The Arcadia Company was founded by Thomas Smith and began operations in July 2015 as a neighborhood hardware store, selling branded lawn and garden supplies, household products, and small tools. The following transactions occurred during the second half of 2015:

1, Smith established The Arcadia Company by contributing \($250,000\) of his personal funds and receiving all of the company’s capital stock in return for his equity investment.

2. The company purchased a small shop in a strip mall for \($150,000\) cash.

3. Needing working capital to purchase inventory, the company borrowed \($120,000\) cash from a local bank, using the recently purchased store as collateral for the loan. Interest on the loan was set at six percent per year, payable every six months. The loan could be repaid at any time, but full loan repayment was required within three years.

4. Smith used the entire loan amount of \($120,000\) to purchase inventory. In addition, he purchased \($30,000\) of inventory on credit. By the end of 2015, all but \($6,000\) of the credit purchase had been repaid.

5. Smith decided to use a simple rule-of-thumb for pricing his inventory for sale—all goods would be marked up 100 percent above their cost. By year-end, Smith noted that he had sold inventory with a cost basis of \($80,000.\) All sales were for cash or on a debit/credit card.

6. Smith decided to depreciate his shop on a straight-line basis, using an expected useful life of 20 years.

7. During the latter half of 2015, Smith withdrew \($20,000\) in cash from the business as his salary.

Ignore all taxes when answering the following questions.If treated as a corporation, the business would owe payroll taxes on the wages paid to the owner unless the money is paid as a dividend.

Required

1. Prepare a spreadsheet for The Arcadia Company using the balance sheet equation, reflecting the financial effects of the above transactions.

2. Prepare an income statement, balance sheet, and statement of cash flow for The Arcadia Company at the end of the first year of operations.