Question

Use the following information for exercises 15 to 18 LO P2 The following information applies to the questions displayed below] On October 1, Ebony Ernst organized Ernst Consulting; on October 3, the owner contributed $83,540 in assets in exchange for its common stock to launch the business. On October 31, the company's records show the following items and amounts. 1,570 12,800 3,110 6,490 850 660 Cash 12,800 Consulting revenue office supplies Land office equipment Accounts payable Common Stock 2,850 Rent expense 45,940 Salaries expense 17,530 Telephone expense 8,110 Miscellaneous expenses 83,540 Exercise 1-17 Preparing a balance sheet LO P2 Using the above information prepare an October 31 balance sheet for Emst Consulting

Answer 1

Answer:

            Ernst Consulting

             Balance Sheet

For the Month Ended October 31, 202x

Assets:

Cash $12,650

Accounts receivable $12,800

Office supplies $2,850

Office equipment $17,530

Land $45,940

Total assets $91,770

Liabilities and stockholders' equity:

Accounts payable $8,110

Common Stock $83,540

Retained earnings $120

Total liabilities and stockholders' equity $91,770

Explanation:

I ordered the accounts and included a couple that were missing:

• Cash 12,650
• Accounts receivable 12,800
• Consulting revenue 12,800
• office supplies 2,850
• Land 45,940
• office equipment 17,530
• Accounts payable 8,110
• Cash dividends 1,570  
• Common Stock 83,540
• Rent expense 3,110
• Salaries expense 6,490
• Telephone expense 850
• Miscellaneous expenses 660

First we need to determine net profit for the month:

Consulting revenue 12,800

Salaries expense -6,490

Rent expense -3,110

Telephone expense -850

Miscellaneous expenses -660

net profit = $1,690

retained earnings = net profit - dividends distributed = $1,690 - $1,570 = $120