The following information is available for two different types of businesses for the 2020 accounting period Pete A CPAs is a service business that provides accounting services to small businesses West Palm Inc is a merchandising business that sells sports clothing, trophies and medals to college students Data for West Palm Inc Borrowed $250,000 from the bank to start the business 2 Purchased $160,000 inventory for cash 3 Inventory costing $92,000 was sold for $150,000 cash hint transaction 3 is 2 transactions Think 3a and 3b 4 Paid $21,000 cash for operating expenses Data for Pete A CPAs Borrowed $250,000 from the bank to start the business Provided and earned $175,000 of services to customers and collected $175,000 cash Paid salary expense of $125,000 Required A Prepare an income statement, a balance sheet, and a statement of cash flows for each of the companies This is different than completing a horizontal model A horizontal model can help organize the transactions B Why does the CPA firm not compute gross margin on its income statement C Which of the two businesses would have product costs or cost of goods Why D Compare the assets of both companies What assets do they have in common What assets are different Why

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The following information is available for two different types of businesses for the 2020 accounting period. Pete A CPAs is a service business that provides

The following information is available for two different types of businesses for the 2020 accounting period. Pete A CPAs is a service business that provides accounting services to small businesses. West Palm Inc is a merchandising business that sells sports clothing, trophies and medals to college students.

Data for West Palm Inc

Borrowed $250,000 from the bank to start the business

2. Purchased $160,000 inventory for cash.

3. Inventory costing $92,000 was sold for $150,000 cash. hint : transaction 3 is 2 transactions. Think 3a and 3b

4. Paid $21,000 cash for operating expenses.

Data for Pete A CPAs

Borrowed $250,000 from the bank to start the business.
Provided and earned $175,000 of services to customers and collected $175,000 cash.
Paid salary expense of $125,000

Required

A. Prepare an income statement, a balance sheet, and a statement of cash flows for each of the companies. This is different than completing a horizontal model. A horizontal model can help organize the transactions.

B. Why does the CPA firm not compute gross margin on its income statement? C. Which of the two businesses would have product costs or cost of goods? Why? D. Compare the assets of both companies. What assets do they have in common? What assets are different? Why?