Question

ABC inc builds and sells single-family homes. the company had the following transactions during q1 2016 period that ended on march 31, 2016:

1. purchased a single-family home on january 10, 2016 which it plans to renovate and resell. the home was purchased for $200,000 with $150,000 paid in cash and the remainder to be paid upon sale of the property.

2. Purchased $10,000 worth of building materials at home depot used in the renovation. The purchased was paid in cash.

3. Hired a contractor to perform the renovation of the house. The renovation was completed on feb. 10, 2016 and the contractor billed ABC inc $50,000 for this renovation. ABC paid $30,000 upon completion of the work. The balance was due in Q2 2016.

4. Paid office employee salaries of $10,000 during Q1 2016.

5. Sold the home for $290,000 on March 30th 2016 of which $250,000 was received and the rest due on April 20th 2016.

At the beginning of the quarter, (1/1/16) ABC inc balance sheet had only $300,000 in cash and $300,000 in owners equity.

1. present income statement for Q1

2. create ABC inc balance sheet at the end of Q1 2016

3. present statement of Cash flow

Answer 1

1.

ABC Inc.
Income Statement
For the Quarter Ended March 31, 2016
Sales revenue	290000
Cost of goods sold	260000
Gross profit	30000
Operating expenses	10000
Net income	20000

Cost of goods sold = $200000 + $10000 + $50000 = $260000

2.

ABC Inc.
Balance Sheet
March 31, 2016
Assets
Cash	350000
Accounts receivable	40000
Total assets	390000
Liabilities and Owner's Equity
Accounts payable	70000
Owner's equity	320000
Total liabilities and owner's equity	390000

Cash = $300000 - 150000 - 10000 - 30000 - 10000 + 250000 = $350000

Accounts receivable = $290000 - 250000 = $40000

Accounts payable = ($200000 - 150000) + ($50000 - 30000) = $50000 + $20000 = $70000

Owner's equity = $300000 + $20000 = $320000

3.

ABC Inc.
Statement of Cash Flows
For the Quarter Ended March 31, 2016
Cash flows from operating activities:
Cash received from customer	250000
Cash paid to suppliers	-190000
Cash paid to employees for salaries	-10000
Net cash provided by operating activities		50000
Net increase (decrease) in cash		50000
Cash balance, beginning		300000
Cash balance, ending		350000