Problem - Effect of business structure on financial statements
Upton Company was started on January 1, 2011; the company earned cash revenues of 120,000 and incurred cash expenses of $82,000. The company also paid cash distributions of $15,000.
Prepare a 2011 income statement, capital statement (statement of changes in equity), balance sheet, and statement of cash flows using each of the following assumptions, (consider each assumption separately)
a. Upton is a sole proprietorship owned by J. Upton.
b. Upton is a partnership with two partners, Dan and Nancy Upton. Dan invested $100,000 and Nancy invested $60,000 of the 160,000 cash that was used to start the business. Nancy was expected to assume the vast majority of the responsibility for operating the business. The partnership agreement called for Nancy to receive 60% of the profits and Dan the remaining 40%. With regard to the 15,000 distribution, Nancy withdrew $6,000 from the business and Dan withdrew $9,000.
c. Upton is a corporation. The owners were issued 10,000 shares of $10 par common stock when they invested the 160,000 cash in the business.