Question

roblem 1-4A revenue as a tor He buys and sells properties on his own, and he also earns com- r 15,2016eal estate agent. He organized his business as a sole proprietorship on er the following facts as of November 30, 2016: on a note payable for some undeveloped land. This land had een acquired by the business for a total price/ Steele's business had spent of $70,000 $15,000 for a RE/MAX Ltd. real estate franchise, which enti- ed him to represent himself as a RE/MAX agent. RE/MAX is a national affiliation of dependent real estate agents. This franchise is a business asset. Steel in e owed $250,000 on a personal mortgage on his personal residence, which he acquired in 2001 for a total price of $500,000. teele had $25,000 in his personal bank account and $9,000 in his business bank account. Steele owed $1,000 on a personal charge account with Hudson's Bay The business acquired the company owed $3,000 on account at November 30. The real estate office had $500 worth of office supplies on hand on November 30. business furniture for $9,000 on November 25. Of this amount, equired Steele is concerned about liability exposure. Which proprietorship feature, if any, limi his personal liability? Identify the personal items given in the preceding facts that would not be reported in t financial records of the business. Prepare the balance sheet of the real estate business of Shawn Steele, Realtor November 30, 2016

Answer 1

1. There is no way Steele can escape personal liability for his business. A proprietor is always personally liable for his/her business liabilties. The only way Steele can discharge his  business libilities in case of any uncertainity is by filing "Personal bankruptcy".

2. Personal items will be mortgages of $250,000, balance of $25,000 in personal bank and charge of $1000 with Hudson's Bay.

3. Balance sheet - It is assumed that office supplies are not directly charged to profit and loss and therefore depreciated through balance sheet. Alternatively, it can be removed from assets, which will change the amount in capital to $70,000 as this $500 will become a business expense/loss. Amount under capital is balancing figure.

Liabilites	Amount ($)	Assets	Amount ($)
Capital	70,500	Land	70,000
Note Payable	30,000	RE/MAX Franchise	15,000
Payables for furniture	3,000	Bank	9,000
		Furniture	9,000
		Office Supplies	500
	103,500		103,500