Question:
Melody Lane Music Company was started by John Ross early in 2013. Initial capital was acquired by
issuing
hares 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, 2013:
a. Cash receipts consisted of the following:
b. Cash disbursements were as follows:
c. The bank loan was made on March 31, 2013. A note was signed requiring payment of interest and
principal on March 31, 2014. The interest rate is 12%.
d. The equipment and furniture were purchased on January 3, 2013, and have an estimated useful life of
10 years with no anticipated salvage value. Depreciation per year is $4,000.
e. Inventories on hand at the end of the year cost $100,000.
f. Amounts owed at December 31, 2013, were as follows:
To suppliers of inventory $20,000
To the utility company 1,000
Melody Lane Music Company was started by John Ross early in 2013. Initial capital was acquired by
issuing
hares 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, 2013:
a. Cash receipts consisted of the following:
b. Cash disbursements were as follows:
c. The bank loan was made on March 31, 2013. A note was signed requiring payment of interest and
principal on March 31, 2014. The interest rate is 12%.
d. The equipment and furniture were purchased on January 3, 2013, and have an estimated useful life of
10 years with no anticipated salvage value. Depreciation per year is $4,000.
e. Inventories on hand at the end of the year cost $100,000.
f. Amounts owed at December 31, 2013, were as follows:
To suppliers of inventory $20,000
To the utility company 1,000
