Answer:
1. Determine the amount of owner’s equity (Cecil Jameson’s capital) as of July 1, 2007.
equity = assets - liabilities = $15,050 - $1,530 = $13,520
2. State the assets, liabilities, and owner’s equity as of July 1 in equation form similar to that shown in this chapter. In tabular form below the equation, indicate the increases and decreases resulting from each transaction and the new balances after each transaction.
since there is not enough room here, I used an excel spreadsheet
3. Prepare an income statement for July, a statement of owner’s equity for July, and a balance sheet as of July 31, 2007.
Cecil Jameson, Attorney-at-Law
Income Statement
For the month ended July 31, 2007
Service revenue $5,953
Expenses:
- Paralegal services $1,635
- Wages expense $850
- Rent $1,200
- Answering service expense $250
- Utilities expense $325
- Supplies expense $115
- Miscellaneous expense $75 <u>$4,450</u>
Operating income $1,503
Cecil Jameson, Attorney-at-Law
Balance Sheet
For the month ended July 31, 2007
Assets:
Cash $6,873
Accounts receivables $2,225
Supplies $980
Land $10,000
Total assets $20,078
Liabilities:
Accounts payable $720
Paralegal fees payable $1,635
Total liabilities $2,355
Equity:
Jameson, Cecil, capital $18,723
Jameson, Cecil, drawings -$1,000
Total equity $17,723
Liabilities + Equity = $20,078
Cecil Jameson, Attorney-at-Law
Statement of Owner’s Equity
For the month ended July 31, 2007
Jameson, Cecil, capital balance July 1, 2007 $13,520
Investment during the month $3,700
Net income <u>$1,503</u>
Subtotal $18,723
Drawings <u>($1,000)</u>
Jameson, Cecil, capital balance July 31, 2007 $17,723
4. (Optional). Prepare a statement of cash flows for July.
Cecil Jameson, Attorney-at-Law
Statement of Cash Flows
For the month ended July 31, 2007
Cash flows from operating activities
Net income $1,503
Adjustments to net income:
- Decrease in accounts receivables $975
- Decrease in accounts payables ($810)
- Increase in supplies inventory ($130)
- Increase in paralegal fees payable $1,635 <u>$1,670</u>
Net increase in cash from operating activities $3,173
Cash flows from investing activities $0
Cash flows from financing activities
Additional paid in capital $3,700
Drawings <u>($1,000)</u>
Net increase in cash from financing activities $2,700
Net increase in cash $5,873
Cash balance July 1, 2007 <u>$1,000</u>
Cash balance July 31, 2007 $6,873
