It is now January 1^st, 2021 and your friend has decided to start that new business. They have decided not only to buy equipment but also to sell courses and merchandise.

Part B1: Based on a number of assumptions your friend wants to forecast the first years Income Statement and Balance Sheet. Once again they call upon you to assist them in creating the forecasted statements. In this assignment you are to construct an Income Statement and Balance Sheet based on the assumptions your friend has provided to you. (6 marks)

1. First year sales will total $100,000
2. Gross margins will be 50%
3. Operating margins will be 20%
4. Accounts Receivable will be about 15% of sales
5. Inventory will be 12% of sales
6. Accounts Payable will be 5% of sales
7. Accrued expenses payable will be 7% of sales
8. The Bank will provide a loan of $50,000. The annual interest will be 4%, compounded annually. Interest-only payments are needed until the loan is due in 5 years, where a balloon payment for the full balance must be paid.
9. The combined federal and provincial tax rates will be 30%
10. Capital equipment purchases will be made at the start of the year. These will total $70,000. These will depreciate at 10% per year.
11. Your friend wants ending cash to be $24,500, to have this amount on hand at year-end.
12. Your friend will provide any other capital needed in the form of equity financing.