The proprietors of two businesses, L.L. Sams Company and Melinda Garcia Career Services, have sought business loans from you. To decide whether to make the loans, you have requested their balance sheet to view.
L.L. Sams Company Balance Sheet August 31, 2004
Assets
Cash $9,000
Accounts Receivable 14,000
Merchandise Inventory 85,000
Store supplies 500
Building 80,000
Furniture and fixtures 9,000
Land 14,000
Total assets $211,500
Liabilities
Accounts Payable 12,000
Note Payable 18,000
Total Liabilities 30,000
Owner's Equity
L.L. Sams, capital 181,500
Total Liabilities And owner's equity $211,500
Melinda Garcia Career Services Balance Sheet August 31, 2004
Assets
Cash $11,000
Accounts Receivable 7,000
Office supplies 1,000
Office furniture 56,000
Land 169,000
Liabilities
Accounts Payable $6,000
Note Payable 168,000
Total Liabilities 174,000
Owner's Equity
Melinda Garcia, capital 70,000
Total liabilities And owner's equity $244,000
I would appreciate the positive response and answer. Please explain I would like to understand this question. Many Thanks!!
Accounting is not my area. But the answer to this problem is obvious. Melinda is already up to her eyeballs in debt; she already owes 168,000+6000 on a business with total assets of 244,000. Further, the 168K far exceeds Melinda's personally invested capital of 70,000. Compare this to Sam.
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