Reference no: EM132472073

On January 1, Chris Small incorporates Small Stores, Inc., a DVD store. He contributes $25,000 cash. Chris Small is the sole owner. On January 1, the corporation borrows $12,500 from a bank. On January 1, the business buys inventory {merchandize for sale] in the amount of $5,000 paying

cash. On Januaryr 1, the business purchases a three-year insurance policy for $1,224 paying cash. The company also records the following transactions in January

1. The business buys inventory for $5,000, agreeing to pay within 60 days.
2. The business purchases land for $24,000 by paying cash $6,000 and taking a 10-year mortgage for $18,000 (assume zero interest rate).
3. The business sells half of this land for $12,000. It receives $3,000 cash and the buyer assumes $9,000 of the mortgage; that is, the company is no responsible for this half.
4. Small receives an acquisition offer of $53,000 for the business; he rejects the offer, because it is evident that the market value of the store's assets is $56,000. Small withdraws $1,000 cash from the store's bank account for his wage (that is, Small works for the corporation and the amount of $1,000 is his wage).
5. Small takes inventory costing $750 from the store for his personal use (assume this is a loan from the corporation to Small, thus, Small is obliged to return it).
6. Small ?nds out that the individual that purchased the land sold it for $14,000. The part still owed by the business is identical in value.
7. The store pays off $6,000 of its mortgage (assume zero interest rate]. Small sells one-third of the stock he owns in Small Stores, Inc. for $11,000 cash. The company sells on credit inventory that costs $5,000 for $9,000.

problem 1: Small asks you to record the above-mentioned accounting transactions and prepare Small Stores, Inc.'s income statement for January and balancesheet as of January 31.