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Financial Statements

A. Company is established with a cash investment of $100,000.
b. Equipment of $60,000 is purchased, financed in part with long term debt of $30,000.
c. Inventory is purchased for $60,000.
d. Cash sales of $140,000 are generated.
e. Cost of goods sold total $50,000.
f. Salary expense is $40,000.
g. Occupancy expense is $20,000.
h. Additional inventory of $60,000 is purchased.
i. Equipment is depreciated equally over five years
j. Borrowing costs are 10%

Solution Preview

For each of the transactions let us write the impact on the income statement or balance sheet

a. Company is established with a cash investment of $100,000. - balance sheet - cash increase and owners equity increase

b. Equipment of $60,000 is purchased, financed in part with long term debt of $30,000. - balance sheet - cash decreased 30,000 equipment increase 60,000 and long term debt increase 30,000

c. Inventory is purchased for $60,000. - balance sheet - inventory increase 60,000 and cash decreased 60,000

d. Cash sales of $140,000 are generated. - Income statement and balance sheet - cash increased 140,000 and revenues increase 140,000

e. Cost of goods sold total $50,000. - Income statement and balance sheet - inventory decrease 50,000 and cost of goods sold increase 50,000

f. Salary expense is $40,000. - Income statement and balance sheet - cash decrease 40,000 and salary expense increase 40,000

g. Occupancy expense is $20,000. - - ...

Solution Summary

The solution explains how to prepare the financial statements given a set of transactions.

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