A-1

Cascade Company was started on 1 January, Year 1, when it acquired $167,000 cash from the owners. During Year 2, the company earned cash revenues of $85,900 and incurred cash expenses of $66,100. The company also paid cash distributions of $9,000. Required Prepare a Year 1 income statement, capital statement (statement of changes in equity), balance sheet, and statement of cash flows under each of the following assumptions. (Could you consider each assumption separately?)

Required

a-1. Could you prepare a Year 1 income statement, please? a-2. Could you prepare a Year 1 capital statement (statement of changes in equity)? a-3. Prepare a Year 1 balance sheet. a-4. Could you prepare a Year 1 statement of cash flows?

A-2

Assume Cascade is a sole proprietorship owned by Carl Cascade. b-1. Prepare a Year 1 income statement. b-2. Prepare a Year 1 capital statement (statement of changes in equity). b-3. Prepare a Year 1 balance sheet. b-4. Prepare a Year 1 statement of cash flows.

Assume Cascade is a partnership with two partners, Carl Cascade and Beth Cascade. Carl Cascade invested $58,450 and Beth Cascade invested $108,550 of the $167,000 cash that was used to start the business. Beth was expected to assume the vast majority of the responsibility for operating the business. The partnership agreement called for Beth to receive 65 percent of the profits and Carl to get the remaining 35 percent. With regard to the $9,000 distribution, Beth withdrew $2,700 from the business and Carl withdrew $6,300.

A-3

Eastport Incorporated was organized on June 5, Year 1. It was authorized to issue 370,000 shares of $9 par common stock and 60,000 shares of 4 percent cumulative class A preferred stock. The class A stock had a stated value of $25 per share. The following stock transactions pertain to Eastport Incorporated:

1. Issued 25,000 shares of common stock for $14 per share.
2. Issued 14,000 shares of the class A preferred stock for $30 per share.
3. Issued 49,000 shares of common stock for $17 per share.

Required a. Prepare general journal entries for these transactions. b. Prepare the stockholders equity section of the balance sheet immediately after these transactions.