Question

Michael Don owns an equipment hire business under the name Safety Hire. Financial data for Safety Hire as of 30 June 2019 are shown as below:.

Account	Balance ($)
Accounts receivable	73,000
Wages expense	78,000
Equipment hire income	200,000
Advertising expense	32,000
Prepaid insurance	9,000
Accounts payable	88,000
Insurance expense	7,000
Cash at bank	48,000
Equipment	190,000
Michael Don, capital	?

Required:

a) Prepare an income statement for the business for the year ending 30 June 2019.
b) Prepare a balance sheet in narrative format for Safety Hire as at 30 June 2019.
c) Prepare a statement of changes in Equity for the year and determine Michael Don’s capital at 30 June 2018?

You may wish to copy/paste the following template for your answer.  

Answer 1

a) An income statement for the business for the year ending 30 June 2019 is as follows:

                          Income statement

            for the year ending 30 June 2019

	$	$
Equipment hire income		200,000
Less: Operating Expenses
Wages expense	78,000
Advertising expense	32,000
Insurance expense	7,000
Total Operating Expenses		117,000
Net Income		$83,000

b) A balance sheet in narrative format for Safety Hire as at 30 June 2019 is as follows:

                                               Balance sheet

                                     as at 30 June 2019

	$	$
Current Assets:
Cash at bank	48,000
Accounts receivable	73,000
Prepaid insurance	9,000
Total Current Assets		130,000
Property, Plant and Equipment:
Equipment		190,000
Total Assets		$320,000
Liability and Stockholder's Equity
Current Liability:
Account Payable		88,000
Stockholder's Equity:
Michael Don, capital (Balance)		149,000
($320,000 - $88,000 - $83,000)
Retained Earnings (Net Income)		83,000
Total Liability and Stockholder's Equity		$320,000

c) A statement of changes in Equity for the year 30 June 2018 is as follows:

	Michael Don, capital	Retained Earnings
Balance Begining	-	-
Net Income	-	$83,000
Capital Introduced	149,000	-
Balance Ending	$ 149,000	$83,000