Answer:
a) May 1 G. Gram invested $40,000 cash in the company in exchange for its common stock.
Dr Cash 40,000
Cr Common stock 40,000
May 1 The company rented a furnished office and paid $2,200 cash for May’s rent.
Dr Rent expense 2,200
Cr Cash 2,200
May 3 The company purchased $1,890 of equipment on credit.
Dr Equipment 1,890
Cr Accounts payable 1,890
May 5 The company paid $750 cash for this month’s cleaning services.
Dr Cleaning expenses 750
Cr Cash 750
May 8 The company provided consulting services for a client and immediately collected $5,400 cash.
Dr Cash 5,400
Cr Service revenue 5,400
May 12 The company provided $2,500 of consulting services for a client on credit.
Dr Accounts receivable 2,500
Cr Service revenue 2,500
May 15 The company paid $750 cash for an assistant’s salary for the first half of this month.
Dr Wages expense 750
Cr Cash 750
May 20 The company received $2,500 cash payment for the services provided on May 12.
Dr Cash 2,500
Cr Accounts receivable 2,500
May 22 The company provided $3,200 of consulting services on credit.
Dr Accounts receivable 3,200
Cr Service revenue 3,200
May 25 The company received $3,200 cash payment for the services provided on May 22.
Dr Cash 3,200
Cr Accounts receivable 3,200
May 26 The company paid $1,890 cash for the equipment purchased on May 3.
Dr Accounts payable 1,890
Cr Cash 1,890
May 27 The company purchased $80 of equipment on credit.
Dr Equipment 80
Cr Accounts payable 80
May 28 The company paid $750 cash for an assistant’s salary for the second half of this month.
Dr Wages expense 750
Cr Cash 750
May 30 The company paid $300 cash for this month’s telephone bill.
Dr Telephone expense 300
Cr Cash 300
May 30 The company paid $280 cash for this month’s utilities.
Dr Utilities expense 280
Cr Cash 280
May 31 The company paid $1,400 cash in dividends to the owner (sole shareholder).
Dr Dividends 1,400
Cr Cash 1,400
debit credit
Cash $42,780
Equipment $1,970
Accounts payable $80
Common stock $40,000
Service revenue $11,100
Rent expense $2,200
Cleaning expenses $750
Wages expense $1,500
Telephone expense $300
Utilities expense $280
Dividends <u>$1,400 </u> <u> </u>
totals $51,180 $51,180
<h2>income statement</h2>
Service revenue $11,100
Expenses:
- Rent expense $2,200
- Cleaning expenses $750
- Wages expense $1,500
- Telephone expense $300
- Utilities expense $280 <u>($5,030)</u>
Net income $6,070
<h2>statement of owner's equity </h2>
Beginning balance $0
Common stocks issued $40,000
Net income <u> $6,070</u>
Sub-total $46,070
Dividends <u> ($1,400)</u>
Ending balance $44,670
<h2>balance sheet</h2>
Assets:
Cash $42,780
Equipment $1,970
Total assets $44,750
Liabilities and equity:
Accounts payable $80
Common stock $40,000
Retained earnings $4,670
Total liabilities and equity $44,750
<h2>cash flow statement</h2>
Cash flows from operating activities:
Net income $6,070
Increase in accounts payable <u> $80</u>
net cash from operating activities $6,150
Cash flows from financing activities:
Purchase of equipment ($1,970)
Cash flow from financing activities:
Common stocks issued $40,000
Dividends paid <u> ($1,400)</u>
net cash fro financing activities $38,600
net cash increase $42,780
beginning cash balance <u> $0 </u>
ending cash balance $42,780
