Upon graduation from high school, John Abel immediately accepted a job as an electrician’s assistant for a large local electrical repair company. After three years of hard work, John received an electrician’s license and decided to start his own business. He had saved $12,000, which he invested in the business. First, he transferred this amount from his savings account to a business bank account for Abel Electric Repair Company, Incorporated. His lawyer had advised him to start as a corporation. He then purchased a used panel truck for $9,000 cash and secondhand tools for $1,500; rented space in small building; inserted an ad in the local paper; and opened the doors on October 1, 2019. Immediately, John was very busy; after one month, he employed an assistant. Although John knew practically nothing about the financial side of the business, he realized that a number of reports were required and that costs and collections had to be controlled carefully. At the end of the year, prompted in part by concern about his income tax situation (previously he had to report only salary), John recognized the need for financial statements. His wife Jane developed some financial statements for the business. On December 31, 2019, with the help of a friend, she gathered the following data for the three months just ended. Bank account deposits of collections for electric repair services totaled $32,000. The following cheques had been written: electrician’s assistant, $8,500; payroll taxes, $175; supplies purchased and used on jobs, $9,500; oil, gas, and maintenance on truck, $1,200; insurance, $700; rent, $500; utilities and telephone, $825; and miscellaneous expenses (including Advertising), $600. Also, uncollected bills to customers for electric repair services amounted to $3,000. The $200 rent for December had not been paid. John estimated the cost of using the truck and tools (depreciation) during the three months to be $1,200. Income taxes for the three-month period were $3,480. Required (A) Prepare Statement of Financial Performance for Abel Electric Repair. (B) Do you think that John may need one or more additional financial reports for 2019 and thereafter? Explain.
Upon graduation from high school, John Abel immediately accepted a job as an electrician’s assistant for a large local electrical repair company. After three
years of hard work, John received an electrician’s license and decided to start his own business. He had saved $12,000, which he invested in the business.
First, he transferred this amount from his savings account to a business bank account for Abel Electric Repair Company, Incorporated. His lawyer had
advised him to start as a corporation. He then purchased a used panel truck for $9,000 cash and secondhand tools for $1,500; rented space in small building;
inserted an ad in the local paper; and opened the doors on October 1, 2019. Immediately, John was very busy; after one month, he employed an assistant.
Although John knew practically nothing about the financial side of the business, he realized that a number of reports were required and that costs and
collections had to be controlled carefully. At the end of the year, prompted in part by concern about his income tax situation (previously he had to report
only salary), John recognized the need for financial statements. His wife Jane developed some financial statements for the business. On December 31, 2019,
with the help of a friend, she gathered the following data for the three months just ended. Bank account deposits of collections for electric repair services
totaled $32,000. The following cheques had been written: electrician’s assistant, $8,500; payroll taxes, $175; supplies purchased and used on jobs, $9,500;
oil, gas, and maintenance on truck, $1,200; insurance, $700; rent, $500; utilities and telephone, $825; and miscellaneous expenses (including Advertising),
$600. Also, uncollected bills to customers for electric repair services amounted to $3,000. The $200 rent for December had not been paid. John estimated the
cost of using the truck and tools (
Required
(A) Prepare Statement of Financial Performance for Abel Electric Repair.
(B) Do you think that John may need one or more additional financial reports for 2019 and thereafter? Explain.
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