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they are related to each other
Income Statement The Income Statement provides a summary of revenues and expenses over a period of time, such as a month, quarter, or year. It provides information about the profitability of a business during the period specified. 1. The following is a cash basis income statement for Sample Cafe's first month of operation. Calculate the total expenses and net income for the business. Sample Cafe Income Statement, Cash Basis Month Ended January 31, 20xx Note Value Item $40,000 Excludes $2,200 in receipts not yet deposited. $0 Purchased last month for $12,000 (5-year life). $600 Premium for whole year. Revenue Equipment Insurance $4,500 Includes $2,500 in rent and utility deposits. $2,300 Includes $100 worth thrown away. $1,600 $700 still in inventory. $14,800 Owe $2,400 in taxes. Rent and Utilities Coffee Purchased Cups Purchased Payroll $200 Paid mid-month. Interest on Loan Advertising/Promotion $12,000 $3,000 each week. Total Expenses Net Income 2. Use the notes from the cash basis income statement for Sample Cafe in question 1 to redo it on an accrual basis. Be sure to break out cost of goods sold from the other expenses, and include a line item for the gross margin. Continued on next page... Balance Sheet The balance sheet provides a snapshot of the financial condition of a company at the end of an accounting period. It shows the assets, liabilities, and owner's equity in the business. asset (A), contra asset (C), liability (L), or 1. Identify each of the following as an equity (E) Category Category Item Item Paid-in Capital Cash Prepaid Insurance Depreciation Retained Earnings Equipment Taxes Owed Inventory Utility Deposit Loans 2. In early December, Alice and Bob decided to open the Sample Cafe with $15,000 of their own money and $20,000 borrowed from a friend. They have spent $12,000 on equipment and furniture, and they have purchased $3,000 worth of inventory. Having put down a $2,500 deposit for a location on Main St., they will pay the first month's rent when they open their doors on January 1. Create a balance sheet showing the financial position of the Sample Cafe as of December 31st . The Sample Cafe nearly broke even in the first month of business. Below is a summary of revenue and expenses for January. Starting with the balance sheet from December 31, use the results to create an updated balance sheet for January 31s Sample Cafe Income Statement Summary Month Ended January 31, 20xx Note Value Item $30,000 n/a $3,500 $1,000 from inventory. $27,000 Includes equipment depreciation of $200. ($500) n/a Revenue Cost of Goods Sold Total Expenses Net Income movt nnao Student or Team Name: 4. What is the book value of the equipment at the end of January? Alice and Bob had a small loss for the month. What happened to cash? Explain. 5
