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Homework answers / question archive / looming Flower Company was started in Year 1 when it acquired $60,000 cash from the issue of common stock
looming Flower Company was started in Year 1 when it acquired $60,000 cash from the issue of common stock. The following data summarize the company's first three years' operating activities. Assume that all transactions were cash transactions.
| 1 | 2 | 3 | ||||||
| Purchases of inventory | $ | 50,000 | $ | 60,000 | $ | 85,000 | ||
| Sales | 68,000 | 85,000 | 130,000 | |||||
| Cost of goods sold | 34,000 | 43,000 | 71,000 | |||||
| Selling and administrative expenses | 29,000 | 35,000 | 42,000 | |||||
Required
Prepare an income statement (use multistep format) and balance sheet for each fiscal year. (Hint: Record the transaction data for each accounting period in the accounting equation before preparing the statements for that year.)
| BLOOMING FLOWER COMPANY | |||
| Income Statements | |||
| For the Year Ended December 31 | |||
| 1 | 2 | 3 | |
| Sales | 68000 | 85000 | 130000 |
| Cost of goods sold | 34000 | 43000 | 71000 |
| Gross Profit | 34000 | 42000 | 59000 |
| Operating expenses: | |||
| Selling and administrative expenses | 29000 | 35000 | 42000 |
| Net profit | 5000 | 7000 | 17000 |
| BLOOMING FLOWER COMPANY | |||
| Balance Sheets | |||
| As of Year Ended December 31 | |||
| 1 | 2 | 3 | |
| Assets | |||
| Cash | 49000 | 39000 | 42000 |
| Inventory | 16000 | 33000 | 47000 |
| Total Assets | 65000 | 72000 | 89000 |
| Liabilities: | |||
| Stockholder's Equity: | |||
| Common Stock | 60000 | 60000 | 60000 |
| Retained Earnings | 5000 | 12000 | 29000 |
| Total Stockholders' equity | 65000 | 72000 | 89000 |
| Total liabilities and stockholder's equity | 65000 | 72000 | 89000 |
Workings:
Year 1:
Cash = Issue of Common Stock + Sales - Purchase of Inventory - Selling and Administrative Expenses
= $60,000 + $68,000 - $50,000 - $29,000
Cash = $49,000
Inventory = Purchases of Inventory - Cost of Goods Sold
= $50,000 - $34,000
Inventory = $16,000
Retained Earnings = Net Operating Income
Retained Earnings = $5,000
Year 2:
Cash = Beginning Cash + Sales - Purchase of Inventory - Selling and Administrative Expenses
= $49,000 + $85,000 - $60,000 - $35,000
Cash = $39,000
Inventory = Beginning Inventory + Purchases of Inventory - Cost of Goods Sold
= $16,000 + $60,000 - $43,000
Inventory = $33,000
Retained Earnings = Beginning Retained Earnings + Net Operating Income
= $5,000 + $7,000
Retained Earnings = $12,000
Year 3:
Cash = Beginning Cash + Sales - Purchase of Inventory - Selling and Administrative Expenses
= $39,000 + $130,000 - $85,000 - $42,000
Cash = $42,000
Inventory = Beginning Inventory + Purchases of Inventory - Cost of Goods Sold
= $33,000 + $85,000 - $71,000
Inventory = $47,000
Retained Earnings = Beginning Retained Earnings + Net Operating Income
= $12,000 + $17,000
Retained Earnings = $29,000
