Question

Sanyu Sony started a new business and completed these transactions during December. Dec. 1 Sanyu Sony transferred $68,100 cash from a personal savings account to a checking account in the name of Sony Electric in exchange for its common stock. 2 The company rented office space and paid $2,000 cash for the December rent. 3 The company purchased $13,300 of electrical equipment by paying $5,100 cash and agreeing to pay the $8,200 balance in 30 days. 5 The company purchased office supplies by paying $900 cash. 6 The company completed electrical work and immediately collected $2,000 cash for these services. 8 The company purchased $2,880 of office equipment on credit. 15 The company completed electrical work on credit in the amount of $4,000. 18 The company purchased $500 of office supplies on credit. 20 The company paid $2,880 cash for the office equipment purchased on December 8. 24 The company billed a client $800 for electrical work completed; the balance is due in 30 days. 28 The company received $4,000 cash for the work completed on December 15. 29 The company paid the assistant’s salary of $2,000 cash for this month. 30 The company paid $540 cash for this month’s utility bill. 31 The company paid $930 cash in dividends to the owner (sole shareholder). 2.1. Prepare the income statement for the current month. 2.2. Prepare the statement of retained earnings for the current month. 2.3. Prepare the balance sheet as of the end of the month. 3. Prepare the statement of cash flows for the current month. (Cash outflows should be indicated with a minus sign.).

Answer 1

2.1 Income statement:

Revenue		6,800
less: expenses
Rental expense	2,000
Assistant's salary	2,000
Utility bill	540
Total expenses		4,540
Net income		2,260

2.2 Statement of retained earnings:

Beginning balance
Retained earnings December 1	0
Add: net income for December	2,260
Total		2,260
less: dividiends
Dividend paid to the sole shareholder		930
Retained earnings balance Dec. 31		1,330

2.3  Balance sheet:

(as on Dec 31)
Assets
Current assets
Cash/Bank	59,750
Accounts receivable	800
Office supplies	1,400
Total current assets	61,950
Electrical equipment	13,300
Office equipment	2,880
Total assets	78,130
Liabilities and shareholder's equity
Current liability
Accounts payable	8,700
Total current liability	8,700
Long term debt	0
Total liabilities	8,700
Shareholder's equity
Equity	68,100
Retained earnings	1,330
Total shareholder's equity	69,430
Total liabilities and shareholder's equity	78,130

3. Statement of cash flows:

Cash flow from operating activities
Net Income	2,260
Adjustments:
(Increase)/Decrease in current assets
Accounts receivable	-          800
Office supplies	-      1,400
Increase/(Decrease) in current liabilities
Accounts payable	8,700
Net cash provided by operating activities	8,760
Cash flows from investing activities
Purchase of electrical equipment	-    13,300
Purchase of office equipment	-      2,880
Net cash used in investing activities	-    16,180
Cash flow from financing activities
Issue of new equity	68,100
Payment of dividends	-          930
Net cash provided by financing activities	67,170
Net increase/(decrease)in cash	59,750
Beginning cash balance	0
Ending cash balance	59,750