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The following information is available for two different types of businesses for the 2016 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.
Prepare an income statement, balance sheet, and statement of cash flows for each of the companies.

User Paul Wintz
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1 Answer

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Answer:

Hopkins CPAs and Sports Clothing

Hopkins CPAs:

Income Statement

Service Revenue $50,000

Salaries expense 32,000

Net Income $18,000

Balance Sheet

Cash $108,000

Total assets $108,000

Bank Loan $90,000

Net Income 18,000

Total liabilities +

equity $108,000

Statement of Cash Flow

Cash from operations:

Net income $18,000

Change in working

capital $90,000

Net operating cash $108,000

Reconciliation with cash:

Cash balance $108,000

Sports Clothing:

Income Statement

Sales Revenue $50,000

Cost of goods sold 26,000

Operating expense 8,000 34,000

Net income $16,000

Balance Sheet

Cash $82,000

Inventory 24,000

Total assets $106,000

Bank Loan $90,000

Net Income 16,000

Total liabilities +

equity $106,000

Statement of Cash Flow

Cash from operations:

Net income $16,000

Change in working

capital:

Bank $90,000

Inventory (24,000)

Net operating cash $82,000

Reconciliation with cash:

Cash balance $82,000

Step-by-step explanation:

a) Data and Calculations:

Hopkins CPAs

Cash account:

Bank loan $90,000

Service revenue 50,000

Salaries expense (32,000)

Balance = $108,000

Trial balance

Cash $108,000

Bank Loan $90,000

Service Revenue 50,000

Salaries expense 32,000

Totals $140,000 $140,000

Sports Clothing:

Cash account:

Bank loan $90,000

Inventory (50,000)

Sales revenue 50,000

Operating expense (8,000)

Balance = $82,000

Trial balance

Cash $82,000

Bank Loan $90,000

Inventory 24,000

Cost of goods sold 26,000

Sales Revenue 50,000

Operating expense 8,000

Totals $140,000 $140,000

User Matteodv
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