Question

The following information is available for two different types of businesses for the Year 1 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 $33,000 from the bank to start the business.
Provided $45,000 of services to clients and collected $45,000 cash.
Paid salary expense of $28,800.Data for Sports Clothing Borrowed $33,000 from the bank to start the business.
Purchased $34,000 inventory for cash.Inventory costing $28,600 was sold for $51,000 cash.
Paid $4,100 cash for operating expenses.
Required:
a. 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:

Explanation:

Entries of Data Hopkins:

Entry of borrowing from bank ⇒Dr Bank   $33000

                                                                Cr      Hopkin Capital    $33000

Entry of services revenue⇒ Dr Cash $45000

                                                    Cr        Service revenue $45000

Entry of salary expense⇒Dr  Salary expense $ 28800

                                                  Cr cash                          $28800

Entries of Sports clothing:

Entry of borrowing from bank ⇒Dr Bank   $33000

                                                                Cr      Sports Capital   $33000

Entry of purchases inventory ⇒ Dr inventory $34000

                                                                Cr      Cash      $34000

Entry of sales of inventory⇒a.) Dr  Cost of goods sold  $28600

                                                                   Cr   Inventory                   $28600

                                           (to record cost of sales)

                                                     b.)  Dr  Cash  $51000

                                                                               Cr Sales revenue $51000    

Entry of Operating expense ⇒ Dr Operating expense $4100

                                                              Cash                       $4100

Ledgers Data Hopkins:

Bank =33000

Cash=45000-28800=16200

Capital =33000

Revenue= 45000

Salary expense=28800

Trial balance Data Hopkins:

        33000+16200+28800=33000+45000

Ledges of Sports clothing:

Bank=33000

Cash=51000-34000-4100=12900

Inventory=34000-28600=5400

Capital=33000

Sales revenue=51000

cost of goods sold=28600

Operating expense= 4100

Trial balance Sports clothing:

33000+12900+5400+28600+4100=33000+51000

a.)                                 Income statement

                                      Hopkin CPA

 Service revenue                                                          = $45000

less: Total operating expense

        Salary expense                =$28800

       

               Total=                                                               (28800)

                                  Gross profit    ⇒                               $ 16200

                                   Income statement

                                      Sports clothing

 Sales revenue                                                          = $51000

less: Cost of goods sold                                          =(28600)

            Gross profit                                                     22400

less: operating expense                                             =(4100)

                                      Net profit                                    18300

       

               

                                  Balance sheet Hopkin Cpa

                       

Total Assets=                              

Bank=$33000

Cash=$16200

Shareholder equity :

Hopkin capital= $33000

Retained earning :$16200

                                  Balance sheet Sports clothing

Total Assets=                              

Bank=$33000

Cash=$12900

Inventory=$5400

Shareholder equity :

Hopkin capital= $33000

Retained earning :$18300

                               Cash flow of hopkins CPA

Cash flow from operation

            Net income                                                                     = 16200

Cash flow from Operating activities

  Increase in salaries                                                                =(28800)

Cash flow from financing activities

loan from bank for investing in business                             = 33000

                                                                                                20400

                           Cash flow of Sports clothing

Cash flow from operation

            Net income                                                                     = 18300

Cash flow from Operating activities

  Increase in inventory     =(34000)

Increase in operating expense       =(4100)      

                                                           Total                            =(38100)

Cash flow from financing activities

loan from bank for investing in business                             = 33000

                                                                                        13200