Melody Lane Music Company was started by John Ross early in 2024. Initial capital was acquired byissuing shares of common stock to various investors and obtaining a bank loan. The companyoperates a retail store that sells records, tapes, and compact discs. Business was so good during thefirst 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, thebank requires financial statements. John asks for your help in preparing the balance sheet andpresents you with the following information for the year ending December 31, 2024: Cash receiptsconsisted of the following: From customers $ 360, 000 From issue of common stock 100, 000 Frombank loan 100,000 Cash disbursements were as follows: Purchase of inventory 300, 000 Rent 15,000Salaries 30, 000 Utilities 5,000 Insurance 3,000 Purchase of equipment 40, 000 The bank loan wasmade on March 31, 2024. A note was signed requiring payment of interest and principal on March31, 2025. The interest rate is 12 %. The equipment was purchased on January 3, 2024, and has anestimated useful life of 10 years with no anticipated salvage value. Depreciation per year is $4,000.Inventory on hand at the end of the year cost $100, 000. Amounts owed at December 31, 2024,were as follows: To suppliers of inventory $ 20, 000 To the utility company 1,000 Rent on the storebuilding is $1,000 per month. On December 1, 2024, four months' rent was paid in advance. Netincome for the year was $76, 000. Assume that the company is not subject to federal, state, or localincome tax. One hundred thousand shares of no par common stock are authorized, of which 20,000shares were issued and are outstanding.Required: Prepare a balance sheet at December 31, 2024. Include headings for each classification, aswell as titles for each classification's subtotal. Note: Amounts to be deducted should be indicated bya minus sign.

Balance sheet stands for the statement and information that shows the assets and liabilities of the…

Answered: Melody Lane Music Company was started…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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