our friend has opened a store selling new and used sports equipment. He has asked you to review his financial statements (balance sheet and income statement) to see if you can tell him how his busines

Simply Sports Financial Statements Simply Sports Balance Sheet For the year ending December 31, 20XX Assets Current Assets Cash $15,000 Accounts receivable 200,000 Notes receivable 50,000 Inventory 335,000 Total current assets $600,000 Fixed assets Land 40,000 Building and improvements $200,000 Less: Accumulated depreciation (90,000) 110,000 Equipment and vehicles 120,000 Less: Accumulated depreciation (80,000) Furniture and fixtures 26,000 Less: Accumulated depreciation (10,000) 16,000 Total fixed assets 206,000 Intangible assets Goodwill 20,000 Total intangible assets 20,000 Total fixed assets $ 826,000 Liabilities and Owners’ Equity Current liabilities Accounts payable 40,000 Notes payable (due June 2016) 8,000 Accrued taxes 150,000 Accrued salaries 90,000 Total current liabilities 288,000 Long-term liabilities Notes payable (due March 2020) 35,000 Bonds payable (due December 2025) 290,000 Total long-term liabilities 325,000 Total liabilities Owners’ equity Common stock (1,000,000 shares) 100,000 Retained earnings 13,000 Total owners’ equity 213,000 Total liabilities and owners’ equity $ 826,000 Simply Sports Income Statement For the year ending December 31, 20XX Revenues Gross sales $ 720,000 Less: Sales returns and allowances $12,000 Sales discounts 8,000 (20,000) Net sales $ 700,000 Cost of goods sold Beginning inventory 01/01 200,000 Merchandise purchases 400,000 Freight 40,000 Net purchases 440,000 Cost of goods available for sale 640,000 Less ending inventory 12/31 (230,000) Cost of goods sold (410,000) Gross profit 290,000 Operating expenses Selling expenses Salaries for salespeople 90,000 Advertising 18,000 Supplies 2,000 Total selling expenses 110,000 General expenses Office supplies 67,000 Depreciation 1,500 Insurance 1,500 Rent 28,000 Light, heat, and power 12,000 Miscellaneous 2,000 112,000 Total operating costs 222,000 Net income before taxes 68,000 Less income tax expense 19,000 Net income after taxes 49,000