Question

The following information is available for two different types of businesses for the Year 1 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 $90,000 from the bank to start the business. 2. Provided $50,000 of services to clients and collected $50,000 cash. 3. Paid salary expense of $32,000. Data for Sports Clothing 1. Borrowed $90,000 from the bank to start the business. 2. Purchased $50,000 inventory for cash. 3. Inventory costing $26,000 was sold for $50,000 cash. 4. Paid $8,000 cash for operating expenses. Required a. Prepare an income statement, balance sheet, and statement of cash flows for each of the companies.

Answer 1

Income Statement
Particulars	Hopkins	Sports	Particulars	Hopkins	Sports
Purchases	0	50000	Sales	50000	50000
Gross Profit ( Bal Fig.)	50000	14000	Closing stock	0	14000
	50000	64000	(50000-26000)	50000	64000
Salary expense	32000	0	Gross profit ( bal fig)	50000	14000
operating expense	0	8000
Net profit (bal fig)	18000	6000
	50000	14000		50000	14000
Balance Sheet
Particulars	Hopkins	Sports	Particulars	Hopkins	Sports
Capital	90000	90000	Inventory	0	14000
Profit & loss	18000	6000	Cash Balance	108000	82000
	108000	96000		108000	82000
Cash Flow Statement
Particulars	Hopkins	Sports
Cash received from borrowing	90000	90000
cash collected from sales	50000	50000
cash paid for salary and exp	-32000	-8000
cash paid for purchases		-50000
Closing cash balance	108000	82000