Question 1.

This case study involves a small restaurant named "Sunset Bistro." You are provided with a trial balance and some additional information. Your task is to prepare financial statements and calculate financial ratios.

Case Study: Sunset Bistro

Trial Balance as of December 31, 2023:

	Debit ($)	Credit ($)
Cash	$12,000	-
Accounts Receivable	$3,000	-
Inventory	$4,500	-
Prepaid Rent	$2,000	-
Restaurant Equipment	$22,500	-
Accounts Payable	-	$6,000
Bank Loan	-	$8,800
Common Stock(Capital)	-	$13,500
Sales Revenue	-	$48,000
Cost of Goods Sold	$16,000	-
Rent Expense	$1,500	-
Wages Expense	$1,200	-
Utilities Expense	$1,000	-
Interest Expense	$800	-
Income Tax Expense	$1,500	-

• Prepare an income statement for the year ended December 31, 2023.(25)
• Prepare a balance sheet as of December 31, 2023. (25)

Answer the following questions

(2) Double Entry (15)

provide the corresponding double entry accounting entry, which typically includes a debit and a credit, expressed in clearer terms.

You invest $10,000 of your personal savings into the business.

You purchase $5,000 worth of inventory on credit from a supplier.

You sell $7,000 worth of electronics for cash.

You pay $4,000 in rent for the store space.

You purchase office supplies for $500 with cash.

You receive a $2,000 loan from a friend for the business.

You pay $1,200 in wages to your part-time employee.

(3) What is the normal balance(which side) of an asset account?(2)

(4) What is an operating income on the income statement?(3)

(5) What is the difference between cash flow and net income?(5)

(6) What happens when a specific bad debt is later recovered?(5)

(7) Cash Flow (20)

categorize it into a cash flow category (such as operating, investing, or financing) and specify whether it represents an inflow or outflow of cash.

1. Sold goods for cash: $5,000
2. Paid rent for the month: $1,200
3. Purchased new equipment and paid in cash: $3,500
4. Received a loan from the bank: $10,000
5. Paid employees' salaries: $2,500
6. Received payment from a customer for a previous sale: $800