Question

Wildhorse Co., a ski tuning and repair shop, opened on November 1, 2016. The company carefully kept track of all its cash receipts and cash payments. The following information is available at the end of the ski season, April 30, 2017.
Cash Receipts Cash Payments
Issuance of common shares $19,900
Payment to purchase repair shop equipment $9,430
Payments to landlord 1,225
Newspaper advertising payment 365
Utility bill payments 885
Part-time helper's wage payments 2,950
Income tax payment 10,000
Cash receipts from ski and snowboard repair services 30,400
Subtotals 50,300 24,855
Cash balance 25,445
Totals $50,300 $50,300
The repair shop equipment was purchased on November 1 and has an estimated useful life of 5 years. Lease payments to the landlord are made at the beginning of each month. The payments to the landlord included a security deposit of $175. The part-time helper is owed $495 at April 30, 2017, for unpaid wages. At April 30, 2017, customers owe Wildhorse Co. $455 for services they have received but have not yet paid for.

Answer 1

Answer and Explanation:

The preparation is as follows:

1. Accrual basis Income statement  

Revenues ($30,400 + $455)  $30,855  

Less: Expenses      

News paper advertising -$365

Rent expense -$1,225

Utility bill payments -$885

Part time helpers wages ($2,950 + $495) -$3,445  

income tax payment -$10,000  

Depreciation expense    

($9,430 ÷ 5 × 6 ÷ 12) -$943  

total expense  -$16,863  

Net income $13,992  

b) Balance sheet  

Assets  

Current assets    

Cash $25,445  

Account receivable $455

total current assets $25,900

PP&E      

Equipment $9,430  

less Accumulated depreciation -$943  

total  $8,487

total Assets $34,387

Liabilities      

Current liabilities    

Salaries and Wages payable $495  

total liabilities  $495

Stockholders Equity    

common stock $19,900  

Add: Retained Earnings $13,992  

Stockholders Equity $33,892

total liabilities & Equity $34,387