Problem 8-18 Effect of business structure on financial statements
Upton Company was started on January 1, 2011, when the owners invested $
160,000 cash in the business. During 2011, the company earned cash
revenues of $ 120,000 and incurred cash expenses of $ 82,000. The
company also paid cash distributions of $ 15,000.
Required
Prepare a 2011 income statement, capital statement ( statement of
changes in equity), balance sheet, and statement of cash flows using
each of the following assumptions. ( Consider each assumption
separately.)
a. Upton is a sole proprietorship owned by J. Upton.
b. Upton is a partnership with two partners, Dan and Nancy Upton. Dan
invested $ 100,000 and Nancy invested $ 60,000 of the $ 160,000 cash
that was used to start the business. Nancy was expected to assume the
vast majority of the responsibility for operating the business. The
partnership agreement called for Nancy to receive 60 percent of the
profits and Dan the remaining 40 percent. With regard to the $ 15,000
distribution, Nancy withdrew $ 6,000 from the business and Dan withdrew $
9,000.
c. Upton is a corporation. The owners were issued 10,000 shares of $ 10
par common stock when they invested the $ 160,000 cash in the business.
Click here for the solution: Upton Company was started on January 1, 2011, when the owners invested $160,000 cash in the business
