Question
Confused on how to do this. The following data is given below. Question is at the bottom. Thanks! You earn some money to finance your
Confused on how to do this. The following data is given below. Question is at the bottom. Thanks!
You earn some money to finance your education by starting a business. You begin business on January 1, 2017, and run the business for the next 12 months.
***Number of hours expected to work: 513***
**Budget Assumptions**
1. Before the business begins, you will take $5,000 cash from your savings account to invest in the business. You will protect yourself by organizing as a corporation, with yourself as the only stockholder.
2. Equipment cost $4,800. Your parents lend the business $4,800 cash so that the business can pay for the equipment and software. The business plans to repay your parents on January 31, 2018. No interest but require you to sign a promissory note.
Beginning balance sheet
Arachne, Inc. Balance Sheet January 1, 2017 | |
Assets |
|
Current Assets |
|
Cash | $5,000 |
Long-term Assets |
|
Equipment | 4,800 |
Less Accumulated Depreciation | 0 |
| 4,800 |
Total Assets | $9,800 |
Liabilities and Stockholders Equity |
|
Current Liabilities | $0 |
Long-term Liabilities |
|
Note Payable | 4,800 |
Total Liabilities | $4,800 |
Stockholders Equity |
|
Common Stock | $5,000 |
Retained Earnings | 0 |
Total Liabilities | $5,000 |
Total Liabilities and Stockholders Equity | $9,800 |
3. Starting January 1, 2017, the business will charge $50 per hour for design work and bill clients as each job is completed. You expect that by December 31, 2017, the end of the fiscal year, 80% of clients will have paid the business in cash. You expect that the rest will pay by January 31, 2018.
4. The business hires an assistant to help with extra work. The assistant will earn $18 per hour and work exactly the same hours that you work. The assistant will be paid for each month's work on the fifth day of the month following the month when the work is done. Treat the assistant as an independent contractor. This means that you do not have to worry about withholding or matching payroll taxes. Assume that hours worked in December 2017 are expected to total 10% (round to nearest whole hour) of the total hours for the year.
5. Purchase of office supplies for cash of $2,500 in January 2017
6. On February 1, the business will pay cash of $2,160 for a one-year liability insurance policy.
7. Business will buy $450 of newspaper advertising each month. All payments for advertising costs will be made in the following month.
8. Dividend of $3,000 will be declared and paid before year-end.
Question:
Fill in the Budgeted Balance Sheet and answer the following question
Assets: | |
Current Assets (List in order of liquidity) | |
| |
Total Current Assets | |
Long-term Assets | |
Total Long-term Assets | |
Total Assets | |
Liabilities: | |
Current Liabilities | |
Total Current Liabilities | |
Total Liabilities | |
Shareholder's equity: | |
Total Shareholder's Equity | |
Total Liabilities and Shareholder's Equity | |
1. Will you be able to repay your parents for the computer and software early on January 1, 2018? | |
2. Will you be able to repay your parents for the computer and software on the due date of January 31, 2018? | |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started