Question

Cascade Company was started on January 1, 2016, when it acquired $60,000 cash from the owners. During 2016, the company earned cash revenues of $35,000 and incurred cash expenses of $18,100. The company also paid cash distributions of $4,000.
Required:
Prepare a 2016 income statement, capital statement (statement of changes in equity), balance sheet, and statement of cash flows under each of the following assumptions.
a. Cascade is a sole proprietorship owned by Carl Cascade.
b. Cascade is a partnership with two partners, Carl Cascade and Beth Cascade. Carl Cascade invested $24,000 and Beth Cascade invested $36,000 of the $60,000 cash that was used to start the business. Beth was expected to assume the vast majority of the responsibility for operating the business. The partnership agreement called for Beth to receive 60 percent of the profits and Carl to get the remaining 40 percent. With regard to the $4,000 distribution, Beth withdrew $2,400 from the business and Carl withdrew $1,600.
c. Cascade is a corporation. It issued 5,000 shares of $5 par common stock
for $60,000 cash to start the business.

Answer 1

Answer:

the income statement is the same for all types of businesses:

Revenues          $35,000

Expenses          ($18,100)

Net income        $16,900

a. Cascade is a sole proprietorship owned by Carl Cascade.

statement of equity

Carl Cascade, capital beginning balance           $0

paid in capital, Carl Cascade                        $60,000

net income                                                      $16,900

subtotal                                                           $76,900

Carl Cascade, drawings                                   (4,000)

Carl Cascade, capital ending balance         $72,900

balance sheet

Assets

Cash $72,900

Equity

Carl Cascade, capital $72,900

statement of cash flows

Cash flow from operating activities           $16,900

Cash flow from financing activities:

Paid in capital                                             $60,000

Drawings                                                     ($4,000)

net cash from financing activities             $56,000

net cash increase                                      $72,900

beginning cash balance                                     $0

ending cash balance                                 $72,900

b. Cascade is a partnership with two partners, Carl Cascade and Beth Cascade.

statement of equity

Carl Cascade, capital beginning balance           $0

Beth Cascade, capital beginning balance          $0

paid in capital, Carl Cascade                        $24,000

paid in capital, Beth Cascade                       $36,000

net income                                                      $16,900

subtotal                                                           $76,900

Carl Cascade, drawings                                    (1,600)

Beth Cascade, drawings                                 (2,400)

Carl Cascade, capital ending balance          $29,160

Beth Cascade, capital ending balance         $43,740

balance sheet

Assets

Cash                                                     $72,900

Equity

Carl Cascade $29,160

Beth Cascade $43,740

total equity                                            $72,900

statement of cash flows

Cash flow from operating activities           $16,900

Cash flow from financing activities:

Paid in capital                                             $60,000

Drawings                                                     ($4,000)

net cash from financing activities             $56,000

net cash increase                                      $72,900

beginning cash balance                                     $0

ending cash balance                                 $72,900

c. Cascade is a corporation.

statement of equity

Common stock beginning balance                        $0

Common stock issued (5,000 stocks)         $25,000

Additional paid in capital                              $35,000

net income                                                      $16,900

subtotal                                                           $76,900

Dividends                                                         (4,000)

Common stock ending balance                   $25,000

Additional paid in capital ending balance   $35,000

Retained earnings                                          $12,900              

balance sheet

Assets

Cash                                                     $72,900

Equity

Common stock $25,000

Additional paid in capital $35,000

Retained earnings $12,900    

total equity                                            $72,900

statement of cash flows

Cash flow from operating activities           $16,900

Cash flow from financing activities:

Common stocks issued                             $25,000

Additional paid in capital                           $35,000

Dividends                                                   ($4,000)

net cash from financing activities             $56,000

net cash increase                                      $72,900

beginning cash balance                                     $0

ending cash balance                                 $72,900