Jake and Dan start a business to build custom bicycles. Jake invests personal funds of $25,000 and Dan invests $20,000. Grandma Jake invested $5,000 with a preference 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 $7,000 from the bank at interest of 1% per month payable monthly. They buy $20,000 worth of parts. They use $8,000 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 draw salaries of $1,500 per month. They sell the resulting bicycles for $20,000.

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