Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

This problem involves financial statement creation. It is not a capital budgeting problem. Today is December 30, 2018. The C.R. Tourism Company just purchased a

image text in transcribed
This problem involves financial statement creation. It is not a capital budgeting problem. Today is December 30, 2018. The C.R. Tourism Company just purchased a tourism van for $18,000. Starting the business, will require an additional $10,000 for operating requirements (cash for making change etc.) to be available on December 30th, 2018. Thus, we need a total of $28,000 to start the business. We will finance the business by borrowing $15,000 at an 8 percent simple interest rate (First-year interest expenses will be $1,200) and investing $13,000 from our pocket. This money will be placed in the business on December 30, 2018. In addition to paying the interest payments on the loan each year, we will pay off $5,000 of the amount that we owe on the loan each year on June 15th of each year. We will begin offering tours on January 1, 2019. The CR Tourism Company will contract our services to another company called Tico Tours. Tico Tours will pay us $43,400 per year for providing tours from San Jose, CA to Monterey, CA. Operating costs for the van will be $10,500 per year (The $10,500 does not include interest expenses or depreciation). All income is cash income that is payable at the end of the year. All operating expenses are cash operating expenses payable at the end of the year. In addition to the operating expenses, the van will wear out (depreciate) by $3,000 per year. The company is in a 10 percent tax bracket. One half of the firm's net income will be paid out to the owners as a dividend and the other half of the firm's net income will be retained within the firm. The Net Present Value of the firm's future projects is $80,000. Create an income statement for the year ending December 31, 2019. PRODUCE ONLY THE INCOME STATEMENT FOR THIS QUESTION. YOU WILL BE ASKED FOR OTHER STATEMENTS IN OTHER QUESTIONS

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting What the Numbers Mean

Authors: David Marshall, Wayne McManus, Daniel Viele

11th edition

1259535312, 978-1259535314

More Books

Students also viewed these Finance questions