Reid’s Rides sells high quality BMX bikes for $485 each. The cost to produce the bikes average $335.00 each. Depreciation expenses run $2,000 per year. Utilities average $1100 per month, insurance is $2,475 per year, vehicle gas averages $85 per month, phone and internet is $255 per month and rent is $2,000 per month. Vehicle license and other fees are $795 per year. In addition, Reid has a budget for tools at $75 per month. Last year Reid sold 597 bikes. Part time help is $7,800 per year. Reid has the following assets, miscellaneous parts $8,955, tools $4,600 delivery/service truck $22,000, office equipment, display racks, computers, phones all equal $17,000 with an inventory of 80 completed bikes. The company has a five-year loan. The loan amount at the start of the year was $55,000 with an interest rate of 6.5%. Accumulated depreciation in the amount of $15,000. Operating cash is $10,000, additionally he has cash in savings of $30,000. His tax rate is 24%. Reid averages $4,500 in accounts receivable and $2,000 in accounts payable. Reid operates as a sole proprietorship.
1. Construct in good form an income statement. What is the profit for Reid’s Rides?
2. Develop a balance sheet for Reid’s Rides.