In January 2006, Mary Jane Bowers was reviewing her plans for the April 1 opening of a garden center in Lynchburg, Virginia. She had selected Lynchburg as the town for a new home, after deciding to leave the large, northern city where she had both worked for the past 10 years. Bowers had a degree in horticulture and had worked for a large chemical company in its agricultural herbicide division. Along with the decision to move, Bowers
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. Bowers 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 Campbell National Bank. She wanted to make sure that she had enough money to get the
business off to a good start. Mary Jane had heard stories about many small businesses that failed because they were undercapitalized.

After careful study and analysis, Mary Jane made the following projections for the first year of operations of Garden Place, Inc.:
1. April 1, 2006—The business would be incorporated, and Mary Jane and John would invest $60,000 in the company in exchange for shares of common stock.
2. April 1, 2006—The Campbell National Bank would loan Garden Place, Inc., $32,000 to be repaid in equal principal payments over four years. The interest rate was 13%, and
interest was payable at the end of each year when the principal payment was made.
3. April 1, 2006—A pickup truck would be purchased for $12,000, of which $10,000 would be financed by the Campbell National Bank. The loan would be repaid over three years at the rate of $336 per month for a total of $12,100.
4. April 1, 2006—Display equipment would be purchased for $6,000 cash.
5. April 1, 2006—A Rototiller would be purchased for $400 cash.
6. April 1, 2006—A cash register would be purchased for $3,600 cash.
7. April 1, 2006—An inventory of plants, trees, and shrubs would be purchased for $60,000 cash.
8. The following things were projected to occur between April 1, 2006, and March 31, 2007
Cash sales: $340,000
Sales on account: $60,000
9. Additional purchase of plants, trees, and shrubs: $200,000. Mary Jane planned to price all items to give her a 40% gross margin, which is to say that if an item cost $6, it would be sold for $10.
10. Advertising expenses would be a percentage of sales, or $20,000 for the year.
11. Mary Jane categorized a group of business expenses as ongoing. They were forecast as follows:

Rent: $7,200 ($600 per month)
Telephone: $1,200 ($100 per month)
Utilities: $4,800 ($400 per month)
Payroll: $112,000 ($40,000 for Mary Jane and $72,000 for three regular and four part-time employees)
12. Monthly payments of $336 would be made on the $10,000 truck loan.
13. A principal payment of $8,000 would be made on the $32,000 bank loan, along with interest of $4,160

Required:
1. Prepare an income statement for the year ending March 31, 2007, and a balance sheet as of March 31, 2007.