The Ekern Company was incorporated on April 1, 2007. Ekern had ten holders of common shares. Elke Ekern, who was the president and chief executive officer, held 51 percent of the shares. The company rented space in chain discount stores and specialized in selling women’s shoes. Ekern’s first location was in a store owned by Nordic Market Centres, Inc.

The following events occurred in April:

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a. The company was incorporated. Common shareholders invested $90,000 cash. b. Purchased merchandise inventory for cash, $35,000. c. Purchased merchandise inventory on open account, $25,000. d. Merchandise carried in inventory at a cost of $37,000 was sold for cash for $25,000 and on open account for $65,000, a grand total of $90,000. Ekern (not Nordic) carries and collects these accounts receivable. e. Collection of the above accounts receivable, $15,000. f. Payments of accounts payable, $18,000. See transaction (c). g. Special display equipment and fixtures were acquired on April 1 for $36,000. Their expected useful life was 36 months with no terminal scrap value. Straight-line amortization was adopted. This equipment was removable. Ekern paid $12,000 as a down payment and signed a promissory note for $24,000. h. On April 1, Ekern signed a rental agreement with Nordic. The agree- ment called for a flat $2,000 per month, payable quarterly in advance. Therefore Ekern paid $6,000 cash on April 1. i. The rental agreement also called for a payment of 10 percent of all sales. This payment was in addition to the flat $2,000 per month. In this way, Nordic would share in any success of the venture and be compensated for general services such as cleaning and utilities. This payment was to be made in cash on the last day of each month as soon as the sales for the month were tabulated. Ekern made the payment on April 30.