Case Study URBAN PLANTS INCORPORATION In January 2021, Ms. Optimistic was reviewing her plans for the April 1 opening of a garden center in Connaught Place, New Delhi. She had selected Delhi as the town for a new home, after deciding to leave the Pune, where she had worked for the past 10 years. Optimistic had a degree on horticulture and had worked for a large chemical company in its agricultural-herbicide division. Along with the decision to move, Optimistic decided to change her work status as well. She wanted to devote her working days to something she enjoyed and was passionate about. Thus, she decided to go into business for herself, starting a retail garden store selling plants, trees, and shrubs. Optimistic accumulated information on upscale retail garden stores from a number of sources, talked to suppliers, looked at potential locations and established a banking relationship with the Union Bank. She wanted to make sure that she had enough money to get the business off to a good start. Ms. Optimistic had heard stories about many small businesses that failed because they were undercapitalized. After careful study and analysis, Ms. Optimistic made the following projections for the first year of operations of the Urban Plants Inc.: 1. April 1, 2021 The business would be incorporated and Ms. Optimistic would invest $80,000 in the Company in exchange for shares of common stock. 2. April 1, 2021 The Union Bank would loan Urban Plants Inc., $32,000 to be repaid in equal principal payments over four years. The interest rate was 11% and interest was payable at the end of each year when the principal payment was made.

3. April 1, 2021 A pickup truck would be purchased for $22,000, of which $10,000 would be financed by Union Bank. The loan would be repaid over three years at the rate of $336 per month for a total of $12,100. The truck is expected to be useful for 5 years. 4. April 1, 2021 Display equipment would be purchased for $9,000 cash with expected economic life of 24 months. 5. April 1, 2021 A Rototiller (Equipment) would be purchased for $1400 cash. 6. April 1, 2021 A cash register (Equipment) would be purchased for $5,600 cash. 7. April 1, 2021 An inventory of plants, trees and shrubs would be purchased for $90,000 cash. 8. The following things were projected to occur between April 1, 2021 and March 31, 2022: Cash Sales: $4,40,000 Sales on Account: $1,60,000 9. Inventory of $20000 was sold on consignment basis. 10. Additional purchase of plants, trees and shrubs: $4,00,000. $300,000 purchase is on account. Ms. Optimistic planned to price all items to give her a 45% gross margin (on sales), which is to say that if an item cost $5.5, it would be sold for $10. 11. Advertising expenses of $ 54,000 will be paid in advance in April for 18 months add run. 12. Ms. Optimistic forecasts the following expenses for the year: Rent: $8400 ($700 per month) Telephone: $1800 ($150 per month) Utilities: $7200 ($600 per month) Payroll: $1,12,000 ($40,000 for Ms. Optimistic and $72,000 for three regular and four part-time employees) 13. Monthly payments of $336 would be made on the $10,000 truck loan. 14. A principal payment of $8,000 would be made on the $32,000 bank loan, along with interest of $3,520. Required: 1. Perform transaction analysis of the above transactions, showing the impact on the Assets, liabilities and Owners Equity of the firm. (15 Marks) 2. A projected balance sheet as on March 31, 2022. (5 marks) 3. A projected multistep income statement for the year ending March 31, 2022