Case 2-2 Music Mart, Inc. insurance 4. The store purchased a three-year fire i On a sheet of paper, set up in pencil the balance sheet of Music Mart, Inc., as it appears after the last transac- tion described in the text (January 4), leaving consid- erable space between each item. Record the effect, if any, of the following events on the balance sheet, ei- policy for $1,224, paying cash. Si2e 5. The store purchased two lots of land of e for a total of $24,000. It paid $6,000 in cash and gave a 10-year mortgage for $18,000. ther by revising existing figures (cross out, rather than erase) or by adding new items as necessary. At least one of these events does not affect the balance sheet. The basic equation, Assets Liabilities + Owners equity, must be preserved at all times. Errors will be minimized if you make a separate list of the balance sheet items affected by each transaction and the The store sold one of the two lots of land for S12,000. It received S3,000 cash, and in addition, the buyer assumed $9,000 of the mortgage; that is Music Mart, Inc., became no longer responsible for this half Smith received a bona fide offer of S33,000 for the business; although his equity was then only S26,970, he rejected the offer. It was evident that the store had already acquired goodwill of $6.030. amount (+ or -) by which each is to be changed. After you have recorded these events, prepare a bal ance sheet in proper form. Assume that all these trans- actions occurred in January and that there were no 8. Smith withdrew $1,000 cash from the store's bank 9. Smith took merchandise costing $750 from the 10. Smith learned that the individual who purchased other transactions in January account for his personal use 1. The store purchased and received merchandise for inventory for $5,000, agreeing to pay within store's inventory for his personal use 30 days. the land (No. 6 above) subsequently sold it for S14,000. The lot still owned by Music Mart, Inc. was identical in value with this other plot. 2. Merchandise costing $1,500 was sold for $2,300 which was received in cash. 3. Merchandise costing $1,700 was sold for $2,620, the customers agreeing to pay $2,620 within 11. The store paid off S6,000 of its note payable (dis- 12. Smith sold one-third of the stock he owned in 13. Merchandise costing $850 was sold for $1,310 regard interest) Music Mart, Inc., for S11,000 cash. which was received in cash. 30 days. Professor Robert N. Anthony. Case 2-3 Case 2-2 Music Mart, Inc. insurance 4. The store purchased a three-year fire i On a sheet of paper, set up in pencil the balance sheet of Music Mart, Inc., as it appears after the last transac- tion described in the text (January 4), leaving consid- erable space between each item. Record the effect, if any, of the following events on the balance sheet, ei- policy for $1,224, paying cash. Si2e 5. The store purchased two lots of land of e for a total of $24,000. It paid $6,000 in cash and gave a 10-year mortgage for $18,000. ther by revising existing figures (cross out, rather than erase) or by adding new items as necessary. At least one of these events does not affect the balance sheet. The basic equation, Assets Liabilities + Owners equity, must be preserved at all times. Errors will be minimized if you make a separate list of the balance sheet items affected by each transaction and the The store sold one of the two lots of land for S12,000. It received S3,000 cash, and in addition, the buyer assumed $9,000 of the mortgage; that is Music Mart, Inc., became no longer responsible for this half Smith received a bona fide offer of S33,000 for the business; although his equity was then only S26,970, he rejected the offer. It was evident that the store had already acquired goodwill of $6.030. amount (+ or -) by which each is to be changed. After you have recorded these events, prepare a bal ance sheet in proper form. Assume that all these trans- actions occurred in January and that there were no 8. Smith withdrew $1,000 cash from the store's bank 9. Smith took merchandise costing $750 from the 10. Smith learned that the individual who purchased other transactions in January account for his personal use 1. The store purchased and received merchandise for inventory for $5,000, agreeing to pay within store's inventory for his personal use 30 days. the land (No. 6 above) subsequently sold it for S14,000. The lot still owned by Music Mart, Inc. was identical in value with this other plot. 2. Merchandise costing $1,500 was sold for $2,300 which was received in cash. 3. Merchandise costing $1,700 was sold for $2,620, the customers agreeing to pay $2,620 within 11. The store paid off S6,000 of its note payable (dis- 12. Smith sold one-third of the stock he owned in 13. Merchandise costing $850 was sold for $1,310 regard interest) Music Mart, Inc., for S11,000 cash. which was received in cash. 30 days. Professor Robert N. Anthony. Case 2-3