Prepare a balance sheet for the last day of the first month

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Reference no: EM131291924

Smith and Jones start a business to build custom bicycles. Smith invests personal funds of $25,000 and Jones invests $20,000. Grandma Smith loaned the company $5,000 with to be cashed out after one year for $6,000. They agreed that ownership would be proportional to their capital investments. In addition, they borrow $8,000 from the bank at interest of 1.5% per month payable monthly. They buy $20,000 worth of parts. They use $9,000 of those parts in the first month. They pay a factory worker $1,000 for the first month. They pay rent of $1,000 for the month for a factory. They each (not Grandma) draw salaries of $1,400 per month. They sell the resulting bicycles for $26,000.

a. Prepare a balance sheet for day zero, that is, before the business begins operation but ready to start.

b. Prepare an income statement for the first month.

c. Prepare a balance sheet for the last day of the first month.

Reference no: EM131291924

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