Melody Lane Music Company was started by John Ross early in 2018. Initial capital was acquired by
Question:
Melody Lane Music Company was started by John Ross early in 2018. Initial capital was acquired by issuing shares of common stock to various investors and by obtaining a bank loan. The company operates a retail store that sells records, tapes, and compact discs. Business was so good during the first year of operations that John is considering opening a second store on the other side of town. The funds necessary for expansion will come from a new bank loan. In order to approve the loan, the bank requires financial statements.
John asks for your help in preparing the balance sheet and presents you with the following information for the year ending December 31, 2018:
a. Cash receipts consisted of the following:
From customers ........................................ $360,000
From issue of common stock ........................ 100,000
From bank loan ........................................ 100,000
b. Cash disbursements were as follows:
Purchase of inventory .................................$300,000
Rent ......................................................15,000
Salaries ..................................................30,000
Utilities .................................................. 5,000
Insurance ................................................ 3,000
Purchase of equipment and furniture ...............40,000
c. The bank loan was made on March 31, 2018. A note was signed requiring payment of interest and principal on March 31, 2019. The interest rate is 12%.
d. The equipment and furniture were purchased on January 3, 2018, and have an estimated useful life of 10 years with no anticipated salvage value. Depreciation per year is $4,000.
e. Inventories on hand at the end of the year cost $100,000.
f. Amounts owed at December 31, 2018, were as follows:
To suppliers of inventory .......................................$20,000
To the utility company .......................................... 1,000
g. Rent on the store building is $1,000 per month. On December 1, 2018, four months' rent was paid in advance.
h. Net income for the year was $76,000. Assume that the company is not subject to federal, state, or local income tax.
i. One hundred thousand shares of no par common stock are authorized, of which 20,000 shares were issued and are outstanding.
Required:
Prepare a balance sheet at December 31, 2018.
Common StockCommon stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
Melody Lane Music Company Balance Sheet At December 31 2018 Assets Current assets Cash 1 ...View the full answer
Intermediate Accounting
ISBN: 9781259722660
9th Edition
Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas
