Question

Carmen Camry operates a consulting firm called Help Today, which began operations on August 1. On August 31, the company’s records show the following accounts and amounts for the month of August. Cash $ 25,310 C. Camry, Withdrawals $ 5,950 Accounts receivable 22,320 Consulting fees earned 26,960 Office supplies 5,200 Rent expense 9,500 Land 43,970 Salaries expense 5,560 Office equipment 19,960 Telephone expense 820 Accounts payable 10,700 Miscellaneous expenses 470 rev: 09_05_2018_QC_CS-135673 Use the above information to prepare an August statement of owner’s equity for Help Today. The owner’s capital account balance at July 31 was $0, and the owner invested $101,400 cash in the company on August 1.

Answer 1

HELP TODAY

STATEMENT OF OWNER'S EQUITY

FOR THE YEAR ENDED 31 AUGUST xxxx

$

Camry: Opening Balance 0

Add : Investment contribution 101, 400

Net income 10, 610

Less: Drawings (5,950)

Camry: Closing Balance 106, 060

Step-by-step explanation:

The statement of owner's equity shows changes that occurred in the capital account in a business classified as a sole proprietorship (a business owned and managed by one person). This statement comprises of any contributions by the owner plus any operating income generated less operating costs and drawings made by the owner. In order to arrive at the above valuation, net income should be calculated. This is done by subtracting all expenses ($16350) from the consulting fees revenue ($26,960) that was generated during August. The net income generated was $10, 610 ($26,960 - ($9500 + $5560 + 820 + 470)). The drawings amount and initial contribution were both given in the question.

Note: The office supplies are considered to be an asset in Help Today. However, if the office supplies were to be treated as an expense, then the net income would be reduced by $5200.

Answer 2

Equity at August 1st 0

adds: Carmen Camry Investment 101,4000

Net Income 5,410

Subtotal 106,810

Withdrawals -5,950

Carmen Camry capital account at the end of August 31th 100,860

Step-by-step explanation:

We have to calculae the net income

Fees earned 26,960

office 5,200

rent expense 9,500

salaries expense 5,560

telephone expense 820

miscellaneous expenses 470

Total Expenses 21,550

Net Income 5,410

Then we do the equity stamtent:

beginning + investment + net income - withdrawals = ending

Equity at August 1st 0

adds: Carmen Camry Investment 101,4000

Net Income 5,410

Subtotal 106,810

Withdrawals -5,950

Carmen Camry capital account at the end of August 31th 100,860