Chapter 3, Problem 3.3.2AAP

Transaction Analysis and Financial Statements

Dynamic Services Inc. was organized on March 1 by two former college roommates. The corporation will provide computer tax services to small businesses. The following transactions occurred during the first month of operations:

March 2: Received contributions of $10,000 from each of the two principal owners in exchange for shares of stock.

March 7: Signed a two-year promissory note at the bank and received cash of $7,500.

Interest, along with the $7,500, will be repaid at the end of the two years.

March 12: Purchased miscellaneous supplies on account for $350, payment due in 30 days.

March 19: Billed a client $2,000 for tax preparation services. According to an agreement between the two companies, the client is to pay 25% of the bill upon its receipt and the remaining balance within 30 days.

March 20: Paid a $650 bill from the local newspaper for advertising for the month of March.

March 22: Received 25% of the amount billed the client on March 19.

March 26: Received cash of $1,400 for services provided in assisting a client in preparing its tax return.

March 29: Purchased a computer system for $4,000 in cash.

March 30: Paid $1,650 in salaries and wages for March.

March 31: Received and paid $700 of gas, electric, and water bills.

Required

Prepare an income statement for the month of March.