Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN: 9781305654174

Author: Gary A. Porter, Curtis L. Norton

Publisher: Cengage Learning

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Textbook Question

Chapter 3, Problem 3.13MCP

Journal Entries, Trial Balance, and Financial Statements

Neveranerror Inc. was organized on June 2 by a group of accountants to provide accounting and tax services to small businesses. The following transactions occurred during the first month of business:

June 2: Received contributions of $10,000 from each of the three owners of the business in exchange for shares of stock.

June 5: Purchased a computer system for $12,000. The agreement with the vendor requires a down payment of $2,500 with the balance due in 60 days.

June 8: Signed a two-year promissory note at the bank and received cash of $20,000.

June 15: Billed $12,350 to clients for the first half of June. Clients are billed twice a month for services performed during the month, and the bills are payable within ten days.

June 17: Paid a $900 bill from the local newspaper for advertising for the month of June.

June 23: Received the amounts billed to clients for services performed during the first half of the month.

June 28: Received and paid gas, electric, and water bills. The total amount is $2,700.

June 29: Received the landlord’s bill for $2,200 for rent on the office space that Neveranerror leases. The bill is payable by the 10th of the following month.

June 30: Paid salaries and wages for June. The total amount is $5,670.

June 30: Billed $18,400 to clients for the second half of June.

June 30: Declared and paid dividends in the amount of $6,000.

Required

Prepare journal entries on the books of Neveranerror Inc. to record the transactions entered into during the month. Ignore depreciation expense and interest expense.
Prepare a trial balance at June 30.
Prepare the following financial statements:

Income statement for the month of June
Statement of retained earnings for the month of June
Classified balance sheet at June 30

Assume that you have just graduated from college and have been approached to join this company as an accountant. From your reading of the financial statements for the first month, would you consider joining the company? Explain your answer. Limit your answer to financial considerations only.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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Chapter 3 Solutions

Financial Accounting: The Impact on Decision Makers

Ch. 3 - Read each definition below and write the number of...Ch. 3 - Types of Events For each of the following events,...Ch. 3 - Prob. 3.2E Ch. 3 - The Effect of Transactions on the Accounting...Ch. 3 - Types of Transactions There are three elements to...Ch. 3 - Balance Sheet Accounts and Their Use Choose from...Ch. 3 - Normal Account Balances Each account has a normal...Ch. 3 - Prob. 3.7E Ch. 3 - Prob. 3.8E Ch. 3 - Trial Balance The following list of accounts was...

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