Name: _______________________________ Student No. _____

PART I: Cash Basis Statements

In December 2018, Amanda and Teresa acquired B-ME, Inc. and began operating the company on

January 1, 2019. The balance sheet as of December, 31 2018 was: B-ME, Inc.

BALANCE SHEET

As of December 31, 2018

ASSETS

Current Assets:

Cash

Inventory - Supplies Long-term Assets:

Building & Equipment

Land Total Assets LIABILITIES & EQUITY 5,000

18,000

23,000 200,000

40,000

240,000 263,000 B-ME, Inc.

CASH RECEIPTS & EXPENDITURES FOR 2019

Cash Receipts:

Sales

Total Cash Receipts 221,800

221,800 Cash Disbursements:

Wages & Salaries Expense

Heat, Light & Power Expenses

More supplies (i.e. more Inventory)

Selling & Administrative Expenses

Payment on Loan (Principal)

Interest Expense on Loan

Total Cash Disbursements 75,500

6,000

42,600

18,275

13,000

3,150

158,525 Increase in Cash 63,275 Current Liabilities:

Accounts Payable

Long-term Liabilities:

Bank Loan

Equity:

Common Stock

Retained Earnings Total Liabilities & Equity - 63,000 200,000

0

200,000

263,000 At the end of 2019, Amanda and Teresa collected

all their receipts/paid invoices and prepared

their cash receipts & expenditures for 2018 (see

chart) and posted them in Quick Books. They

just hired Ryan as their new bookkeeper and

asked him to prepare a Balance Sheet and

Income Statement for 2018.

Question: What should Ryan's Cash Basis

Balance Sheet and Income Statement for 2019

look like?

Remember: they made no accruals...just cash

entries. Name: _________________________ Student No. ________ YOUR ANSWER TO PART I: Cash Basis Financials for 2019 B-ME, Inc.

BALANCE SHEET

As of December 31, 2019

(Cash Basis)

ASSETS

Current Assets:

Cash

Inventory - Supplies

Total Current Assets

Long-term Assets:

Building & Equipment

Land

Total Long-term Assets Total Assets

B-ME, Inc.

INCOME STATEMENT

For the Year Ended December 31, 2019

(Cash Basis)

Sales

Expenses: Total Expenses

NET INCOME LIABILITIES & EQUITY

Current Liabilities:

Accounts Payable

Long-term Liabilities:

Bank Loan

Equity:

Common Stock

Retained Earnings

Total Equity

Total Liabilities & Equity 368,875 PART II: Prepare Year-end Accruals for 2019

Kristie, Amamda, Teresa & Ryan went to Tom, their Accountant, and asked him to review the

financials. Tom said..."Looks good, but there's no Cost of Goods Sold (i.e., Supplies used) and

you need some accruals to get a "true picture" of 2019. After further discussion, they

determined five (5) more journal entries would be needed. They are:

1. At the end of 2019, B-ME owed $18,875 to vendors for the purchase of

supplies for which they had received (in addition to supplies already paid

for) but were purchased on credit (plan to pay in the next 30 days).

2. Depreciation Expense on the Buildings and Equipment was $10,000 for

2019.

3. At the end of 2019, B-ME was owed $15,000 for services by customers who

had not yet paid. They expected all of these customers would pay within

30 days (i.e., January 2019). 4. After taking inventory of supplies at the end of 2019, they determined that

$60,250 were used (i.e., Cost of Goods Sold) in 2019.

5. Tom did some calculations and told them they would owe $14,203 in taxes

for 2019. Question: What should their journal entries for 2019 be? PART III: Prepare Accrual Basis Statements for 2019

Together, they realized they now have enough information to prepare an accrual based Balance

Sheet and Income Statement for 2019. Once again, they asked Ryan to prepare the financials. Question: What should Ryan's Accrual Basis Balance Sheet and Income

Statement for 2019 look like? PART IV: Prepare a Cash Flow Statement for 2019

After a review of the Balance Sheet and Income Statement, Tom asked Kristie & Leah "Where's

the Cash Flow Statement?". Again, they went to Ryan and he said "I'll do it, but it'll cost you".

The next day, Ryan began putting one together. Question: What should Ryan's Statement of Cash Flow for 2019 look

like? Name: __________________________ Student No. ________ YOUR ANSWER TO PART II: Year-end Accruals for 2019

B-ME, Inc.

JE # Journal Entry Debit Credit 1. 2. 3. 4. 5. Total Debits = Total Credits 118,328 (118,328) Name: _________________________ Student No. ________ YOUR ANSWER TO PART III: Prepare 2019 Accrual Basis Statements

B-ME, Inc.

BALANCE SHEET

As of December 31, 2019

(Accrual Basis)

ASSETS LIABILITIES & EQUITY Current Assets:

Cash Current Liabilities:

Accounts Payable Inventory - Supplies

Total Current Assets Total Current Liabilities

Long-term Liabilities:

Bank Loan

Total Liabilities Long-term Assets:

Building & Equipment

Less:

Land

Total Long-term Assets

Total Assets

INCOME STATEMENT

For the Year Ended December 31, 2019

(Accrual Basis)

Sales

Expenses: Total Expenses

NET INCOME Equity:

Common Stock

Retained Earnings

Total Equity

Total Liabilities & Equity 332,500 Name: _______________________________ Student No. ________ YOUR ANSWER TO PART IV: Prepare a 2019 Statement of Cash Flow

B-ME, Inc.

STATEMENT OF CASH FLOW

For the Year Ended December 31, 2019 Operating Cash Flows:

A Net Income 49,422 Plus:

B

C

D Subtotal (B+C+D) E Minus:

F

G

H

I Subtotal (F+G)

Total Operating Cash Flow (A+E+H) Investing Cash Flows:

J Financing Cash Flows:

K

L Change in Cash (I+J+K) M Cash Beginning Balance @ Dec 31,2018

N Cash Ending Balance @ Dec 31, 2019 (L+M) 5,000