(L. OBJ. 5, 6, 9) Proprietorship attributes, applying the entity concept, and preparing financial statements [20—25 min]
Beth Plum is a realtor. She organized her business as a proprietorship, Beth Plum, Realtor, by investing $23,000 cash. The business gave capital to her. Consider the following facts at November 30, 2010:
a. The business owes $61,000 on a note payable for land that the business acquired for a total price of $85,000.
b. The business spent $30,000 for a Cinko Banker real estate franchise, which entitles the business to represent itself as a Cinko Banker office. This franchise is a business asset.
c. Plum owes $50,000 on a personal mortgage for her personal residence, which she acquired in 2010 for a total price of $170,000.
d. Plum has $5,000 in her personal bank account, and the business has $10,000 in its bank account.
e. Plum owes $1,000 on a personal charge account with Chico’s.
f. The office acquired business furniture for $15,000 on November 25. Of this amount, the business owes $1,000 on account at November 30.
g. Office supplies on hand at the real estate office total $500.
Requirements
1. Beth was concerned about liability exposure. Which proprietorship feature, if any, limits Beth’s personal liability?
2. Prepare the balance sheet of the real estate business of Beth Plum, Realtor, at November 30, 2010.
3. Identify the personal items that would not be reported on the business records.
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