Question

On October 1, Ebony Ernst organized Ernst Consulting; on October 3, the owner contributed $84,000 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.
Cash $11,360 Cash dividends $2,000
Accounts receivable 14,000 Consulting revenue 14,000
Office supplies 3,250 Rent expense 3,550
Land 46,000 Salaries expense 7,000
Office equipment 18,000 Telephone expense 760
Accounts payable 8,500 Miscellaneous expenses 580
Common Stock 84,000

Required:
Using the above information prepare an October 31 balance sheet for Ernst Consulting.

Answer 1

Answer:

Balance sheet

Assets

Cash $11,360

Accounts receivable $14,000

Office supplies $3,250

Office equipment $18,000

Land $46,000

Total assets                                      $92,610

Liabilities

Accounts payable $8,500

Total liabilities                       $8,500

Equity

Common Stock $84,000

Retained earnings $110      

Total equity                           $84,110

Total liabilities + equity                      $92,610

Income statement

Consulting revenue        $14,000

Expenses:

• Salaries $7,000
• Rent $3,550
• Telephone $760
• Misc. $580             ($11,890)

Net income                        $2,110

retained earnings = net income - dividends = $2,110 - $2,000 = $110