?THE GARDEN PLACE

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 the 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.$

$1.$prepare t accounts

$2.$Prepare a projected income statement for the year ending March $31,2007,$ ?and a projected

balance sheet as of March $31,2007.$