Music Mart

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Music Mart
Balance Sheet
As Of January 4

AssetsLiabilities and Owner’s Equity
Cash$ 25,636Notes Payable$ 6,500
Land12,000
Inventory 4,700Paid-in Capital 25,000
Accounts Receivable2620Accounts Payable 5,000
Prepaid Insurance1,224

Long Term Debt9,000
Retained Earnings680
Total$ 46,180Total$ 46,180

1.The store purchased and received merchandise for inventory for $5000, agreeing to pay within 30 days. = Inventory – 5000, Accounts Receivable – 5000

2.Merchandise costing $1,500 was sold for $2,300. which was received in Cash. = Cash - $2300 , Inventory – 1,500, Retained Earnings – 800

3.Merchandise costing $1,700 was sold for $2,620, the customers agreeing to pay $2620 within 30 days. = Inventory – 1700, Accounts Receivable $2620, Retained Earnings - $920

4.The store purchased a 3-year fire insurance policy for $1224, paying cash. = Cash – 1224, Prepaid Insurance – 1224

5.The store purchased 2 lots of land of equal size for a total of $24,000. It paid $6000 In cash and gave a 10-year mortgage for $18,000. = Long term debt – 18,000, cash – 6000, LAND – 24,000

6.The store sold one of the 2 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 became no longer responsible for this half. = Cash – 3.000, Land – 12,000, Long term debt – 9000

7.Smith received a bona fide offer of $33,000 for the business; although this equity was then only $26,970 he rejected the offer. It was evident that the store had already acquired goodwill of $6,030. = NONE

8.Smith withdrew $1,000 cash from the store’s bank account for his personal use. = CASH – 1000, Retained Earnings – 1,000

9.Smith took merchandise costing $750 for his own use.
= Inventory - $750, retained earnings – 750

10.Smith learned that the individual who purchased the land subsequently sold it for $14,000. The lot still owned by Music Mart was...
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