C 1 A sole proprietorship had the following assets and liabilities at the beginning and end of this year. Assets Beginning of the year $ 88,500 End of the year 129,500 If the owner withdrew $850 cash per month for personal use and invested an additional $25,000 cash Liabilities $ 29,500 54,500 The net income earned or net loss incurred by the business during the year is: (If the answer is a net loss, it should be indicated with a minus sign.)

C 1 A sole proprietorship had the following assets and liabilities at the beginning and end of this year. Assets Beginning of the year $ 88,500 End of the year 129,500 If the owner withdrew $850 cash per month for personal use and invested an additional $25,000 cash Liabilities $ 29,500 54,500 The net income earned or net loss incurred by the business during the year is: (If the answer is a net loss, it should be indicated with a minus sign.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Problem 08-48 (Algo) [LO 8-1, 8-7, 8-8] Ms. Drake sold a business that she had operated as a sole proprietorship for 18 years. On the date of sale, the business balance sheet showed the following assets: Accounts receivable Inventory Furniture and equipment: Cost Accumulated depreciation Leasehold improvements: Cost Accumulated amortization Tax Basis $ 37,750 143,200 Net cash flow 50,750 (40,600) 22,000 (4,400) Required: The purchaser paid a lump-sum price of $316,000 cash for the business. The sales contract stipulates that the FMV of the business Inventory is $156,400, and the FMV of the remaining balance sheet assets equals adjusted tax basis. Assuming that Ms. Drake's marginal tax rate on ordinary income is 35 percent and her rate on capital gain is 15 percent, compute the net cash flow from the sale of her business.
A-6
4a
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Income from Continuing Operations
A-5