Answer:
See answers below.
Explanation:
Question a
The balance sheet for day 0 will have the following balances.
<em>Asset side</em>
Parts $120,000
Cash $114,000
<u>Total assets $234,000</u>
<em>Liabilities and Equity side</em>
Capital $170,000
Short term loan $24,000
Long term loan $40,000
<u>Total liabilities $234,000</u>
Question b
The income statement for the first month will have the following balances.
<em>Revenue (credit) side</em>
Sales $150,000
<em>Expenses (debit) side</em>
Parts used $80,000
wages to factory workers $15,000
rent $4,000
salary $8,000
Interest on grandma's loan $360
Interest on bank loan $600.
<em>Profit for the month $42,040.</em>
<em></em>
Question c
The balance sheet for the last day of the month will have the following balances.
<em>Asset side</em>
Parts $40,000
Cash $234,040
<u>Total assets $274,040</u>
<em>Liabilities and Equity side</em>
Capital $170,000
Profit (added to reserves) $42,040
Short term loan $22,000
Long term loan $40,000
<u>Total liabilities $274,040</u>
Question d
Grandma is not an equity owner since she will be repaid after 1 year.
Therefore, percentage ownership by Smith, Jones and Grandma will be as follows in the ratio of their equity contribution.
Total capital contributed = 100,000 + 70,000 = 170,000
Smith percentage ownership =
= 58.8%
Jones percentage ownership =
= 41.2%
Grandma's ownership = 0% (no equity contribution).