Balance Sheet Preparation Sam has asked his uncle to renew the loan he made to Sam’s Bar and Grill. Dear old Uncle, however, has said that Sam must provide him with a balance sheet for the business prepared as of the end of the current calendar year in accordance with generally accepted accounting principles before he will consider the request. The following pieces of information have been provided to you by Sam, who is fearful that he will be unable to continue in business unless the loan is renewed:

a. Several years ago, Sam’s Bar and Grill borrowed $60,000 from Sam’s uncle. Interest of $3,500 is paid at the end of each year; however, the payment for the current year will not be made until early next year.

b. At the end of the current year, Sam has on hand beer that cost $4,500 and soda that cost $1,700. Sam still owes

$1,500 for the beer and $700 for the soda.

c. As a promotional gimmick, the bar sold 1,000 coupon books to customers. Each book sold for $15 and entitled the holder to 25 glasses of beer, which normally sell for

$1 each. All coupons are expected to be used. By the end of the current year, half of the coupons have been used.

d. Unpaid wages at the end of the current year total $23,000.

e. Sam’s Bar and Grill exercised the purchase clause in its lease agreement for furniture and equipment and paid $85,000 at the end of the current year to buy these items.

f. Halfway through the current year, Sam’s Bar and Grill paid Nofault Insurance Company $21,000 for three years’
liability coverage to comply with the dram law insurance requirements for the State of Tennessee, coverage to start on that date.
g. The cash balance on hand at the end of the year is $14,000.
Prepare a balance sheet for Sam’s Bar and Grill as of the end of the current year. Based on the balance sheet data, do you think Uncle is likely to renew the loan? Why?