During year 1 UrbanThreads made the following trans

1. Issues common stock worth Rs. 50,00,000 (common stock)

2a. Purchases sports apparel inventory worth Rs. 7,00,000 on account(inventory)
2b. The inventory is purchased at the FOB shipping point. The responsible party had to pa
2c. Cash discount offered on the purchased inventory is 2/10, n/30. (cash discount)
3. Cleared the dues within 10 days on accounts payable. Value 5,00,000
4. UrbanThreads generates the sales revenue of Rs. 8,00,000 on account. The cost of goo
5. Partial payment recevied of Rs 5,00,000 in cash and 1,00,000 via credit card. Credit car
6. The company estimates and recognizes 2 percent of revenue (8,00,000) will be uncolle
7. Sells the inventory worth Rs. 1,00,000 at 2,00,000 (in cash). (recognizing revenue and C
8. Collects GST of 10% on the total sales. (8,00,000)
9. Remits GST in the next month. (sales tax)
10. The inventory sold is FOB destination point. The responsible party pays Rs 10,000 to d
11. UrbanThreads rents a warehouse/store for an year on May1 at the annual rent of Rs.
12. Pays a dividend of 10,000 to the shareholders. (Dividend)
13. Incurred selling and administrative expenses of Rs. 40,000. (expense)
14. Recorded accrued salaries of Rs 20,000. (salaries payable)
15. UrbanThreads pays income tax of 92,000.
the following transactions (for calender yr):

ount(inventory)
ponsible party had to pay 30,000 cash to deliver the merchandise. (Freight-in)
0. (cash discount)

ccount. The cost of goods sold is Rs 4,00,000. (recognizing revenue and COGS)
a credit card. Credit card company charges a 5 percent handling fee. (credit card handling)
,00,000) will be uncollectible. (Uncollectible allowance by percent of revenue method) (Bad debts)
cognizing revenue and COGS)

arty pays Rs 10,000 to deliver the merchandise. (Freight-out)

t the annual rent of Rs. 18000. (Prepaid item)
od) (Bad debts)
 Year 1
1 Cash from common stock 500,000
2a Inventory 700,000
2b Freight-in 30,000
2c cash discount 10,000
3 Clearing Accounts Receivable 490,000
4a Accounts Receivable for selling inventory 800,000
4b Recognizing the COGS 400,000
5 credit card expense = 5000 600,000
6 Uncollectible account expense 16,000
7a Sales Revenue 200,000
7b Recognizing the COGS 100,000
8 Sales Tax collected 80,000
9 Remit Sales Tax 80,000
10 Freight-out 10,000
11a Prepaid Rent 18,000
11b recognizing prepaid expense of 8 months 12,000
12 Dividend 10,000
13 S&A Expense 40,000
14 Salaries Payable 20,000
15 Income Tax 92,000
Total Balance
Total
 Assets
Cash Inv. Loan AR Prepaid Land Building
FA 500,000
700,000
OA (30,000)

OA (490,000)
800,000
(400,000)
OA 595,000 (600,000)
(16,000)
OA 200,000
(100,000)
OA 80,000
OA (80,000)
OA (10,000)
OA (18,000) 6,000

FA (10,000)
OA (40,000)

OA (92,000)
605,000 200,000 - 184,000 6,000 - -
995,
 Accrued Unbilled Liabilities
Salaries Unearne Owner's equity
Interest rev GST Payable AP d rev Com. Stock RE
500,000
700,000
(30,000)
(10,000) 10,000
(490,000)
800,000
(400,000)
(5,000)
(16,000)
200,000
(100,000)
80,000
(80,000)
(10,000)

(12,000)
(10,000)
(40,000)
20,000 (20,000)
(92,000)
- - - 20,000 200,000 - 500,000 275,000
995,000 `
Rev. Exp. Cash Flow
500,000

30,000 (30,000)
10,000
(490,000)
800,000
400,000
5,000 595,000
16,000
200,000 200,000
100,000
80,000
(80,000)
10,000 (10,000)
(18,000)
12,000
(10,000)
40,000 (40,000)
20,000
92,000 (92,000)
1,010,000 725,000 605,000
285,000
 Data
Income Statement
Particulars Year 1 (in Rs)
Sales 1,000,000
(-) Sales returns -
Net sales 1,000,000
(-) Cost of goods sold 500,000
Gross profit 500,000
Cash Discount Received 10,000
Total Income 510,000
Less:- Expenses
Freight 40,000
Credit Card Expenses 5,000
Prepaid Expenses 12,000
Selling & Administrative Expenses 40,000
Salary Payable 20,000
Unbilled Expenses 16,000
Income before income tax 377,000
Income tax expense 92,000
Net income 285,000

Statement of Retained Earnings

Particulars Year 1 (in Rs)
Retained earnings jan 1 -
Add net income 285,000
Total 285,000
Less Dividends:
On Preference capital -
On Equity capital 10,000
Retained earnings dec 31 275,000

Balance sheet
Particulars Year 1 (in Rs)
Cash 605,000
Accounts receivable 184,000
Stock 200,000
Prepaid expenses 6,000
Accounts payable 200,000
Salaries payable 20,000
Equity share capital Rs 10 par 500,000
Retained earnings 275,000

Market price per equity share 15

 Statement of Changes in Stockholders' Equity Year 1 (in Rs)

Beginning Common Stock -

Plus: Common Stock Issued 500,000
Ending Common Stock 500,000
Beginning Retained Earnings -
Plus: Net income 285,000
Less: Dividends 10,000
Ending Retained Earnings 275,000
Total Stockholders's Equity 775,000

Cash Flow Statement

Year 1 Amount
Cash Flow from Operating Activities
Freight in (30,000)
Clearing a/c receivable (490,000)
Partial revenue from sale of merchandise 595,000
Sales revenue 200,000
Sales tax collected 80,000
Sales tax remitted (80,000)
Freight out (10,000)
Prepaid rent (18,000)
S&A expense (40,000)
Income tax (92,000)
Total 115,000
Cash Flow from Investing Activities
Dividend (10,000)
Cash Flow from Financing Activities
Cash from issue of common stock 500,000
Total 605,000
 Indirect Method
Cash Flow Statement (Year 1)
Particulars Details
Cash Flow From Operating Activities
Net Profit as Per Profit & Loss Account ₹ 275,000.00
Add: - Tax Paid ₹ 92,000.00
Net Profit Before Tax & Extraordinary Items ₹ 367,000.00
Adjustment for Non -Cash & Non Operating Items
+ Dividend Paid ₹ 10,000.00
+ Bad Debts ₹ 16,000.00
Operating Profit Before Working Capital Changes ₹ 393,000.00
+ Decrease in Current Assets & Increase in Current Liabilties
Increase in Account Payable ₹ 200,000.00
Increase in O/s Salaries ₹ 20,000.00

- Increase in Current Assets & Decrease in Current Liabilties

Increase in Inventory ₹ -200,000.00
Increase in Accounts Recieveable ₹ -200,000.00
Prepaid expense ₹ -6,000.00
Cash Generated From Operations ₹ 207,000.00
- Income Tax Paid ₹ -92,000.00
Cash Flow Before Extraordinary Items ₹ 115,000.00
+/- Extraordinary Items

Net Cash From or Used in Operating Activities ₹ 115,000.00

Cash Flow From Investing Activities

Net Cash From or Used in Investing Activities ₹ 0.00

Cash Flow From Financing Activities
Issue of Common Stock ₹ 500,000.00
Dividend Paid ₹ -10,000.00

Net Cash From or Used in Financing Activities ₹ 490,000.00

Net Change in Cash & Cash Equivalents ₹ 605,000.00
Cash & Cash Equivalents at Beginning of the Year ₹ 0.00
Cash & Cash Equivalents at End of the Year ₹ 605,000.00
 Direct Method
Cash Flow Statement (Year 1)
Particulars Details
Cash Flow From Operating Activities (Direct Method)

Add:-
Partial revenue from sale of merchandise ₹ 595,000.00
Sales revenue ₹ 200,000.00
Sales tax collected ₹ 80,000.00
Less:-
Sales tax remitted -₹ 80,000.00
Freight out -₹ 10,000.00
Prepaid rent -₹ 18,000.00
S&A expense -₹ 40,000.00
Income tax -₹ 92,000.00
Freight in -₹ 30,000.00
Clearing a/c receivable -₹ 490,000.00

Net Cash From or Used in Operating Activities ₹ 115,000.00

Cash Flow From Investing Activities

Net Cash From or Used in Investing Activities ₹ 0.00

Cash Flow From Financing Activities
Issue of Common Stock ₹ 500,000.00
Dividend Paid ₹ -10,000.00

Net Cash From or Used in Financing Activities ₹ 490,000.00

Net Change in Cash & Cash Equivalents ₹ 605,000.00
Cash & Cash Equivalents at Beginning of the Year ₹ 0.00
Cash & Cash Equivalents at End of the Year ₹ 605,000.00