Question

Liu Zhang operates Lawson Consulting, which began operations on June 1. The Retained Earnings account balance at June 1 was $0 and the owner invested $20,660 cash in the company on June 1. On June 30, the company's records show the following accounts and amounts for the month of June.

Cash $13,000 Dividends $ 3,100
Accounts receivable 6,100 Service revenue 16,800
Equipment 8,100 Rent expense 3,600
Accounts payable 4,440 Wages expense 8,000
Common stock 20,660



Use the above information to prepare a June 30 balance sheet for Lawson Consulting. Hint The ending Retained Earnings account balance as of June 30 is $2,100.

Answer 1

The balance sheet for Lawson Consulting lists total assets of $27,200, total liabilities of $4,440, and shareholders' equity comprising common stock of $20,660 and retained earnings of $2,100.

Step-by-step explanation:

To prepare the balance sheet for Lawson Consulting as of June 30, you need to list the company's assets, liabilities, and shareholders' equity. The balance sheet adheres to the formula Assets = Liabilities + Shareholders' Equity. Based on the provided information, the business assets include cash, accounts receivable, and equipment totaling $27,200. The liabilities consist of accounts payable amounting to $4,440. The shareholders' equity includes the common stock valued at $20,660 and the retained earnings at $2,100, as provided in the hint. The dividend payments do not appear on the balance sheet but are instead deducted from retained earnings to calculate the ending balance.

Lawson Consulting's balance sheet lists assets of $27,200, liabilities of $4,440, and shareholders' equity of $22,760 (common stock of $20,660 and retained earnings of $2,100).

We calculate retained earnings as follows:

Beginning Retained Earnings: $0
Add: Service Revenue: $16,800
Less: Rent Expense: $3,600
Less: Wages Expense: $8,000
Less: Dividends: $3,100
Ending Retained Earnings: $2,100