Determining Balance Sheet Totals One of the owners of THE REALLY SINFUL COOKIE SHOP is considering selling his ownership and wishes to determine his equity in the cookie shop using good accounting principles.

The owners know the following transactions have occurred since they started operations at the beginning of the year:

* $35,000 was borrowed from the bank to help get the business started, and $10,000 was repaid by year-end. In addition, the owners contributed $15,000 to get the business started.

* Ingredients costing $40,000 were purchased during the year, and 80 percent was used in goods baked during the year. All but $6,000 of the ingredients was paid for by the end of the year.

* Cookie ovens were rented during the year for $13,000. At year-end, an option to purchase the ovens was exercised, and $37,000 was paid to acquire ownership.

* Salaries of $20,000 were earned by employees during the year; all were paid except taxes of $3,000, which were withheld and will be forwarded to the proper agencies early next year.

» After collecting $86,000 for goods sold, the cash balance at the end of the year was $25,000, and net income of

$21,000 was reported.

a. List each of the assets and liabilities of the bakery at the end of the year.

b. Compute the amount of the equity of the owners at yearend.

c. Prepare a simple balance sheet for the bakery at year-end.

d. For what amount should the owner be able to sell his 25-

percent ownership interest?