• LAB, Inc.

Today is December 31^st of Year 0 and LAB, Inc. provides the following information for the assets in place and the source of funds:

• borrowed $5,000 on December 31^st of Year 0 due in 10 years and bearing an interest rate of 10.00% per year paid yearly in cash
• issued equity (as common stock) for $6,000 on December 31^st of Year 0
• bought a tractor for $10,000 paid in cash on December 31^st of Year 0, with an expected life of 50 years; LAB, Inc. will depreciate the tractor in a straight line fashion to zero salvage value

LAB, Inc. provides also its forecasts for the next five years (that is Year 1 to Year 5):

• expects revenue of $1,000 for Year 1 and expects that revenue to increase at 5.00% for each of the next four years
• cost of sales is expected to be 40.00% of revenue in each year
• all revenues and cost of sales are in cash in the year incurred Additional information:
• LAB, Inc. expects to it pays dividends in cash as 10.00% of Net income, whenever the Net Income is positive, with the remaining amount retained as Retained Earnings
• Treatment of taxes in case of losses: if the taxable income is negative LAB, Inc. receives in cash a tax credit equal to 20.00% of the taxable income, for example if the taxable income for a certain year is $50 then LAB, Inc. receives a cash credit in cash of $10; if the taxable income is positive LAB, Inc. pays in cash a tax equal to 20.00% of the taxable income, for example if the taxable income for a certain year is

$50 then LAB, Inc. pays a tax in cash of $10

1. Provide the four statements for Year 1 to Year 5. (Balance statement, Cash flow statement, Income statement, Stockholders Equity)