Question

Paula is considering forming her own pool service and supply company. She has decided to incorporate the business to limit her legal liability. She invests $39,000 of her own savings and receive 3,000 shares of common stock. Her first year of operations results in the following amounts at the end of the year December 31, current year: Cash in bank, $13,800; amounts due from customers for services rendered, $4,200; pool supplies inventory, $16,800; equipment, $29,900 ($5,000 in depreciation); amounts owed to a pool supply wholesaler, $5,400; loan

payable to the bank, $6,900 at 10% interest per year. She has $13,400 in retained earnings.

Paula sees next year (Year 2) sales of $71,400, wages (DL) of $25,900, cost of supplies used $10,100, other administrative expenses $6,400, and income tax expense of $5,900. She expects to pay herself a $10,000 dividend as the sole stockholder of the company. See collected all of the outstanding AR and 66,000 of current year sales.

Please make opening (end of year 1) and closing balance sheet, and an income statement.

Answer 1