For the following financial events in the start-up phase of the business:

1. For the land contributed to the business, they received three million shares of 1$ par value stock in the corporation.
2. Fees for attorneys, incorporation costs and corporate officers salaries during the star-up phase amounted to $100,000.
3. They opted for a fixed-rate at 8% per year and agree to pay the 3 million loan in equal annual installments over 10 years.
4. Distribution terminals required investments in plant of $1,500,000. Distribution truck required an investment of $600,000.
5. They purchased 500,000 gallons of propane at $.60 per gallon.
6. The entrepreneurs agreed that they be members of the board of directors.

With the information available to them about start-up activities, they produce the following project balance sheet.

BALANCE SHEET	(Dollars )
ASSETS	CASH	$ 500,000
	INVENTORY	300,000
	EQUIPMENT	600,000
	PLANT	1,500,000
	LAND	3,000,000
	START-UP COSTS	100,000
	TOTAL ASSETS	$6,000,000
LIABILITIES
	NOTES PAYABLE	$3,000,000
EQUITY
	STOCK	3,000,000
	RETAINED EARNINGS	0
LIABILITIES& EQUITY		$6,000,000

In order to comply with the banks request for projected financial statements, they compiled a list of important events that would likely occur during the first year of operations. The list included the following events:

1. It was estimated that propane could be sold to industrial customers at $1.40 per gallon but that retail customers would be charged $1.50 per gallon because of the additional costs of servicing small customers. Estimated sales were one million gallons for industrial customers and 200,000 gallons for retail customers. About 80% of sales revenue would be on credit terms of 30-60 days. The remaining amount uncollected at the end of the year was projected to be $660,000.
2. Additional purchases of propane were estimated to be 800,000 gallons during the year, they were unsure what the price of propane would be so they decided to assume that it would be the same as beginning of the year, i.e. $0.60 per gallon. All purchases would be on credit terms 0f 30-60 days. It was estimated the amount remaining unpaid at the end of the year would be $8,000.
3. The loan agreement on the bank called for payments of $300,000 at the end of year. Interest would also have to be paid.
4. Fixed payroll expenses for employees, including distribution truck drivers and storage operators were estimated to be $100,000 during the year. In addition, all employees would be paid incentive compensation of $0.05 per gallon of propane sold. Selling and general administration expenses of $50,000 were expected during the first year.
5. Additional equipment would require an outlay of $200,000 during the year.
6. A physical inventory would be necessary to determine the amount of propane remaining in inventory. Ending inventory was estimated at 100,000 gallons
7. Depreciation for the year was determined to be as follows
   1. $80,000 for equipment with an estimated life of 10 years
   2. $75,000 for the plant based on an expected life of 20 years
8. The companys start-up costs would be written off over two years
9. They issued 500,000 $2 par value shares to a passive investor at to finance future expansion plans.
10. Because of generous federal and state tax incentives, income tax were estimated to be only $60,000 with 60% being paid by the end of the year.
11. They expected to declare and pay cash dividends of $180,000.

Requirements

For the first year of operations,

Prepare:

• The balance sheet
• The income statement
• The statement of Retained Earnings
• The statement of cash flow