EXHIBIT 2.5 Income Statement for Team Shirts Team Shirts for February Income Statement This is the income statement for For the Month Ended February 28, 2010 the second month of business for Team Shirts. Revenue Sales ..... $1,850 TEAM Expenses SHIRTS Cost of goods sold . $740 Advertising expense 150 Insurance expense 25 Total expenses . ... . 15 Net income $ 915 The statement of changes in shareholder's equity is prepared next (shown in Exhibit 2.6). EXHIBIT 2.6 Statement of Changes in Team Shirts Shareholder's Equity for Statement of Changes in Shareholder's Equity Team Shirts for February For the Month Ended February 28, 2010 The statement of changes in shareholder's equity shows how all of the equity accounts have changed during the month. Beginning common stock .. . . . .. .. .. . ....... .....14141414 85,000 Common stock issued during the month . 0 Ending common stock . . . . . . .. .. . $5,000 Beginning retained earnings . $ 385 TEAM Net income for the month 9:35 SHIRTS Dividends declared . . . . . .. . .. Ending retained earnings . . . .. .. 1.220 Total shareholder's equity $6.220EXHIBIT 2.7 Team Shirts Balance Sheet for Team Balance Sheet Shirts at February 28, 2010 At February 28, 2010 The balance sheet at February 28 has incorporated the new retained Assets Liabilities and Shareholder's Equity earnings balance. Cash . . .......... . . . . ...... $6.696 Accounts payable $ 800 Accounts receivable ..... ... 150 Other payables . . . . . 50 Inventory . ... . . . . . . . . ...... 100 Prepaid insurance 125 Common stock 5.000 TEAM Retained earnings 1,220 SHIRTS Total liabilities and Total assets $7.070 shareholder's equity $7.070EXHIBIT 2.8 Team Shirts Statement of Cash Flows Statement of Cash Flows for Team Shirts for For the Month Ended February 28, 2010 February The statement of cash flows provides details about the changes to cash during the period. Cash from operating activities Cash collected from customers . . . $1,700 Cash paid for advertising . . . . . ..... (100) Cash paid for insurance . ... . . (150) Net cash from operations . .. . . . . . $1.450 TEAM SHIRTS Cash from investing activities 0 Cash from financing activities Cash paid for dividends ...still $ (100 Net cash from financing activities . . . . .. .. .. .. .... .! ! ! ! ! ! ! ! !! ! ! (100) Net increase in cash . . . . . . $1,350 Add beginning cash balance . .. 5,345 Ending cash balance . . . . . $6,695Group Assignment Look at the four basic financial statements for Team Shirts in Exhibits 2.5, 2.6, 2.7, and 2.8. Work together to find numbers that show the links between the various financial statements. Then, write a brief explanation of how the statements relate to each other