Financial Statements for a New Business Plan LO1-1 Penny Cassidy is considering forming her own pool service and supply company, Penny’s Pool Service

& Supply Inc. (PPSS). She has decided to incorporate the business to limit her legal liability. She expects to invest $40,000 of her own savings and receive 1,000 shares of capital. Her plan for the first year of operations forecasts the following amounts at December 31, 2019, the end of the year: cash in bank, $2,900; amounts due from customers for services rendered, $2,300; pool supplies inventory,

$4,600; equipment, $48,000; amounts owed to Pool Corporation Inc., a pool supply wholesaler,

$3,500; note payable to the bank, $5,000. Penny forecasts first year sales of $60,000, wages of $24,000, cost of supplies used $8,200, other administrative expenses $4,500, and income tax expense of $4,000.

She expects to pay herself a $10,000 dividend as the sole shareholder of the company.

Required:

If Penny’s estimates are correct, what would the following first-year financial statements look like for Penny’s Pool Service & Supply Inc.? (Use Exhibits 1.2, 1.3, and 1.4 as models.)

1. Statement of earnings for the year ended December 31, 2019 2. Statement of shareholders’ equity as at December 31, 2019 3. Statement of financial position as at December 31, 2019