Chapter 1, Problem 9BPSB

To determine

2. To Prepare:

The income statement, statement of owner's equity and the balance sheet from the given data.

Explanation of Solution

The income statement for Rivera Roofing Co for July month is as below:

Rivera Roofing Co
Income Statement for the month July
	Details		Amount in S
	Revenue
	Income from services		$20,800
	Expenses
	Rent expenses	700
	Salary expenses	1,560
	Utilities expenses	295	2,555
	Net income		$18,245

The statement of owner's equity for Rivera Roofing Co is as below:

Rivera Roofing Co
Statement of owner's equity for the month of July
	Details	Amount in S
	Opening equity	0
	Add: Equity introduced in form of cash	80,000
	Add: Net income for the year	18,245
	Less: Cash withdrawals	-1,800
	Closing equity as on July 31	$96,445

The balance sheet as of July 31 is as below;

Rivera Roofing Company
Balance Sheet as on July 31
	Details	Amount in S
	Liabilities
	Equity	$96,445
	Account payable	$7,100
	Total	$103,545
	Assets
	Cash	$87,545
	Account receivable	$5,000
	Office Equipments	$2,300
	Office Supplies	$3,700
	Total	$103,545

To determine

3. To Prepare:

A statement of cash flows for the month of July.

Explanation of Solution

The statement of cash flows for the month of July is prepared as below.

Rivera Roofing Company
Statement of Cash flow for the month of July
			Amount in S
	Opening cash balance		0
	Cash flow from operating activities
	Rent paid in cash	-700
	Revenue received in cash	7,600
	Cash received from customer	8,200
	Salary paid in cash	-1,560
	Utilities expenses paid in cash	-295	13,245
	Cash flow from financing activities
	Cash paid to supplier of equipment	-1,000
	Cash paid to supplier of office supplies	-600
	Cash paid to supplier of equipment	-2,300	-3,900
	Cash flow from investing activities
	Cash received from Owner	80,000
	Cash withdrawals by owner	-1,800	78,200
	Cash Balance as on July 31		87,545

To determine

4. To Compute:

The dollar effect of the given assumption on the month end amount for

a) Total assets

b) Total liabilities

c) Total equity.

Explanation of Solution

The dollar effect of given assumption on month end is as below

a) Total assets: Total asset increased by $1,000.

b) Total liabilities: Total liabilities decreased by $4,000.

c) Total equity: Total equity increased by $1,000