Question

The following information is available for two different types of businesses for the 2016 accounting year services to is a merchandising business that sells sports clothing to college students
Data for Hopkins CPAs
1 Borrowed $41,000 from the bank to start the business
2. Provided $31,000 of services to clients and collected $31,000 cash
3. Paid salary expense of $ 19,800.
Data for Sports Clothing
1. Borrowed $41,000 from the bank to start the business
2. Purchased $20,000 inventory for cash
3. Inventory costing $16,800 was sold for $30,000 cash
4. Paid $2,400 in cash for operating expenses.
Required
Prepare an income statement, balance sheet, and statement of cash flows for each of the companies (Statement of Cash Flows only, items to be deducted must be indicated with a negative amount.)

Answer 1

Answer and Explanation:

The Preparation of income statement, balance sheet, and statement of cash flows for each of the companies is prepared below:-

Income Statement

HOPKINS CPAs

For the year ended December,31 2016

Particulars                          Amount

Revenue:

Service Revenue                 $31,000  

Less: Salaries Expense       ($19,800)

Net Income                           $11,200

Balance Sheet

HOPKINS CPAs

As at December 31,2016

Particulars                                     Amount

Assets  

Cash                        $52,200  

Total Assets                                   $52,200

Liabilities:  

Notes Payable          $41,000  

Total Liabilities                                 $41,000

Stockholder's Equity:  

Retained Earnings     $11,200  

Total Stockholder's

Equity                                        $11,200

Total Liabilities and

Stockholder's Equity                           $52,200

Working Note:

The Cash balance as on 31 December, 2016

= Borrowed amount + Collection from customer - Salary expense

= $41,000 + $31,000 - $19,800

=$52,200

Statement of cash flows

HOPKINS CPAs

For the Year Ended 31, December, 2016

Particulars                                                         Amount

Cash Flows From Operating Activities:

Cash Inflow from Clients         $31,000  

Cash outflows for Salaries      -$19,800  

Net Cash Flow from Operating Activities         $11,200

Cash Flows From Investing Activities:             $0

Cash Flows From Financing Activities:

Cash Inflow from Loan                $41,000  

Net Cash Flows from Financing Activities  $41,000

Net Increase in Cash                                             $52,200

Add: Beginning Cash Balance                              $0

Ending Cash Balance                                            $52,200

Income Statement

Sports clothing

For the Year Ended 31 December,2016

Particulars                                 Amount

Revenue:  

Service Revenue                     $30,000

Less;Cost of Goods Sold        -$16,800

Gross Margin                            $13,200

Less: Operating Expense        -$2,400

Net Income                                 $10,800

Balance Sheet

Sports clothing

As of December 31,2016

Particulars                                                 Amount

Assets:  

Cash                                  $48,600  

Merchandise Inventory    $3,200  

Total Assets                                              $51,800

Liabilities:

Notes Payable                $41,000  

Total Liabilities                                          $41,000

Stockholder's Equity:  

Retained Earnings          $10,800  

Total Stockholder's Equity                       $10,800

Total Liabilities and

Stockholder's Equity                                 $51,800

Notes:-

Cash balance on 31 December,2016 = Borrowed amount - Purchase of Inventory + Collection from sale of inventory -Operating expense

= $41,000 - $20,000 + $30,000 - $2,400

= $48,600

Merchandise Inventory = Purchase - Cost of goods sold

= $20,000 - $16,800

= $3,200

Statement of Cash Flows

Sports Clothing

For the Year Ended 31, Dec 2016

Particulars                                                                      Amount

Cash Flows From Operating Activities  

Cash Inflow from Customers                   $30,000  

Less: Inventory for Cash Outflow           -$20,000

Less: Expenses for Cash Outflow           -$2,400  

Net Cash Flow From Operating Activities                        $7,600

Cash Flow From Investing Activities                                  $0

Cash Flow From Financing Activities

Cash Inflow from Loan                                   $41,000  

Net Cash Flow From Financing Activities                         $41,000

Net Increase in Cash                                                             $48,600

Add: Beginning Cash Balance                                               $0

Ending Cash Balance                                                             $48,600