Question

Required information CC1-1 Financial Statements for a Business Plan (LO 1-2, LO 1-3] [The following information applies to the questions displayed below.] Nicole Mackisey is thinking of forming her own spa business, Nicole's Getaway Spa (NGS). Nicole expects that she and two family members will each contribute $10,000 to the business and receive 1,000 shares each. Nicole forecasts the following amounts for the first year of operations, ending December 31, 2018: Cash on hand and in the bank, $2,350, amounts due from customers from spa treatments, $1,800, building and equipment, $72,000; amounts owed to beauty supply outlets for spa equipment, $4,680, notes payable to a local bank for $39,070. Cash dividends of $4,000 will be paid to the stockholders during the year. Nicole also forecasts that first-year sales revenues will be $47,200, wages will be $25,000; the cost of supplies used up will be $8,000, office expenses will be $6,000, and income taxes will be $1,800. C1-1 Part 3

my balance sheet is off by 27000

Answer 1

The 1st step is to compute the income statement:

Revenue	47,200
less: expenses
Wages	25,000
Cost of supplies	8,000
Office expenses	6,000
Income tax	1,800
Net income	6,400

From this we will determine the amount of retained earnings. Retained earnings = net income - dividend = 6400 - 4000 = 2400

We can now make the balance sheet as shown below:

ASSETS		LIABILITIES
Current assets:		Current liabilities:
Cash	2,350	Accounts payable	4,680
Accounts receivable	1,800	Total current liabilities	4,680
Total current assets	4,150	Notes payable	39,070
Fixed assets		Total liabilities	43,750
Building and equipment	72,000	Owner's equity	30,000
		Add: Retained earnings	2,400
		Total equity	32,400
Total assets	76,150	Total equity and liabilities	76,150

The balance sheet is balancing and total assets = total liabilities + total equity