Question

On November 1, 2017, Tom Riddle started his business IMLV, a Sole proprietorship by transferring $50,000 from his personal bank account into a bank account for IMLV. In addition to starting the business, the following transactions occurred:

Part A
11/2 Prepaid office rent for the following 12 months starting with December in the amount of $18,000

11/6 Purchased office furniture from Weasley Interiors and paid $6,000 cash

11/6 Purchased office equipment from Potter Electronics for $7,500 on credit

11/8 Billed Olivander's Supply $2,500 for services performed

11/10 Purchased office supplies from Dumbledore for $600 cash.

11/18 Paid $12,000 in advance to Hogsmead marketing for marketing services

11/21 Billed Gringot's Financial Services, $7,000 for services performed

11/26 Completed work for a customer and received $11,000 cash

11/29 Paid his assistant Creature $500 cash for part time help.

Part B
12/3 Received $4,500 from Gringot's Financial Services for services performed in November

12/7 Received $700 from Oliveander's Supply for services performed in November

12/18 Paid assistant Creature $1,200 cash for part time help

12/19 Received a utility bill for November's Utilities in the amount of $800 Purchased liability insurance from Diagon Insurance for $12,000 paid in advance. The policy is for 12

12/20 months

12/21 Paid $3,500 to Potter Electronics for office equipment purchased in November

12/30 Recorded December's rent expense

12/30 Recorded one month's marketing expense which was paid in advance in November

12/30 Recorded office equipment depreciation of $125.00

12/30 Recorded office furniture depreciation of $71.00 12/30 Paid assistant Creature $1,200 cash for part time help

12/30 Tom withdrew $2,500 for personal expenses
Instructions:

1. Using the given information and worksheets, prepare the ending Income Statement, Statement of Owner's Equity and Balance Sheet for IMLV.

Answer 1

Income Statement, Statement of Owner's Equity and Balance Sheet for IMLV is as prepared below:

IMLV
Income Statement
For Year Ended December 31, 2017
Particulars	Amount ($)	Amount ($)
Service Revenue		20,500
Less:
Wages Expense	2,900
Utility Expense	800
Rent Expense	1500
Marketing expense	12,000
Depreciation exp	125
Depreciation exp- furniture	71
Total Operating Expenses		17,396
Net income		3,104

IMLV
Statement of owner's equity
For Year Ended December 31, 2017
Particulars	Amount ($)	Amount ($)
Tom Riddle capital		50,000
Add:
Net income	3,104
Less:
Drawings	2,500
Tom Riddle Closing Capital		50,604

IMLV
Balance Sheet
As at December 31, 2017
Particulars	Amount ($)	Amount ($)
ASSETS
Current Assets:
Cash	12,200
Prepaid Insurance	12,000
Account Receivable	4,300
Office Supplies	600
Prepaid Rent	16,500
Total Current Assets		45,600
Office Furniture	6,000
Less: Accumulated dep- Office Furniture	125	5,875
Office Equipment	7,500
Less: Accumulated depreciation - Office Equipment	-71	7,429
Total Assets		58,904
LIABILITIES AND STOCKHOLDERS EQUITY
Liabilities :
Current Liabilities
Accounts Payable	7,500
Utilities payable	800
Total Current Liabilities		8,300
Total Stockholders' Equity
Tom Riddle's Capital	50,604
Total Stockholders' Equity		50,604
Total Liabilities and stockholders’ equity		58,904

Working:

	Cash	Tom Riddle's capital	Prepaid Rent	Office Furniture	Office Equipment	Accounts Payable	Account Receivable	Service Revenue	Office Supplies	Prepaid Expenses	Wages Expense	Utility Expense	Utility Payable	Prepaid Insurance	Rent Expense	Marketing expense	Depreciation exp	Accumulated dep- equipment	Depreciation exp- furniture	Accumulated dep- furniture	Tom Riddle's Drawings
Nov-01	50,000	50,000
11/2 Prepaid office rent for the following 12 months starting with December in the amount of $18,000	-18,000		18,000
11/6 Purchased office furniture from Weasley Interiors and paid $6,000 cash	-6,000			6,000
11/6 Purchased office equipment from Potter Electronics for $7,500 on credit					7,500	7,500
11/8 Billed Olivander's Supply $2,500 for services performed							2,500	2,500
11/10 Purchased office supplies from Dumbledore for $600 cash.	-600								600
11/18 Paid $12,000 in advance to Hogsmead marketing for marketing services	-12,000									12,000
11/21 Billed Gringot's Financial Services, $7,000 for services performed							7,000	7,000
11/26 Completed work for a customer and received $11,000 cash	11,000							11,000
11/29 Paid his assistant Creature $500 cash for part time help.	-500										500
Part B
12/3 Received $4,500 from Gringot's Financial Services for services performed in November	4,500						-4,500
12/7 Received $700 from Oliveander's Supply for services performed in November	700						-700
12/18 Paid assistant Creature $1,200 cash for part time help	-1,200										1,200
12/19 Received a utility bill for November's Utilities in the amount of $800												800	800
12/20 Purchased liability insurance from Diagon Insurance for $12,000 paid in advance. The policy is for 12 months	-12,000													12,000
12/21 Paid $3,500 to Potter Electronics for office equipment purchased in November
12/30 Recorded December's rent expense			-1500												1,500
12/30 Recorded one month's marketing expense which was paid in advance in November										-12,000						12,000
12/30 Recorded office equipment depreciation of $125.00																	125	125
12/30 Recorded office furniture depreciation of $71.00																			71	71
12/30 Paid assistant Creature $1,200 cash for part time help	-1,200										1,200
12/30 Tom withdrew $2,500 for personal expenses	-2,500																				2,500
	12,200	50,000	16,500	6,000	7,500	7,500	4,300	20,500	600	0	2,900	800	800	12,000	1,500	12,000	125	125	71	71	2,500

	Debit	Credit
Cash	12,200
Prepaid Rent	16,500
Office Furniture	6,000
Accumulated dep- equipment		125
Office Equipment	7,500
Accumulated dep- furniture		71
Account Receivable	4,300
Office Supplies	600
Prepaid Expenses	0
Prepaid Insurance	12,000
Accounts Payable		7,500
Utility Payable		800
Tom Riddle's capital		50,000
Tom Riddle's Drawings	2,500
Service Revenue		20,500
Wages Expense	2,900
Utility Expense	800
Rent Expense	1,500
Marketing expense	12,000
Depreciation exp	125
Depreciation exp- furniture	71
	78,996	78,996