Jeremy Slacker started the Del Fuego Surf Shop on January 1 after determining that business school classes conflicted with his preferred activity. He invested $50,000 in the shop$25,000 of his own savings and $25,000 borrowed from an acquaintance. The loan is to be repaid in 5 years. Jeremy will pay the lender annual interest at a rate of 8 percent. Shortly after opening, Jeremy realized that he is not the best financial planner and has come to you for help. With some prodding, you are able to establish that Jeremy plans to sell only two models of surfboard, the Zuma and the Coronado, for at least the first year. Data on the boards are given as follows.

	Zuma			Coronado
Expected annual sales (units)		480			240
Retail price (per unit)	$	350		$	650
Purchase cost (per unit)		250			400

Additional information on the planned operations for the year includes the following.

1. Equipment costing $40,000 was purchased for cash when the store opened. The equipment will be depreciated over five years using straight-line depreciation.
2. Because of the fantastic weather in Del Fuego, Jeremy expects sales to occur uniformly over the year. Sales will be both for cash (60 percent) and on account (40 percent). Sales on account are assumed to be collected in two months.
3. Jeremy will maintain inventory equal to one-half of a months sales. All boards will be purchased from the manufacturer on credit with payment made one month after purchase.
4. Annual cash selling, general, and administrative expenses are $36,000 fixed plus 10 percent of revenues.
5. Jeremys tax rate is 40 percent.

Required:

a. Prepare an income statement for the year based on the data and assumptions available. b. Prepare the year-end (December 31) balance sheet based on the data and assumptions available.

Prepare an income statement for the year based on the data and assumptions available.

Del Fuego Surf Shop
Budgeted Income Statement
For the Year
	Zuma	Coronado	Total
	$0	$0	$0
Less other costs:
			$0
			$0

• Prepare the year-end (December 31) balance sheet based on the data and assumptions available.

  Del Fuego Surf Shop
  Budgeted Balance Sheet
  December 31
  Assets
  Current assets		$0
  		0
  Total assets		$0
  Liabilities and Net Worth
  Total liabilities		$0
  Total net worth		0
  Total liabilities and net worth		$0