looming Flower Company was started in Year 1 when it acquired $60,000 cash from the issue of common stock. The

Question

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.)

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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

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looming Flower Company was started in Year 1 when it acquired $60,000 cash from the issue of common stock

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Archived Solution

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

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