Question

Bindy Crawford created a corporation providing legal services, Skysong, Inc., on July 1, 2022. On July 31 the balance sheet showed: Cash $4,600; Accounts Receivable $7,400; Supplies $730; Equipment $9,900; Accounts Payable $9,100; Common Stock $11,700; and Retained Earnings $1,830. During August the following transactions occurred.

Aug. 1 Collected $1,200 of accounts receivable due from customers.
4 Paid $2,770 cash for accounts payable due.
9 Performed services worth $6,050, of which $3,510 is collected in cash and the balance is due in September.
15 Purchased additional office equipment for $4,180, paying $510 in cash and the balance on account.
19 Paid salaries $1,390, rent for August $760, and advertising expenses $330. 23 Paid a cash dividend of $670.
26 Borrowed $5,700 from American Federal Bank; the money was borrowed on a 4-month note payable.
31 Incurred utility expenses for the month on account $370.
Prepare a tabular analysis of the August transactions beginning with July 31 balances.
Prepare an income statement for August, a retained earnings statement for August and a classified balance sheet at August 31.

Answer 1

Bindy Crawford

1. Tabular Analysis of the August Transactions:

Cash Accounts Supplies Equipment Accounts Common Retained

Receivable Payable Earnings

7/31 $4,600 $7,400 $730 $9,900 $9,100 $11,700 $1,830

8/1 +1,200 -1,200

8/4 -2,770 -2,770

8/9 +3,510 +2,540 +6,050

8/15 -510 +4,180 +3,670

8/19 -2,480 -2,480

8/23 -670 -670

8/26 +5,700 +5,700

8/31 -370 -370

8/31 $8,210 $8,740 $730 $14,080 $15,700 $11,700 $4,360

2. Income Statement for the month of August

Service revenue $6,050

Salaries expense $1,390

Rent expense 760

Advertising expenses 330

Utility expenses 370 2,850

Net income $3,200

3. Retained Earnings Statement for the month of August

Retained earnings, July 31 $1,830

Net income 3,200

Dividends (670)

Retained earnings, Aug. 31 $4,360

4. Classified Balance Sheet as of August 31

Assets

Current Assets:

Cash $8,210

Accounts receivable 8,740

Supplies 730 $17,680

Long-term Assets:

Equipment $14,080

Total assets $31,760

Liabilities and Equity

Current liabilities:

Accounts Payable 10,000

Notes Payable 5,700 $15,700

Equity:

Common stock 11,700

Retained earnings 4,360 $16,060

Total liabilities and equity $31,760

Step-by-step explanation:

a) Data and Analysis:

8/1 Cash $1,200 Accounts receivable $1,200

8/4 Accounts payable $2,770 Cash $2,770

8/9 Accounts receivable $2,540, Cash $3,510 Service revenue $6,050

8/15 Equipment $4,180 Cash $510 Accounts payable $3,670

8/19 Salaries expense $1,390, Rent expense $760, Advertising expenses $330 Cash $6,150

8/23 Cash dividend $670 Cash $670

8/26 Cash $5,700 Note payable (American Federal Bank) $5,700

8/31 Utility expenses $370 Cash $370

Tabular Analysis of the August Transactions:

Cash Accounts Supplies Equipment Accounts Common Retained

Receivable Payable Earnings

7/31 $4,600 $7,400 $730 $9,900 $9,100 $11,700 $1,830

8/1 +1,200 -1,200

8/4 -2,770 -2,770

8/9 +3,510 +2,540 +6,050

8/15 -510 +4,180 +3,670

8/19 -2,480 -2,480

8/23 -670 -670

8/26 +5,700 +5,700

8/31 -370 -370

8/31 $8,210 $8,740 $730 $14,080 $15,700 $11,700 $4,360