Your Uncle Bob has worked in an upholstery shop for ten years. Last year, Uncle Bobs wages were $ 30,000. Lately, however, Bob has been unhappy with his employer. Convinced that he could run an upholstery shop that did better work at a lower cost, Bob decides to go into business for himself. Withdrawing $ 7,000 cash from his personal savings account, Bob opens BOBS UPHOLSTERY SHOP. Primarily for liability purposes, Bob has decided to incorporate the business. 7,000 shares of stock, at $1 par value, are issued to Bob. His lawyers accept 500 shares of stock in exchange for the value of their legal advice during the start-up phase. These legal fees would be considered Organization Costs and are amortized over 5 years.

To get the business going, Bob purchases several industrial sewing machines costing $ 4,000. Bob also needs other tools and equipment costing $ 3,000. Not wanting to completely deplete his cash balance, he applies for, and receives, a $ 2,500, 3-year loan from a local bank.

REQUIRED (2 points)

1. Prepare a Balance Sheet for BOBS UPHOLSTERY SHOP dated January 1, 2008. (Hint: Prepare

journal entries for each transaction noted above.

2. Is Bobs financial condition better, worse, or the same as it was before he started the business?