Question
Buster Brown just opened his own business as a sole proprietorship. During his first month in business, he recorded the following transactions: He purchased $50,000
Buster Brown just opened his own business as a sole proprietorship. During his first month in business, he recorded the following transactions:
- He purchased $50,000 of equipment, putting 15% down and borrowing the remainder.
- He was able to sell 1,000 units of product at an average price of $45 each. Half of the sales were on credit, none of which had been paid as of the end of the month.
- Cost of goods sold came to $21,000 and are related to the above sales.
- $36,000 worth of inventory was purchased in cash.
- All other expenses (including the interest from the loan) of $5,000, were paid in cash.
- Buster's personal tax rate is 34%. (You remembered that in sole proprietorships, income is paid at the individuals level). Taxes will be paid in a subsequent period.)
- Write out an Income Statement and fill in the two blanks below. Do not include $ signs on your answers. Add commas to all values that are in the thousands. 21000 would be written 21,000.
- The Gross Margin amount is
- The Net Income amount is :
2. What are the flows of cash in and out of the business during the month. Show inflows as positives and outflows as negatives (using - sign). Sum these values to arrive at a "Net Cash Flow" figure. Do not write the $ sign for your answers Add commas, to all your answers.
Cash Flows Purchase of Equipment: $
Proceeds from the Loan (hint: 15% was paid in cash) $
Proceeds from Sales:$
Purchase of Inventory:$
Other Expenses: $
Net Cash Flow (cash available to the company): $: |
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