Music Mart, Inc.

Robert Antony

Balance sheet of Music Mart on January $4^{th}$ is shown in Exhibit $1.$Transactions subsequently entered into during January are listed below. Prepare Income statement and balance sheet for ${30}^{th}$ January after considering effect of these transactions.

The store purchased and received merchandise for inventory for $$5,000,$ agreeing to pay within $30$ days.

Merchandise costing $$1,500$ was sold for $$2,300,$ which was received in cash.

Merchandise costing $$1,700$ was sold for $$2,620,$ the customers agreeing to pay $$2,620,$ within $30$ days.

The store purchased a three$-$year Fire insurance policy for $$1,224,$ paying cash.

The store purchased two lots of land of equal size for a total of $$24,000.$ It paid $$6,000$ In cash and gave a $10-$ year mortgage for $$18,000.$

The store sold one of the two lots of land for $$12,000.$It received $$3,000$ 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 bonafide offer of $$33,000$ for the business; although his equity was then only $$26,970,$ he rejected the offer. It was evident that the store had already acquired goodwill of $$6,030.$

Smith withdraw $$1,000$ cash from the store's bank account for his personal use.

Smith took merchandise costing $$750$ from the store's inventory for his personal use.

Smith learned that the individual who purchased THE Land $($No$.6$ above$)$ subsequently sold it for $$14,000.$ The lot still owned by Music Mart. Inc., was identical in value with the other plot.

The store paid off $$6,000$ of its note payable $($disregard interest$)$

Smith sold one$-$third of the stock he owned in Music Mart. Inc., for $ $11,000$ cash.

Merchandise costing $$850$ was sold for $$1,310$ which was received in cash.

Exhibit $-1$

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