Question

On October 1, Ebony Ernst organized Ernst Consulting; on October 3, the owner contributed $83,540 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. Retained earnings, October 1 as $0.

Cash $12,650 Cash dividends $1,570
Accounts receivable 13,520 Consulting revenue 13,520
Office supplies 2,850 Rent expense 3,110
Land 45,940 Salaries expense 6,490
Office equipment 17,530 Telephone expense 850
Accounts payable 8,110 Miscellaneous expenses 660
Common stock 83,540

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

Answer 1

Particulars Amount

Consulting revenue $13,520

Less: Expenses

Rent Expense ($3,110)

Salaries Expense ($6,490)

Telephone Expense ($850)

Miscellaneous Expense ($660)

Net Profit $2,410

Statement of Retained Earnings

Particulars Amount

Retained Earnings $2,410

Less : Cash Dividend ($1,570)

Net Retained Earnings $840

Ernst Consulting Balance Sheet as of October 31

Assets Amount Liabilities Amount

Current Assets Current Liabilities

Cash $12,650 Accounts Payable $8,110

Office Supplies $2,850

Accounts Receivable $13,520

Non-Current Assets Equity

Office Equipment $17,350 Common Stock $83,540

Land $45,940 Retained Earnings $840

Total $92,490 Total $92,490