Question

The following information is available for two different types of businesses for the 2018 accounting year. Hopkins CPAs is a service business that provides accounting services to small businesses. Sports Clothing is a merchandising business that sells sports clothing to college students. Data for Hopkins CPAs Borrowed $34,000 from the bank to start the business. Provided $44,000 of services to clients and collected $44,000 cash. Paid salary expense of $28,200. Data for Sports Clothing Borrowed $34,000 from the bank to start the business. Purchased $33,000 inventory for cash. Inventory costing $27,700 was sold for $50,000 cash. Paid $4,000 cash for operating expenses. Required Prepare an income statement, balance sheet, and statement of cash flows for each of the companies.

Answer 1

Answer:

Hopkins CPAs  

Income Statement  

Revenue   44,000.00  

Salary   28,200.00  

Profit   15,800.00  

 

Balance Sheet  

Assets  

Cash   49,800.00  

Total   49,800.00  

Capital & Liabilities  

Retained Earnings   15,800.00  

Loan                           34,000.00  

                                                   

Total                           49,800.00  

   

Cashflow Statement    

Operating Activities  

Revenue   44,000.00  

Salary   28,200.00  

Net Flow   15,800.00  

Investing Activities  

NIL    

Financing Activities  

Loan   34,000.00  

Opening Cash          NIL

Net Cashflow          49,800

Closing Cash   49,800.00  

     

2. Sports Clothing        

  Income Statement    

Revenue    50,000.00  

Cost of Sales   27,700.00  

Operating Expenses 4,000.00  

Profit               18,300.00  

 

Balance Sheet    

Assets    

Cash    47,000.00  

Inventory          5,300.00  

                           

Total   52,300.00  

Capital & Liabilities    

Retained Earnings    18,300.00  

Loan    34,000.00  

Total    52,300.00  

 

Cashflow Statement    

Operating Activities    

Revenue    50,000.00  

Operating Costs   31,700.00  

Working Capital      5,300.00  

Net Flow    13,000.00  

Investing Activities    

NIL      

Financing Activities    

Loan    34,000.00  

Opening Cash         NIL

Net Cashflow           47,000  

Closing Cash     47,000.00  

     

Explanation:

1. Hopkins CPAs      

Data for Hopkins CPAs Borrowed $34,000 from the bank to start the business.        

Dr. Cash...34,000        

Cr.  Loan..........34,000        

       

Provided $44,000 of services to clients and collected $44,000 cash.        

Dr Cash......44,000        

Cr Revenue..........44,000        

       

Paid salary expense of $28,200.        

Dr Salary Expense...28,200        

Cr Cash............................28,200        

Hopkins CPAs  

Income Statement  

Revenue   44,000.00  

Salary   28,200.00  

Profit   15,800.00  

 

Balance Sheet  

Assets  

Cash   49,800.00  

Total   49,800.00  

Capital & Liabilities  

Retained Earnings   15,800.00  

Loan                           34,000.00  

                                                   

Total                           49,800.00  

 

 

Cashflow Statement    

Operating Activities  

Revenue   44,000.00  

Salary   28,200.00  

Net Flow   15,800.00  

Investing Activities  

NIL    

Financing Activities  

Loan   34,000.00  

Opening Cash          NIL

Net Cashflow          49,800

Closing Cash   49,800.00  

     

2. Sports Clothing        

1.Borrowed $34,000 from the bank to start the business.                

Dr Cash...34,000        

Cr Loan..............34,000        

       

2.Purchased $33,000 inventory for cash.              

Dr. Inventory.....33,000        

Cr. Cash.....................33,000        

       

3.Inventory costing $27,700 was sold for $50,000 cash.              

Dr. Cash.... 50,000        

Cr. Sales.................50,000        

Dr. Cost of Sales...27,700        

Cr. Inventory...................27,700  

     

4.Paid $4,000 cash for operating expenses.        

Dr. Operating Expenses...4000        

Cr. Cash..................................4,000        

Income Statement    

Revenue    50,000.00  

Cost of Sales   27,700.00  

Operating Expenses 4,000.00  

Profit               18,300.00  

 

Balance Sheet    

Assets    

Cash    47,000.00  

Inventory          5,300.00  

                           

Total   52,300.00  

Capital & Liabilities    

Retained Earnings    18,300.00  

Loan    34,000.00  

Total    52,300.00  

 

Cashflow Statement    

Operating Activities    

Revenue    50,000.00  

Operating Costs   31,700.00  

Working Capital      5,300.00  

Net Flow    13,000.00  

Investing Activities    

NIL      

Financing Activities    

Loan    34,000.00  

Opening Cash         NIL

Net Cashflow           47,000  

Closing Cash     47,000.00