Beginning Balance Sheet Beginning. Balance Sheet For year beginning January, 2001 Assets: Current assets: Cash 1,000 Inventory 2,278 Total current assets 3,278 Property, plant and equipment (net) 5,000 Other assets (net) 8,250 Total assets 16,528 Liabilities: Current liabilities: Accounts payable (inventory) 2,278 Line of credit 4,250 Total current liabilities 6,528 Total liabilities 6,528 Equity: Contributed cash 10,000 Total equity 10,000 Total liabilities and equity 16,528 Debt-to-equity ratio 0.65 Cash - A minimum target balance of $1,000 has been set for the cash account. The partners will be infusing $10,000 into the business, and the $15,000 line of credit will be available. Inventory - HydroHut plans on having 30 days' worth of inventory on-hand, due to the perishability of its products. Beginning inventory is calculated by looking at the total cost of sales for month 1, which is $2,278, and making sure the business has this inventory level prior to opening. Property, Plant and Equipment (net) - This is the $5,000 of equipment HydroHut needs to buy to open its store. A detailed equipment list can be found in the appendix. Other Assets (net) - This account includes mostly intangible assets that can be amortized for accounting/tax purposes. These assets include leasehold improvements of $5,000, legal and consulting fees of $1,000, permit and licenses totaling $750, and miscellaneous start-up expenses of $1,500. Accounts Payable - HydroHut will have Net 30 terms with its suppliers regarding inventory. Line of Credit - Assumes a $15,000 line-of-credit loan is available, and $4,250 will be needed to fund initial start-up costs. The projected interest rate of this line of credit is 12 percent. Contributed Cash - This is the $10,000 investment by the owners.
Beginning Balance Sheet Beginning. Balance Sheet For year beginning January, 2000 Assets: Current assets: Cash 145,000 Inventory 7,500 Total current assets 152,500 Property, plant and equipment (net) 65,000 Total assets 217,500 Liabilities: Current liabilities: Accounts payable (inventory) 7,500 Total current liabilities 7,500 Total liabilities 7,500 Equity: Contributed cash 200,000 Assets transferred in 10,000 Total equity 210,000 Total liabilities and equity 217,500 Debt-to-equity ratio 0.04 Cash - The amount of cash remaining after the anticipated $200,000 infusion, $100,000 by the founders and $100,000 from the new equity partner. Of this amount, $55,000 will be used to purchase a packaging system ($15,000), soldering equipment ($7,500), an automated production line ($7,500), and perform some building improvements ($25,000). Inventory - Since IMT plans on having 60 days’ worth of inventory on-hand at all times, this is the amount of inventory IMT will have on-hand at the beginning of its operation to meet its first two month's sales. Property, plant and equipment (net) - This includes the planned purchase of $55,000 of equipment and building improvements, plus the $10,000 of office equipment and furniture contributed by the founders. The contribution consists of computers worth $5,000, a telephone system worth $2,500, and some office furniture worth $2,500. Contributed cash - This is anticipated joint investment by the founders and the new equity partner. Assets transferred in - This is value of the office equipment and furniture contributed by the founders.
