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Eric's Bike Shop: Prepare a Corrected Balance Sheet

See attached file.

1. A friend of yours has prepared the following balance sheet for his bicycle shop but it has a problem. 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:

Prepare a corrected balance sheet for Eric's Bike Shop, Inc.

Attachments

Solution Preview

See attached file.

Eric's Bike Shop, Inc.
Balance Sheet
As of December 31, Year 1
Assets
Current Assets:
Cash $15,000
Merchandise Inventory 30,000
Prepaid Insurance 1,000
Total ...

Solution Summary

This solution is comprised of a detailed explanation to prepare a corrected balance sheet for Eric's Bike Shop, Inc.

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