Question

Cascade Company was started on January 1, Year 1, when it acquired $161,000 cash from the owners. During Year 1, the company earned cash revenues of $87,500 and incurred cash expenses of $61,200. The company also paid cash distributions of $11,500.

Required
Prepare a Year 1 income statement, capital statement (statement of changes in equity), balance sheet, and statement of cash flows under each of the following assumptions. (Consider each assumption separately.)

c. Cascade is a corporation. It issued 10,000 shares of $11 par common stock for $161,000 cash to start the business. (Amounts to be deducted should be indicated with minus sign.)

Answer 1

Income statement for Year 1:

Description	Amount
Revenues	$87500
Less: Expenses	($61200)
Net income	$26300

Statement of changes in equity:

Description	Amount
Beginning common stock (10000 * $11)	$110000
Add: Paid in capital in excess of par	$51000
Add: Net income	$26300
Less: Dividends paid	- $11500
Ending stockholder's equity	$175800

Statement of cash flows:

Description	Amount	Amount
Operating activities:
Net income	$26300
Net cash flows from operating activities		$26300
Investing activities:
Net cash flows from investing activities		$0
Financing activities:
Dividends paid	-$11500
Common stock issued	$110000
Proceeds from paid in capital in excess of par	$51000
Net cash flows from financing activities		$149500
Net increase in cash		$175800
Beginning cash balance		$0
Ending cash balance		$175800

Balance sheet:

Description	Amount
Assets:
Cash	$175800
Total assets	$175800
Liabilities & stockholder's equity:
Stockholder's equity	$175800
Total liabilities & stockholder's equity	$175800