Problem: 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
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Assets
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Current Assets:
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Cash
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$15,000
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Merchandise Inventory
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30,000
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Merchandise Sold, at cost
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37,500
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Prepaid Insurance
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1,000
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Advance from Customer
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(1,000)
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Total Current Assets
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$82,500
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Property, Plant, and Equipment:
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Equipment
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8,000
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Less Note Payable
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(5,000)
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Total Assets
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$85,500
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Liabilities and Shareholders' Equity
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Current Liabilities:
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Bike Sales
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$55,000
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Accounts Payable
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2,000
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Accumulated Depreciation
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700
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Rent Payable
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1,000
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Total Current Liabilities
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$58,700
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Shareholders' Equity:
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Common Stock 1,000 shares at $10 par value
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$10,000
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Additional Paid-in Capital
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7,500
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Retained Earnings
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9,300
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Total Shareholders' Equity
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$26,800
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Total Liabilities and Shareholders' Equity
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$85,500
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Required:
Prepare a corrected balance sheet for Eric's Bike Shop, Inc.