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Problem

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, 2013: Cash on hand and in the bank, $3,750; amounts due from customers from spa treatments, $1,940; building and equipment, $77,000; amounts owed to beauty supply outlets for spa equipment, $4,820; notes payable to a local bank for $40,470. Cash dividends of $6,500 will be paid to the stockholders during the year. Nicole also forecasts that first year sales revenues will be $77,100; wages will be $32,000; the cost of supplies used up will be $15,000; selling and administrative expenses will be $13,000; and income taxes will be $3,200.

Required:

1. Based on Nicole's estimates, prepare a (forecasted) income statement for Nicole's Getaway Spa for the year ended December 31, 2013.

2. Prepare a (forecasted) statement of retained earnings for Nicole's Getaway Spa for the year ended December 31, 2013.

3. Prepare a (forecasted) balance sheet for Nicole's Getaway Spa at December 31, 2013.

4. As of December 31, 2013, would most of the financing for assets come from creditors or stockholders?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M92767166

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