Exercise 3-2

Lewis CPAs record events in the accounting equation.

Event No.	ASSETS	=	LIABILITIES	+	STOCKHOLDERS EQUITY
	Cash	=	Notes Payable	+	Retained Earnings	Acct. Title for RE
1.
2.
3.
Ending Balances, 12/31/14

Casual Clothing record events in the accounting equation.

Event No.	ASSETS		=	LIABILITIES	+	STOCKHOLDERS EQUITY
	Cash	Inventory	=	Notes Payable	+	Retained Earnings	Account Title for RE
1.
2.
3a.
3b.
4.
Ending Balances, 12/31/14

a) Prepare an income statement and a balance sheet for each of the 2 companies.

b) Which of the two busineses would have product costs? Why?

c) Why does Lewis CPAs not compute gross profit (margin) on its income statement?

d) Compare assets of both companies. What assets do they have in common? What assets are different? Why?

It's one question

Comparing a merchandising company with a service company lowing information is available for two different types of businesses for the 2014 Exercise 3-2 accounting period. Lewis CPAs is a service business that provides accounting services to small businesses. Casual Clothing is a merchandising business that sells college students. sports clothing to Data for Lewis CPAs Borrowed $80,000 from the bank to start the business. Provided $60,000 of services to clients and collected S60,000 cash. Paid salary expense of $40,000. 1. 2. 3