Problem 3-1 30 points The following information is available for two different types of businesses for the 2020 accounting period. Pliny CPAs is a service business that provides accounting services to small businesses. TElder is a merchandising business that sells sports clothing, trophies and medals to college students. Data for TElder 1. Borrowed $175,000 from the bank to start the business. 2. Purchased $112,000 inventory for cash. 3. Inventory costing $64,400 was sold for $105,000 cash. 4. Paid $14,700 cash for operating expenses. Data for Pliny CPAs 1. Borrowed $175,000 from the bank to start the business. 2. Provided $122,500 of services to customers and collected 3. Paid salary expense of $87,500 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? Which of the two businesses would have product costs or cost of goods? Why? Compare the assets of both companies. What assets do they have in common? What assets are different? Why? 9-? $122,500 cash