Effect of business structure on financial statements
Calloway Company was started on January 1, 2011, when it acquired $40,000 cash from the owners. During 2011, the company earned cash revenues of $18,000 and incurred cash expenses of $12,500. The company also paid cash distributions of $3,000.
Required
Prepare a 2011 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.)
a. Calloway is a sole proprietorship owned by Macy Calloway.
b. Calloway is a partnership with two partners, Macy Calloway and Artie Calloway. Macy Calloway invested $25,000 and Artie Calloway invested $15,000 of the $40,000 cash that was used to start the business. A. Calloway was expected to assume the vast majority of the responsibility for operating the business. The partnership agreement called for A. Calloway to receive 60 percent of the profits and M. Calloway to get the remaining 40 percent. With regard to the $3,000 distribution. A. Calloway withdrew $1,200 from the business and M. Calloway withdrew $1,800.
c. Calloway is a corporation. It issued 5,000 shares of $5 par common stock for $40,000 cash to start the business.
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