Reconstructing accounting records. An employee of K9 Supplies Company removes most of the financial records of the company on October 31, as well as all of the cash on hand. The company had correctly recorded all transactions through October 31. From supplementary records, the company obtains the following information:

(1) According to the bank, cash in the bank was $3,290.

(2) Amounts payable to creditors totaled $3,620.

(3) K9's initial contribution to the business was $12,000, and the total shareholders'

equity at the time of the theft was $14,500.

(4) Cost of merchandise on hand was $9,740.

(5) A one-year fire insurance policy was purchased on October 1 for $1,200.

(6) Furniture and fixtures are rented from the Anderson Office Supply Company for

$300 per month. The rental for October has not been paid.

(7) A note for $1,500 was given to K9 Supplies Company by a customer. Interest due at October 31 was $75.

(8) Payments due from other customers amounted to $1,510.

(9) K9 purchased a license from the city for $600 on September 1 . The license allows retail operations for one year.

a. Prepare a well-organized balance sheet presenting the financial position immediately preceding the theft.

b. What is the probable cash shortage?