Question 6

Janet Jones is a professional gym instructor. She started her own business, Janet’s Gym, a proprietorship, in 2014. Consider the following facts, as of December 31, 2018:

1. Janet’s Gym owned a small gym, which it acquired for $ 600,000 in 2018; the land was worth $ 500,000, and the building was worth $ 100,000. The business took out a $ 520,000 mortgage, and Janet Jones contributed the remaining $ 80,000 cash to buy the property.

2. In 2018, Janet’s Gym spent $ 15,000 to acquire a gym franchise, Gym to Go.

3. Janet Jones had $ 15,000 in the business bank account and $ 7,000 in her personal bank account.

4. Janet Jones owed $ 1,900 on her personal MasterCard.

5. Janet’s Gym acquired $ 10,000 in gym equipment on December 15, 2018: Janet’s Gym put a down payment of $ 2,000 and was going to pay the remaining balance in January, 2019.

6. Janet’s Gym had $ 400 in office supplies on hand at December 31, 2018.

7. Janet Jones bought a condo in 2016 for $ 400,000. At December 31, 2018, her mortgage on the condo was $ 300,000.

Required:

A. Janet’s Gym was researching liability exposure. What advice can you provide to Janet’s Gym?

B. What items above would not appear on the financial statements of Janet’s Gym?

C. Prepare the December 31, 2018 balance sheet of Janet’s Gym.