Question

Transaction Analysis and Financial Statements

Blue Jay Delivery Service is incorporated on January 2 and enters into the following transactions during its first month of operations:

January 2:	Filed articles of incorporation with the state and issued 100,000 shares of capital stock. Cash of $100,000 is received from the new owners for the shares.
January 3:	Purchased a warehouse and land for $80,000 in cash. An appraiser values the land at $20,000 and the warehouse at $60,000.
January 4:	Signed a three-year promissory note at Third State Bank in the amount of $50,000.
January 6:	Purchased five new delivery trucks for a total of $45,000 in cash.
January 31:	Performed services on account that amounted to $15,900 during the month. Cash amounting to $7,490 was received from customers on account during the month.
January 31:	Established an open account at a local service station at the beginning of the month. Purchases of gas and oil during January amounted to $3,230. Blue Jay has until the 10th of the following month to pay its bill.

Required:

1. Complete the below table to summarize the preceding transactions as they affect the accounting equation. Ignore depreciation expense and interest expense. If an account is unaffected by a transaction, enter "0". Use the minus sign to indicate decreases.

Blue Jay Delivery Service Transactions for the Month of January

Assets

=

Liabilities

+

Stockholders' Equity

Date

Cash

Accounts Receivable

Trucks

Warehouse

Land

Accounts Payable

Notes Payable

Capital Stock

Retained Earnings

January 2

$

$

$

$

$

$

$

$

$

January 3

Balance

$

$

$

$

$

$

$

$

$

January 4

Balance

$

$

$

$

$

$

$

$

$

January 6

Balance

$

$

$

$

$

$

$

$

$

January 31-Revenue

Balance

$

$

$

$

$

$

$

$

$

January 31-Payment received

Balance

$

$

$

$

$

$

$

$

$

January 31-Gas & oil

Balance

$

$

$

$

$

$

$

$

$

Total Assets:

$

Total Liabilities and Stockholders' Equity:

$

Feedback

After every transaction check that equation is still in balance. The equation equates to a weight balance that requires both sides to be balanced. An increase on one side either requires an equal decrease on same side or equal increase on other side. The same process for decreases. Increases/decreases are actions affecting an account balance. All transactions involve an exchange.
January 2: Record receipt of cash (increase to asset) in exchange for capital stock (increase to capital stock).
January 3: Record land and warehouse purchases (increase to assets) with payment of cash (decrease to asset).
January 4: Record receipt of cash (increase to asset) with notes payable (increase to liability).
January 6: Record purchase of delivery trucks (increase to asset) with payment of cash (decrease to asset).
January 31: Record service revenue earned (increase to retained earnings) with amount due on account receivable (increase to asset). Revenue is an indirect increase to Retained Earnings.
January 31: Record receipt of cash (increase to asset) with payment on account receivable (decrease to asset).
January 31: Record gas and oil expense (decrease to retained earnings) with amount due on account payable (increase to liability).

2. Prepare an income statement for the month of January.

Blue Jay Delivery Service
Income Statement
For the Month Ended January 31
Service revenue	$
Gas and oil expense
Net income	$

Feedback

1) Revenue – expenses = net income.
2) Revenues represents all types of income earned.
3) Expenses represent all of the various costs necessary to generate revenue.

3. Prepare a classified balance sheet at January 31.

Blue Jay Delivery Service
Balance Sheet
January 31
Assets
Current assets:
Cash	$
Accounts receivable
Total current assets		$
Property, plant, and equipment:
Delivery trucks	$
Warehouse
Land
Total property, plant, and equipment
Total assets		$
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$
Long-term debt:
Notes payable
Total liabilities		$
Capital stock	$
Retained earnings
Total stockholders' equity
Total liabilities and stockholders' equity		$ Correct

Feedback

Answer 1