Concept explainers
1.
To identify: The effect of given transactions on the
1.
Explanation of Solution
Table (1)
Hence, the cash balance is $130,060,
2.
To prepare: The income statement, statement of
2.
Explanation of Solution
Prepare income statement.
N. Company | ||
Income Statement | ||
For the month ended June 30,20XX | ||
Particulars | Amount ($) | Amount ($) |
Revenue: | ||
Service Revenue | 16,925 | |
Total Revenue | 16,925 | |
Expenses: | ||
Advertising Expenses | 1,150 | |
Rent Expenses | 6,000 | |
Salary Expenses | 1,600 | |
Telephone Expenses | 150 | |
Utilities Expenses | 890 | |
Total Expense | 9,790 | |
Net income | 7,135 |
Table(2)
Hence, net income of .N Company as on June 30, 20XX is $7,135
Prepare statement of retained earnings
N. Company | |
Retained Earnings Statement | |
For the month ended June 30,20XX | |
Particulars | Amount ($) |
Opening balance | 0 |
Net income | 7,135 |
Total | 7,135 |
Dividends | (4,000) |
Retained earnings | 3,135 |
Table(3)
Hence, the retained earnings of N Company as on June 30, 20XX are $3,135.
Prepare balance sheet
N. Company | ||
Balance sheet | ||
As on June 30, 20XX | ||
Particulars |
| Amount ($) |
Assets | ||
Cash | 130,060 | |
Equipment | 2,400 | |
Accounts Receivables | 675 | |
Total Assets |
| 133,135 |
Liabilities and | ||
Liabilities | ||
Stockholder’s Equity | ||
Common Stock | 130,000 | |
Retained earnings | 3,135 | |
Total stockholders’ equity |
| 133,135 |
Total Liabilities and Stockholder’s equity |
| 133,135 |
Table(4)
Hence, the total of the balance sheet of the N Company as on June 30, 20XX is of $133,135.
3.
To prepare: The statement of
3.
Explanation of Solution
Prepare the cash flow statement:
N. Company | ||
Statement of Cash Flows | ||
Month Ended June 30, 20XX | ||
Particulars | Amount ($) | Amount ($) |
Cash flow from operating activities | ||
Receipts: | ||
Collections from customers |
| 16,250 |
Payments: |
| |
…Advertising Expense | (1,150) | |
Rent Expenses | (6,000) | |
Salary Expenses | (1,600) | |
Telephone Expenses | (150) | |
Utilities Expense | (890) | (9,790) |
Net cash from operating activities |
| 6,460 |
Cash flow from investing activities |
| |
Purchase of equipment | (2,400) | |
Net cash from investing activities |
| (2,400) |
Cash flow from financing activities |
| |
Issued common stock | 130,000 | |
Less: Payment of cash dividends | (4,000) | |
Net cash from financing activities |
| 126,000 |
Net increase in cash |
| 130,060 |
Cash balance, June 1,20XX |
| 0 |
Cash balance, June 30,20XX |
| 130,060 |
Table(5)
Hence, the cash balance of the N Company as on June 30, 20XX is $130,060.
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Chapter 1 Solutions
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