Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 72

Financial Statements for a Business Plan
Nicole Mackisey is chinking 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, $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; selling and administrative expenses will be $.5,000; and income taxes will be $1,600.
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