a)
Prepare a Year 1 income statement, capital statement,
a)
Explanation of Solution
Income statement:
It is one of the financial statements which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.
Prepare the income statement of for C’s sole proprietorship the year ended December 31, Year 1.
| C’s sole proprietorship | |
| Income statement | |
| For the year ended December 31, Year 1 | |
| Particulars | Amount ($) |
| Revenues | 35,000 |
| Less: Expenses | (18,100) |
| Net income | 16,900 |
Table (1)
Statement of owner's’ equity:
This statement reports the beginning owner’s equity and all the changes which led to ending owner's’ equity. Additional capital, net income from income statement is added to and drawings are deducted from beginning owner’s equity to arrive at the end result, ending owner’s equity.
Prepare the capital account of C’s sole proprietorship for the year ended December 31, Year 1.
| C’s sole proprietorship | |
| Capital statement | |
| For the year ended December 31, Year 1 | |
| Particulars | Amount ($) |
| Beginning Capital Balance | 0 |
| Add: initial Capital from partners | 60,000 |
| Add: Net Income | 16,900 |
| Less: Withdrawal by person C | (4,000) |
| Ending Capital Balance | 72,900 |
Table (2)
Balance sheet:
Balance Sheet is one of the financial statements which summarize the assets, the liabilities, and the Shareholder’s equity of a company at a given date. It is also known as the statement of financial status of the business.
Prepare the balance sheet of C’s sole proprietorship as on December 31st, year 1.
| C’s sole proprietorship | |
| Balance sheet | |
| As on December 31, Year 1 | |
| Particulars | Amount ($) |
| Assets | |
| Cash | 72,900 |
| Total assets | 72,900 |
| Liabilities and Equity | |
| Liabilities | 0 |
| Equity | |
| C’s Capital | 72,900 |
| Total Liabilities and Equity | 72,900 |
Table (3)
Statement of cash flows:
This statement reports all the cash transactions which are responsible for inflow and outflow of cash, and result of these transactions is reported as ending balance of cash at the end of reported period.
Prepare statement of cash flows for year ended December 31st, Year 1 of C’s sole proprietorship.
| C’s sole proprietorship | ||
| Cash Flow Statement | ||
| For the year ended December 31, Year 1 | ||
| Particulars | Amount ($) | Amount ($) |
| Cash Flows From Operating Activities: | ||
| Receipts from Revenues | 35,000 | |
| Paid for Expenses | (18,100) | |
| Net Cash Flow from Operating Activities | 16,900 | |
| Cash Flows From Investing Activities | 0 | |
| Cash Flows From Financing Activities: | ||
| Proceeds from owners | 60,000 | |
| Paid for Owner’s Withdrawals | (4,000) | |
| Net Cash Flow from Financing Activities | 56,000 | |
| Net Change in Cash | 72,900 | |
| Add: Beginning Cash Balance | 0 | |
| Ending Cash Balance | 72,900 | |
Table (4)
b)
Prepare a Year 1 income statement, capital statement, balance sheet, and statement of cash flows for a
b)
Explanation of Solution
Calculate the capital contributions and determine the adjustments to the capital account.
| Particulars | Amount ($) | Percentage (%) |
| Capital contributions: | ||
| CC’s contribution | 24,000 | 40% |
| JC’s contribution | 36,000 | 60% |
| Total capital contribution | 60,000 | 100% |
| Adjustments to capital account | ||
| Revenues (add to capital) | 35,000 | |
| Expenses (deduct from capital) | 18,100 | |
| Withdrawals: | ||
| CC (deduct from capital) | 1,600 | |
| BC (deduct from capital) | 2,400 |
Table (5)
Income statement:
It is one of the financial statements which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.
Prepare the income statement of a partnership C for the year ended December 31, Year 1.
| Partnership C | |
| Income statement | |
| for the year ended December 31, Year 1 | |
| Particulars | Amount ($) |
| Revenues | 35,000 |
| Less: Expenses | (18,100) |
| Net income | 16,900 |
Table (6)
Statement of owner's’ equity:
This statement reports the beginning owner’s equity and all the changes which led to ending owner's’ equity. Additional capital, net income from income statement is added to and drawings are deducted from beginning owner’s equity to arrive at the end result, ending owner’s equity.
Prepare the capital account of Partnership C for the year ended December 31, Year 1.
| Partnership C | |
| Capital statement | |
| for the year ended December 31, Year 1 | |
| Particulars | Amount ($) |
| Beginning Capital Balance | 0 |
| Add: initial Capital from partners | 60,000 |
| Add: Net Income | 16,900 |
| Less: Withdrawal by partners | (4,000) |
| Ending Capital Balance | 72,900 |
Table (7)
Balance sheet:
Balance Sheet is one of the financial statements which summarize the assets, the liabilities, and the Shareholder’s equity of a company at a given date. It is also known as the statement of financial status of the business.
Prepare the balance sheet of Partnership C as on December 31st, year 1.
| Partnership C | |
| Balance sheet | |
| as on December 31, Year 1 | |
| Particulars | Amount ($) |
| Assets | |
| Cash | 72,900 |
| Total assets | 72,900 |
| Liabilities and Equity | |
| Liabilities | 0 |
| Equity | |
| CC’s Capital (1) | 29,160 |
| BC’s Capital (1) | 43,740 |
| Total Liabilities and Equity | 72,900 |
Table (8)
Statement of cash flows:
This statement reports all the cash transactions which are responsible for inflow and outflow of cash, and result of these transactions is reported as ending balance of cash at the end of reported period.
Prepare statement of cash flows for year ended December 31st, Year 1 of Partnership C.
| Partnership C | ||
| Cash Flow Statement | ||
| For the year ended December 31, Year 1 | ||
| Particulars | Amount ($) | Amount ($) |
| Cash Flows From Operating Activities: | ||
| Receipts from Revenues | 35,000 | |
| Paid for Expenses | (18,100) | |
| Net Cash Flow from Operating Activities | 16,900 | |
| Cash Flows From Investing Activities | 0 | |
| Cash Flows From Financing Activities: | ||
| Proceeds from Partners | 60,000 | |
| Paid for partners’ Withdrawals | (4,000) | |
| Net Cash Flow from Financing Activities | 54,000 | |
| Net Change in Cash | 72,900 | |
| Add: Beginning Cash Balance | 0 | |
| Ending Cash Balance | 72,900 | |
Table (9)
Working note:
Calculate the ending balance of capital for each partner.
| Particulars | CC | BC | Total |
| Beginning Capital Balance | $0 | $0 | $0 |
| Investments | 24,000 | 36,000 | 60,000 |
| Add: Net Income | 16,900 | ||
| CC 40% | 6,760 | ||
| BC 60% | 10,140 | ||
| Less: Withdrawals | (1,600) | (2,400) | (4,000) |
| Ending Capital Balances | $29,160 | $43,740 | $72,900 |
…… (1)
Table (10)
c)
Prepare a Year 1 income statement, statement of changes in
c)
Explanation of Solution
Income statement:
It is one of the financial statements which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.
Prepare the income statement of Corporation C for the year ended December 31, Year 1.
| Corporation C | |
| Income statement | |
| For the year ended December 31, Year 1 | |
| Particulars | Amount ($) |
| Revenues | 35,000 |
| Less: Expenses | (18,100) |
| Net income | 16,900 |
Table (11)
Statement of owner's’ equity:
This statement reports the beginning owner’s equity and all the changes which led to ending owner's’ equity. Additional capital, net income from income statement is added to and drawings are deducted from beginning owner’s equity to arrive at the end result, ending owner’s equity.
Prepare the capital account of Corporation C for the year ended December 31, Year 1.
| Corporation C | |
| Statement of changes in stockholders’ equity | |
| For the year ended December 31, Year 1 | |
| Particulars | Amount ($) |
| Beginning Capital Balance | 0 |
| Add: issuance of common stock | 60,000 |
| Ending common stock | 60,000 |
| Beginning | $0 |
| Add: Net Income | 16,900 |
| Less: Dividends | (4,000) |
| Ending retained earnings | $12,900 |
| Total stockholders’ equity | 72,900 |
Table (12)
Balance sheet:
Balance Sheet is one of the financial statements which summarize the assets, the liabilities, and the Shareholder’s equity of a company at a given date. It is also known as the statement of financial status of the business.
Prepare the balance sheet of Corporation C as on December 31st, year 1.
| Corporation C | |
| Balance sheet | |
| As on December 31, Year 1 | |
| Particulars | Amount ($) |
| Assets | |
| Cash | 72,900 |
| Total assets | 72,900 |
| Liabilities and Equity | |
| Liabilities | 0 |
| Equity | |
| Common stock, $5 par value, 5000 shares issued and outstanding | 25,000 |
| Paid-in capital in excess and outstanding | 35,000 |
| Total paid in capital | 60,000 |
| Retained earnings | 12,900 |
| Total Liabilities and Equity | 72,900 |
Table (13)
Statement of cash flows:
This statement reports all the cash transactions which are responsible for inflow and outflow of cash, and result of these transactions is reported as ending balance of cash at the end of reported period.
Prepare statement of cash flows for year ended December 31st, Year 1 of Corporation C.
| Corporation C | ||
| Cash Flow Statement | ||
| For the year ended December 31, Year 1 | ||
| Particulars | Amount ($) | Amount ($) |
| Cash Flows From Operating Activities: | ||
| Receipts from Revenues | 35,000 | |
| Paid for Expenses | (18,100) | |
| Net Cash Flow from Operating Activities | 16,900 | |
| Cash Flows From Investing Activities | 0 | |
| Cash Flows From Financing Activities: | ||
| Proceeds from issue of stock | 60,000 | |
| Paid for Dividends | (4,000) | |
| Net Cash Flow from Financing Activities | 54,000 | |
| Net Change in Cash | 72,900 | |
| Add: Beginning Cash Balance | 0 | |
| Ending Cash Balance | 72,900 | |
Table (14)
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