Question

Omar and Janet own a small jewelry-supply business called Rings and Things. From January through April, the company generated a fair amount of business. However, Janet and Omar’s owner equity is lower than they had expected, and they seem to be losing money every month, even though sales are steady. Below is April’s balance sheet for Rings and Things.
Assets
Cash (bills and coins) $35
Bank checking account $1,997
Materials (beads and wires) $40
Finished jewelry $100
Office supplies $50
Furniture $100
Total $2,322

Liabilities
Balance on loans $925
Payroll $1,000
(1 salesperson who works 20 hours/month)
Total $1,925



Assets – Liabilities = Owner Equity
$2,322 total assets
– $1,925 total liabilities
= $407 owner equity

1) Based on the balance sheet for April, offer two ways in which Janet and Omar can increase their owner equity.


2) Review the liabilities section of the balance sheet for Rings and Things. What problem can you identify with the payroll information, particularly as it relates to how much the one employee gets paid? What solution would you offer Janet and Omar?

Answer 1

The Jewelry Store Kiosk, which is to be located in the Westfield Montgomery Mall in Bethesda, Maryland, is a new business. We will offer a great selection of gemstone jewelry in various designs, colors and sizes. Our jewelry will include bracelets, necklaces, earrings and rings. All of the pieces will be designed and created by the owner. The kiosk will stock a wide selection of jewelry and will offer a service to make custom pieces for shoppers while they wait or shop in the mall. All sales for the business will be through this mall kiosk. After approximately eight months of operations the owner plans to hire a sales representative to handle customer interaction and some marketing.

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Answer 2

Answer:

Capital  should be increased.

Explanation:

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