20X1, will show the undeveloped land valued at $85,000 as an asset and a corresponding liability of $85,000 for the mortgage owed on the land.

Step-by-step explanation:

In accounting, a balance sheet presents a snapshot of a company's financial position at a specific point in time. It consists of assets, liabilities, and owner's equity.

As a realtor, Jennifer Grant's balance sheet on November 30, 20X1, would list the undeveloped land as an asset. The land's value, being $85,000, represents what her business owns. Simultaneously, since the land was acquired through a mortgage, this incurs a liability.

Liabilities represent the debts or obligations owed by the business. Therefore, the $85,000 mortgage she owes for the land will be recorded as a liability on her balance sheet. The balance sheet's fundamental equation is: Assets = Liabilities + Owner's Equity.

In this scenario, the undeveloped land at $85,000 represents the asset, while the $85,000 mortgage serves as the corresponding liability. Since the land was acquired for $170,000, the mortgage is equal to half the land's purchase price, illustrating a clear liability related to this particular asset on Grant's balance sheet.

This balance sheet snapshot on November 30, 20X1, portrays a balanced equation with the undeveloped land valued at $85,000 listed as an asset and the $85,000 mortgage as a liability, giving an accurate depiction of Jennifer Grant's financial position regarding this property acquisition.