Question

The following information is available for two different types of businesses for the 2016 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 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 cash for operating expenses.

a.	Prepare an income statement, balance sheet, and statement of cash flows for each of the companies.

Answer 1

Hopkins CPA

Income statement
Particulars	Amount
Service revenue	31000
Less salary expense	19800
Net income	11200
Balance sheet
Assets	Amount		Equity and liabilities	Amount
Current assets
Cash	52200		Bank loan	41000
			Retained earnings	11200
Total	52200		Total	52200
Cash flow statement
Particulars	Amount
Cash received from customers	31000
Cash paid to employees	19800
Cash from operations		11200
Bank loan	41000
Cash from financing activities		41000
Net cash generated		52200
Add opening balance		0
Closig balance		52200

Sports clothing

Income statement
Particulars	Amount
Service revenue	30000
Less cost of goods sold	16800
Other expenses	2400
Net income	10800
Balance sheet
Assets	Amount		Equity and liabilities	Amount
Current assets
Cash	48600		Bank loan	41000
Inventory	3200
			Retained earnings	10800
Total	51800		Total	51800
Cash flow statement
Particulars	Amount
Cash received from customers	30000
Cash paid to suppliers	-20000
Cash paid for operating expenses	-2400
Cash from operations		7600
Bank loan	41000
Cash from financing activities		41000
Net cash generated		48600
Add opening balance		0
Closig balance		48600