Mr. Davis formed the Java Specialty Shoppe in August of last year to sell specialty products associated with coffee and tea drinkers. Mr. Davis invested $11,000 of his own money to start the company. For the first five months Mr. Davis ran the business as a mail order company out of his home while still working full-time as a salesman for the food service division of a major food manufacturer.

On January 1st of the following year, he moved the business into a small store in a shopping mall. While Mr. Davis was reasonably confident that the store would be successful, he decided to keep his full-time position with the food manufacturer for the time being and hire full and part-time staff to run the new store. The Balance Sheet for the company as at December 31st, last year is shown below.