Chapter 1, Problem 1.1CC

Financial Statements for a Business Plan

Nicole Mackisey is thinking of forming her own spa business. Nicole’s Getaway Spa (NGS). Nicole expects that she and two family members will each contribute $10.000 to the business and receive 1,000 shares each. Nicole forecasts the following amounts for the first year of operations, ending December 31, 2015; Cash on hand and in the bank, $2,150; amounts due from customers from spa treatments, $1,780; building and equipment, $70,000; amounts owed to beauty supply outlets for spa equipment, $4,660; notes payable to a local bank for $38.870. Cash dividends of $2,000 will be paid to the stockholders during the year. Nicole also forecasts that first-year sales revenues will be $40,000; wages will be $24,000; the cost of supplies used up will be $7,000; office expenses will be $5,000; and income taxes will be $1,600.

Required:

1. 1. Based on Nicole’s estimates, prepare a (forecasted) income statement for Nicole’s Getaway Spa for the year ended December 31, 2015.
2. 2. Prepare a (forecasted) statement of retained earnings for Nicole’s Getaway Spa for the year ended December 31, 2015.
3. 3. Prepare a (forecasted) balance sheet for Nicole’s Getaway Spa at December 31, 2015.
4. 4. As of December 31, 2015, would most of the financing for assets come from creditors or stockholders?