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Instructions: Prepare a classified balance sheet for Baxter Incorporated, at December 31, 2018. The balance sheet...

Instructions: Prepare a classified balance sheet for Baxter Incorporated, at December 31, 2018. The balance sheet should be prepared in good form in excel. Be sure to use proper spacing, references, and formulas.

Baxter Incorporated was started by John Ross early in 2018. Initial capital was acquired by issuing shares of commons 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 operation 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, 2018:

A: Cash receipts consisted of the following:

From customers: $360,000
From issue of common stock: $100,000

From bank loan: $100,000

B: Cash disbursements were as follows

Purchase of inventory: $300,000

Rent: $15,000
Salaries: $30,000
Utilities $5,000

Insurance: $3,000
Purchase of equipment and furniture $40,000

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 12%.

D: The equipment and furniture were purchased on January 3, 2018, and have an estimated useful life of 10 years with no anticipation 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, 2018, were as follows:

To suppliers of inventory $20,000

To the utility company 1,000

G: Rent on the store building is $1,000 per month. On December 1, 2018, four months was paid in advance.

H: Net income for the year was $76,000. Assume that the company is not subject to federal, state, or local

income tax.

I: One hundred thousand shares of no common stock are authorized, of which $20,000 shares were issued

and are outstanding.

Solutions

Expert Solution

Cash Balance for the year ended 31/12/2018
Particulars Amount $
Cash Receipts
From customers 360000
From issue of common stock 100000
From bank loan 100000
Total Cash Receipts (a) 560000
Cash Payments
Purchase of inventory 300000
Rent 15000
Salaries 30000
Utilities 5000
Insurance 3000
Purchase of equipment and furniture 40000
Total Cash Payments (b) 393000
Cash Balance at year end (a-b) 167000
Balance Sheet
As at December 31, 2018
Particulars Amount $ Amount $
Assets
Current Assets
Cash        1,67,000
Inventory        1,00,000
Prepaid Expenses (Rent)              3,000
Fixed Assets
Equipment and Furniture        40,000
Less: Depreciation           4,000            36,000
Total        3,06,000
Liabilities
Current Liabilities
Accounts Payable (20,000+1,000)            21,000
Accrued Expenses (Interest on Loan)              9,000
Long Term Liabilities
Bank Loan        1,00,000
Owners Equity
Owners Equity
Common Stock        1,00,000
Retained Earnings            76,000
Total        3,06,000

ekkarill92 answered 8 months ago
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