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.