Question

Faith Busby and Jeremy Beatty started the B&B partnership on January 1, 2018. The business acquired $86,800 cash from Busby and $193,200 from Beatty. During 2018, the partnership earned $68,200 in cash revenues and paid $43,150 for cash expenses. Busby withdrew $3,500 cash from the business, and Beatty withdrew $4,700 cash. The net income was allocated to the capital accounts of the two partners in proportion to the amounts of their original investments in the business.

Required:

Prepare an income statement, capital statement (statement of changes in equity), balance sheet, and statement of cash flows for B&B’s 2018 fiscal year.

Answer 1

B&B Partnership

Income Statement

for the year ended December 31, 2018

Cash Revenues $68,200 Cash Expenses $43,150 Net Income for the year $25,050

B&B Partnership

Capital Statement

for the year ended December 31, 2018

	Busby	Beatty
Beginning Capital Balance	$86,800	$193,200
Less:- Withdrawal	($3500)	($4700)
Add:- Net Income	$7765	$17,285
Ending Capital Balance	$91,065	$205,785

B&B Partnership

Balance Sheet

As of December 31, 2018

Assets
Cash	$296,850
Total Assets		$296,850
Liabilities
Equity
Busby	$91,065
Beatty	$205,785
Total Liabilities and Equity		$296,850

B&B Partnership

Cash Flow Statement

for the year ended December 31, 2018

Cash Flows from Operating Activitties:
Revenue from Operations	$68,200
Operating Expenses	($43,150)
Net Cash flow from operating activities		$25,050
Net Cash flow from Investing activities		$0
Cash Flows from Financing Activities
Proceeds from Partners	$2,80,000
Withdrawal by Partners	($8,200)
Net cash flow from financing activities		$2,71,800
Net cash change		$296,850
Opening cash balance		$0
Ending Cash Balance		$296,850