Best Auto Parts Company was started on January 1, 2016, when the owners invested $120,000 cash in the business. During 2016, the company earned cash revenues of $80,000 and incurred cash expenses of $56,000. The company also paid cash distributions of $5,000.
Prepare a 2016 income statement, capital statement (statement of changes in equity), balance sheet, and statement of cash flows using each of the following assumptions.
a. Best Auto Parts is a sole proprietorship owned by J. Smart.
b. Best Auto Parts is a partnership with two partners, Beth Song and J. Smart. Song invested $72,000 and Smart invested $48,000 of the $120,000 cash that was used to start the business.
Smart was expected to assume the vast majority of the responsibility for operating the business. The partnership agreement called for Smart to receive 60 percent of the pro f its and Song the remaining 40 percent. With regard to the $5,000 distribution, Smart wit h drew $1,500 from the business and Song withdrew $3,500.
c. Best Auto Parts is a corporation. The owners were issued 10,000 shares of $10 par common stock when they invested the $120,000 cash in the business.