Chapter 2, Problem P2.40BPGB

To determine

Income Statement: Income Statement is a financial statement that shows an entity’s revenues and expenses and the resulting net income or net loss for the particular period.

Net Income: Net Income is defined as the excess of total revenues over total expenses.

Statement of owner’s equity: Statement of owner’s equity is a financial statement that shows the events or transactions that cause the increase or decrease in owner’s equity from the beginning to the end of the period.

Balance sheet: Balance sheet is a financial statement that shows the types of assets, liabilities, and owner’s equity and their respective amounts as on a specific date. It reports on the entity’s financial position as of a specific date. The amount of total assets is equal to the amount of total liabilities & owner’s equity as shown in the entity’s balance sheet as on a specific date.

Debt ratio: Debt ratio is a financial ratio that shows the percentage of entity’s total assets that are financed by debt. It is calculated by dividing the total liabilities (which is also known as total debt) by total assets of the entity.

1.

To Prepare: The income statement for the month ended July 31, 2018.

To determine

2.

To Prepare: The statement of owner’s equity for the month ended July 31, 2018.

To determine

3.

To Prepare: The balance sheet as of July 31, 2018.

To determine

4.

To Calculate: The debt ratio as of July 31, 2018.