Souvenirs-On-The-Go Ltd. (Souvenirs-On-The-Go) is a mobile souvenir stand that moves around the city to be "where the action is." Souvenirs-On-The-Go was started this summer by Evan Shayne as a way to earn money in the summer months to help pay for his education.
Evan registered his corporation and contributed $15,000 of his savings to the company in exchange for shares. Souvenirs-On-The-Go borrowed $7,000 from Evan's parents to provide additional cash and purchased a used cart for $15,000 cash. If it's successful, Evan hopes to operate Souvenirs-On-The-Go for four years, until he graduates from university. Souvenirs-On-The-Go obtained a municipal vending licence for $500 that allows the cart to operate in designated areas around the city. The licence is valid for two years.
Over the summer, Souvenirs-On-The-Go sold $22,400 in souvenirs, all for cash. It purchased $12,200 worth of souvenirs, including $1,800 in souvenirs that weren't paid for by the end of the summer. Souvenirs-On-The-Go incurred $1,050 of maintenance and repairs on the cart and $3,100 of miscellaneous expenses during the summer. As of the end of the summer, the maintenance and repairs had been fully paid for and $500 of the miscellaneous expenses was still owed to the suppliers, and unsold souvenirs costing $2,200 remained. However, Evan thinks he will be able to sell them next sum mer. Souvenirs-On-The-Go also owes Evan's parents $600 in interest.
The summer is now over and Evan is back at school. Evan hasn't had a chance to evaluate the performance of Souvenirs-On-The-Go and he has asked you to prepare an income statement, balance sheet, and cash flow statement for the summer just ended. Use the financial statements you prepared to assess the financial situation of Souvenirs-On-The-Go. Your assessment should consider information from all of the financial statements. (To prepare the cash flow statement, identify Souvenirs-On-The Go cash transactions and organize them into the different categories [operating, in vesting, financing].)