You have a friend Steve who wants to start a car shop and you decide to invest and on Jan1, 2010, you gave Steve $100,000 in exchange for 10,000 shares of common stock. Steve on January 1, 2010, he purchased shop equipment for $50,000 and Tools for $20,000. At that time, he also purchased a store front for $750,000. He paid $50,000 in cash and borrowed the remaining $700,000 from a bank. The bank loan has an interest rate of 12 percent a year. Steve pays interest on the 15th of the month for the previous months interest but will pay no principal until January 1, 2020, when the loan is due in full. Although the loan is for 10 years, Steve expects to use the building for at least 30 years. When you call Steve after the first year to check in, he says this year he collected $800,000 in cash from my customers. Throughout the year, Ive purchased and received $500,000 in car parts for the shop from various vendors. He pays cash when I purchase these items. He only has about 500 of inventory at the end of the month. The shop is working out great and the customers love it. However, the tools usage is leading to it needing to be replaced within 2 years, but the other shop the equipment he purchased is probably good for another three years. The bank loan isnt due until 2020 and he has been keeping current with the monthly interest payments of $7000. He will be paying Decembers interest in the next few days. Also, he paid you out a dividend check for $10,000. As you agreed agreed, he received a salary of $80,000 for the year.

Based on what you know prepare a balance sheet, income statement and statement of cash flow for Steve.