Final answer:
A balance sheet is an accounting statement that shows a company's financial status by listing its assets, liabilities, and equity. The accounting equation that defines the balance sheet is Assets = Liabilities + Equity. For the given data, the multiple choice answer is (a).
Step-by-step explanation:
A balance sheet is a fundamental financial statement used in accounting that provides a snapshot of a company's financial condition at a specific point in time. It details the company's assets, liabilities, and equity, offering a basis for computing rates of return and evaluating its capital structure. The balance sheet adheres to the fundamental accounting equation which is:
Assets = Liabilities + Equity
According to the provided information, the assets comprise reserves of 30, bonds of 50, and loans of 50, totalling 130 in assets. The liabilities are deposits amounting to 300, and the equity stands at 30.
Calculation of Equity
If you follow the accounting equation, equity can be calculated by re-arranging the formula to:
Equity = Assets - Liabilities
However, it is essential to recognize the mistake in the provided data. If the assets total 130 and the liabilities are 300, this suggests that the equity would be a negative value, which typically indicates financial distress. In real-world scenarios, such a situation demands further investigation for potential errors in the balance sheet data or may reflect a company in financial trouble.
To prepare a section of the manufacturing inventories balance sheet for May 31, 2022, we would list out the assets specific to manufacturing such as raw materials, work-in-progress, and finished goods, and balance them with respective liabilities and equity, ensuring that assets equal liabilities plus equity.
In conclusion, the multiple choice answer (MCQ) is (a), representing the correct formula: Assets = Liabilities + Equity.