The following information is available for two different types of businesses for
ID: 2597620 • Letter: T
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 $38,000 from the bank to start the business.
Provided $40,000 of services to clients and collected $40,000 cash.
Paid salary expense of $25,600.
Data for Sports Clothing
Borrowed $38,000 from the bank to start the business.
Purchased $29,000 inventory for cash.
Inventory costing $24,400 was sold for $44,000 cash.
Paid $3,500 cash for operating expenses.
Required
Prepare an income statement, balance sheet, and statement of cash flows for each of the companies.
Explanation / Answer
Income Statement : Hopkins CPAs Sports Clothing Revenue from operations 40000 44000 Ending Inventory (29000-24400) 4600 Less: Expenses Salary -25600 Purchase of Inventory -29000 Operating Expenses -3500 Net Income 14400 16100 Balance Sheet: Hopkins CPAs Sports Clothing Assets: Inventory 4600 Cash 52400 49500 52400 54100 Liabilities: Borrowing 38000 38000 Net Income 14400 16100 52400 54100 Statement of Cash Flows: Hopkins CPAs Sports Clothing Cash Flow from operating activities: Net Income 14400 16100 Increase in Inventory -4600 Net Cash Flow from operating activities 14400 11500 Cash Flow from Investing activities: Borrowings 38000 38000 Cash Flow from Financing Activities: Net Cash Flow during the year 52400 49500 Beginning Cash Balance 0 0 Ending Cash Balance 52400 49500
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