Answer Happy

Gail's Greenhouse, Inc., a small retail store that sells houseplants, started business on
January 1, 2019. At the end of January 2019, the following information was available:

Sales of plants for cash $75,000
Sales of plants for credit (not yet collected) 15,000
Cost of plants which were sold and paid for during January 45,000
Expenses during January incurred, and paid for, during January unless otherwise noted:
Salaries $5,000
Telephone 250
Office supplies (all used) 150
Electricity 300
Rent on the store for January, 2019 (will not be paid
until February, 2019) 1,000
A. Using the above information, prepare the income statement for Gail's Greenhouse for the
month ended January 31, 2019.
B. What is the amount of cash flows provided by operating activities to be presented on the
statement of cash flows?
Answer:
A.
Gail's Greenhouse, Inc.
Income Statement
For the Month Ended January 31, 2019
Revenue ($75,000 + $15,000) $90,000
Expenses:
Cost of goods sold $45,000
Salaries 5,000
Telephone 250
Office supplies 150
Electricity 300
Rent 1,000
Total expenses 51,700
Net income $38,300
B. $38,300 - 15,000 + 1,000 = $24,300; or, alternatively, $75,000 - 45,000 - 5,000 - 250 - 150 -
300 = $24,300
Difficulty: 3 Hard
Topic: Distinguish different financial statements
Learning Objective: 01-01 Recognize the information conveyed in each of the four basic
financial statements and the way that it is used by different decision makers (investors, creditors,
and managers).