Montana Company was started on January 1, 2013, when it acquired $50,000 cash from the owners. During 2013, the company earned cash revenues of $25,000 and incurred cash expenses of $16,200. The company also paid cash distributions of $5,000.
Required:
Prepare a 2013 income statement, capital statement (statement of changes in equity), balance sheet, and statement of cash flows under each of the following assumptions. (Consider each assumption separately.)
a. Montana is a sole proprietorship owned by Steve Montana.
b. Montana is a partnership with two partners, Steve Montana and Jane Montana. Steve Montana invested $30,000 and Jane Montana invested $20,000 of the $50,000 cash that was used to start the business. Jane was expected to assume the vast majority of the responsibility for operating the business. The partnership agreement called for Jane to receive 60 percent of the profits and Steve to get the remaining 40 percent. With regard to the $5,000 distribution, Jane withdrew $3,000 from the business and Steve $2,000.
c. Montana is a corporation. It issued 5,000 shares of $5 par common stock for $50,000 cash to start the business.