Question

Required information [The following information applies to the questions displayed below.] Gabi Gram started The Gram Co., a new business that began operations on May 1. The Gram Co. completed the following transactions during its first month of operations. May 1 G. Gram invested $44,500 cash in the company in exchange for its common stock. 1 The company rented a furnished office and paid $2,200 cash for May’s rent. 3 The company purchased $4,590 of office equipment on credit. 5 The company paid $730 cash for this month’s cleaning services. 8 The company provided consulting services for a client and immediately collected $5,200 cash. 12 The company provided $2,500 of consulting services for a client on credit. 15 The company paid $790 cash for an assistant’s salary for the first half of this month. 20 The company received $2,500 cash payment for the services provided on May 12. 22 The company provided $3,600 of consulting services on credit. 25 The company received $3,600 cash payment for the services provided on May 22. 26 The company paid $4,590 cash for the office equipment purchased on May 3. 27 The company purchased $80 of advertising in this month’s (May) local paper on credit; cash payment is due June 1. 28 The company paid $790 cash for an assistant’s salary for the second half of this month. 30 The company paid $300 cash for this month’s telephone bill. 30 The company paid $300 cash for this month’s utilities. 31 The company paid $1,600 cash in dividends to the owner (sole shareholder). 2.1. Prepare income statement for May. 2.2. Prepare statement of retained earnings for May. 2.3. Prepare Balance Sheet for May 31. 3. Prepare statement of cash flows for May. (Cash outflows should be indicated with a minus sign.)

Answer 1

	Income Statement
	Particulars				Amounts
	Revenue from operations				$ 11,300.00
	($ 5200+ $ 2500+ $ 3600)
Less:	Expenses
	Rent Paid			$ 2,200.00
	Cleaning services			$     730.00
	Salary to Assistant (Full)			$ 1,580.00
	Advertising Expense			$        80.00
	Telephone Bill			$     300.00
	Utilities			$     300.00
	Total Expenses				$    5,190.00
			Net Income		$    6,110.00

	Statement of Retained Earnings
	Particulars				Amounts
	Opening Balance on 1st May				$               -
Add:	Net income for the period				$ 6,110.00
Less:	Dividend Paid				$ 1,600.00
	Closing balance on 31st May				$ 4,510.00

Balance Sheet
Assets
Current Assets
Cash				$ 44,500.00
Non-Current Assets
Office equipment				$    4,590.00
	Total Assets			$ 49,090.00
Liabilities
Current Liabilities
Advertising Exp Payable				$          80.00
Owner's Equity
Common Stock				$ 44,500.00
Retained Earnings				$    4,510.00
Total Liabilities and owner's equity				$ 49,090.00

Statement of Cash Flow
Cash flow from Operating Activities
Net Income as per income statement					$    6,110.00
Adjustments:
Increase in Advertising expense payable					$          80.00
Net cash flow from operating activities				(A)	$    6,190.00
Cash flow from Investing Activities
Equipment Purchased					$ (4,590.00)
Net cash flow from investing activities				(B)	$ (4,590.00)
Cash flow from Financing Activities
Issue of common stock					$ 44,500.00
Dividend Paid					$ (1,600.00)
Net cash flow from financing activities				(C')	$ 42,900.00
Net Increase in cash and cash equivalent					$ 44,500.00
(A+B+C)
Cash balance at beginning					$                 -
Cash balance at end					$ 44,500.00