Question

On October 1, Ebony Ernst organized Ernst Consulting; on October 3, the owner contributed $84,000 in assets in exchange for its common stock to launch the business. On October 31, the company’s records show the following items and amounts.

Cash $ 11,360 Cash dividends $ 2,000

Accounts receivable 14,000 Consulting revenue 14,000

Office supplies 3,250 Rent expense 3,550

Land 46,000 Salaries expense 7,000

Office equipment 18,000 Telephone expense 760

Accounts payable 8,500 Miscellaneous expenses 580

Common Stock 84,000

Using the above information prepare an October 31 balance sheet for Ernst Consulting.

Answer 1

The balance sheet as on October 31, prepared below:

Income statement
For the Year ended October 31…
Particulars	Amount ($)	Particulars	Amount ($)
Rent expense	3,550	Consulting revenue	14,000
Salaries Expense	7,000
Telephone Expense	760
Miscellaneous expense	580
Net income	2,110
	14,000		14,000
Equity statement
Retained earning, beginning balance	0
Add: Net income	2,110
Less: Dividend	2,000
Retained earnings, ending balance	110
Balance sheet
As on October 31…
Liabilities	Amount ($)	Assets	Amount ($)
Stockholders' equity:		Land	46,000
Common stock	84,000	Office equipment	18,000
Retained earnings	110
Current liabilties:		Current assets:
Accounts payable	8,500	Cash	11,360
		Accounts receivable	14,000
		office supplies	3,250
	92,610		92,610

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