Eric's Bike Shop, Inc. A friend of yours has prepared the following balance sheet for his bicycle shop but it has problems
A friend of yours has prepared the following balance sheet for his bicycle shop but it has problems. He thought his total assets did not reflect the assets available to the firm. He has asked you to take a look at this balance sheet and help him out.
Eric's Bike Shop, Inc.
Balance Sheet
As of December 31, Year 1
Assets
| |
Current Assets:
| |
Cash
|
$15,000
|
Merchandise Inventory
|
30,000
|
Merchandise Sold, at cost
|
37,500
|
Prepaid Insurance
|
1,000
|
Advance from Customer
|
(1,000)
|
Total Current Assets
|
$82,500
|
Property, Plant, and Equipment:
| |
Equipment
|
8,000
|
Less Note Payable
|
(5,000)
|
Total Assets
|
$85,500
|
Liabilities and Shareholders' Equity
Current Liabilities:
| |
Bike Sales
|
$55,000
|
Accounts Payable
|
2,000
|
Accumulated Depreciation
|
700
|
Rent Payable
|
1,000
|
Total Current Liabilities
|
$58,700
|
Shareholders' Equity:
| |
Common Stock 1,000 shares at $10 par value
|
$10,000
|
Additional Paid-in Capital
|
7,500
|
Retained Earnings
|
9,300
|
Total Shareholders' Equity
|
$26,800
|
Total Liabilities and Shareholders' Equity
|
$85,500
|
Required:
a. Prepare a corrected balance sheet for Eric's Bike Shop, Inc
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