Melody Lane Music Company was started by John Ross early in 2016. Initial capita
ID: 2415170 • Letter: M
Question
Melody Lane Music Company was started by John Ross early in 2016. Initial capital was acquired by issuing shares of common stock to various investors and by obtaining a bank loan. The company operates a retail store that sells records, tapes, and compact discs. Business was so good during the first year of operations that John is considering opening a second store on the other side of town. The funds necessary for expansion will come from a new bank loan. In order to approve the loan, the bank requires financial statements.
John asks for your help in preparing the balance sheet and presents you with the following information for the year ending December 31, 2016:
The bank loan was made on March 31, 2016. A note was signed requiring payment of interest and principal on March 31, 2017. The interest rate is 10%.
The equipment and furniture were purchased on January 3, 2016, and have an estimated useful life of 5 years with no anticipated salvage value. Depreciation per year is $6,000.
Rent on the store building is $3,000 per month. On December 1, 2016, four months' rent was paid in advance.
Net income for the year was $86,000. Assume that the company is not subject to federal, state, or local income tax.
Three hundred thousand shares of no par common stock are authorized, of which 30,000 shares were issued and are outstanding.
Prepare a balance sheet at December 31, 2016. (Amounts to be deducted should be indicated by a minus sign.)
Melody Lane Music Company was started by John Ross early in 2016. Initial capital was acquired by issuing shares of common stock to various investors and by obtaining a bank loan. The company operates a retail store that sells records, tapes, and compact discs. Business was so good during the first year of operations that John is considering opening a second store on the other side of town. The funds necessary for expansion will come from a new bank loan. In order to approve the loan, the bank requires financial statements.
John asks for your help in preparing the balance sheet and presents you with the following information for the year ending December 31, 2016:
Explanation / Answer
CALCULATION OF CLOSING CASH
BALNCE SHEET AT DECEMBER 31 2016
AMERICAL BALANCE SHEET
FIXED ASSETS
PARTICULLAR AMOUNT $ CASH RECEIVED FROM CUSTMER 438000 CASH RECEIVED FROM COMMON STOCK 150000 CASH RECEIVED FROM BANK LOAN 120000 LESS CASH PAID FOR PURCHASE OF INVENTORY - 310000 RENT - 45000 SALARIES - 40000 UTILITES - 15000 INSURANCE - 13000 EQUIPEMENT & FURNITURE - 30000 BALANCE CASH AT END 255000