Question

Toby invested $30,000 from her retirement account, borrowed $20,000 from the bank and opened her landscaping business by buying $10,000 in equipment (expected to last 10 years) and $5,000 in inventory (lime, sod, stones, loam, etc.). Set up the balance sheet in excel format for this point in the formation.

During the year, Toby made $100,000 in sales (30% for cash) and collected $60,000 in AR. She paid $20,000 in wages for a part time employee, sold $3,000 of inventory (included in the total sales of $100,000), paid $2,000 in insurance, paid $8,000 for gas, $1,000 in interest, $1,000 in taxes. She bought $4,000 in job materials (inventory that is used immediately) all on account but paid $1,000 off by year-end. Construct a balance sheet and income statement in excel format at this point for the firm.

Answer 1

Income Statement
		$	$
	Sales Revenue	100,000
	Less: Cost of goods sold	(3,000)
	Gross income ( A )		97,000
	Less: Operating expenses;
	Wages	20,000
	Insurance expenses	2,000
	Gas	8,000
	Interest	1,000
	Taxes	1,000
	Total operating expenses (B )		32,000
	Net income ( A ) - ( B )		65,000
	Balance Sheet
	Owner's equity and liabilities	$	$
	Owner's Capital	30,000
	Add: Net income	65,000
	Total owner's equity		95,000
	Bank borrowings		20,000
	Current liabilities;
	Accounts Payable ( $ 4,000 - $ 1,000 )		3,000
	TOTAL EQUITY AND LIABILITIES		118,000
	Assets;
	Fixed Assets;
	Equipment		10,000
	Current assets;
	Inventory ( $ 5,000 + $ 4,000 - $ 3,000 )	6,000
	Accounts Receivable ( $ 100,000 x 70% - $ 60,000 )	10,000
	Cash ( See workings below )	92,000
	total current assets		108,000
	TOTAL ASSETS		118,000
	Working note;
	Cash balance	$
	Cash invested from retirement account	30,000
	Borrowed from bank	20,000
	Cash paid for equipment	(10,000)
	Paid for inventory	(5,000)
	Cash sales ( $ 100,000 x 30% )	30,000
	Collected from AR	60,000
	Wages paid	(20,000)
	Insurance paid	(2,000)
	paid for gas	(8,000)
	Interest paid	(1,000)
	Taxes paid	(1,000)
	paid against accounts payable	(1,000)
	Ending balance of Cash	92,000