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Jake and Dan start a business to build custom bicycles. Jakeinvests personal funds of $25,

Jake and Dan start a business to build custom bicycles. Jakeinvests personal funds of $25,

Jake and Dan start a business to build custom bicycles. Jakeinvests personal funds of $25,000 and Dan invests $20,000. GrandmaJake invested $5,000 with a preference to be cashed out after oneyear for $6,000. They agreed that ownership would be proportionalto their capital investments. In addition, they borrow $7,000 fromthe 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 firstmonth. They pay a factory worker $1,000 for the first month. Theypay rent of $1,000 for the month for a factory. They each drawsalaries of $1,500 per month. They sell the resulting bicycles for$20,000.

a. Prepare a balance sheet for day zero, that is, before thebusiness 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 firstmonth.

 
Abhinav 04-Dec-2019

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