Reference no: EM132853575
Problem - On October 1, 2020, Rahul Vata completed the financing and investing activities necessary for the operation of a carwash facility that he had incorporated. At the end of that day the new company's balance sheet was as follows:
Vata Ltd. Balance Sheet As at October 1, 2020
Assets:
Cash $75,000
Land 60,000
Building 210,000
Washing Bay Equipment 45,000
Total $390,000
Liabilities & Shareholders Equity
NB Small Business loan payable $30,000
Bank loan payable (Scotia Bank) 150,000
Common Shares (no-par value) 210,000
Total $390,000
i. For the rest of the three months ended December 31, 2020, the following were paid in cash.
Salary, Rahul Vata $25,000
Other salaries 113,700
Insurance (for one-year) 19,200
Shop Supplies 72,000
Interest & General expenses 42,000
ii. Also for the three months ended December 31, 2020, the company received in cash, $330,000 for services rendered. At December 31, 2020, corporate customers owed Vata Ltd. $13,500 for services already performed.
iii. At December 31, 2020, the company owed $6,000 for shop supplies already received. Only $4,500 of shop supplies were still on hand as of December 31, 2020.
iv. Interest on the Scotia Bank loan (at 7%) is payable at the end of each month, (the December interest had already been paid) but principal repayment is to start only after two years of operations. The six percent (6%) interest on the NB Small Business loan is due every year, on October 1, starting from 2021, with the principal payable on October 1, 2025. No adjustment had been made in connection with this NB Small Business loan. In line with similar shops, Vata Ltd. decided to depreciate its building and washing bay equipment on a straight-line basis over twenty years. The shareholders agreed that there will be no dividends in the first two years of operation.
Required - Prepare in good form:
a. An income statement for Vata Ltd. for the three months ended Dec 31, 2020.
b. A classified balance sheet for Vata Ltd. as at December 31, 2020.