QUESTION 3. Barden Company was started early in 2018. Initial capital was acquired by issuing shares of common stock to various investors and by...

QUESTION 3.

Barden Company was started early in 2018. 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 the founder 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.

Mr. Barden asks for your help in preparing the balance sheet and presents you with the following information for the year ending December 31, 2018:

a.             Cash receipts consisted of the following:

From customers                                $           438,000  

From issue of common stock                         150,000  

From bank loan                                               120,000  

b.             Cash disbursements were as follows: 

Purchase of inventory                           $         310,000           

Rent                                                                    45,000           

Salaries                                                             40,000           

Utilities                                                               15,000           

Insurance                                                                     13,000           

Purchase of equipment and furniture                30,000           

c. The bank loan was made on March 31, 2018. A note was signed requiring payment of interest and principal on March 31, 2019. The interest rate is 10%.

d. The equipment and furniture were purchased on January 3, 2018, and have an estimated useful life of 5 years with no anticipated salvage value. Depreciation per year is $6,000.

e. Inventories on hand at the end of the year cost $110,000.

f. Amounts owed at December 31, 2018, were as follows:

To suppliers of inventory                          $          30,000         

To the utility company                                            3,000         

g.  Rent on the store building is $3,000 per month. On December 1, 2018, four months' rent was paid in advance.

h.  Income before taxes for the year was $86,000. The company is subject to a 21% federal income tax rate.

i.    Three hundred thousand shares of no-par common stock are authorized, of which 30,000 shares were issued and are outstanding.

Prepare classified balance sheet in good form at December 31, 2018.