Question

Stacey's Piano Rebuilding Company has been operating for one year. At the start of the second year, its income statement accounts had zero balances and its balance sheet account balances were as follows:

Cash	$	6,900	Accounts payable	$	9,200
Accounts receivable		30,600	Unearned revenue		3,740
Supplies		1,530	Note payable (long-term)		47,800
Equipment		9,800	Common stock		1,600
Land		7,800	Retained earings		14,790
Building		26,900	Additional paid-in capital		6,400

a. Rebuilt and delivered five pianos in January to customers who paid $18,700 in cash.

b. Received a $560 deposit from a customer who wanted her piano rebuilt.

c. Rented a part of the building to a bicycle repair shop; received $900 for rent in January.

d. Received $7,500 from customers as payment on their accounts.

e. Received an electric and gas utility bill for $510 to be paid in February.

f. Ordered $910 in supplies.

g. Paid $1,540 on account in January.

h. Received from the home of Stacey Eddy, the major shareholder, a $960 tool (equipment) to use in the business in exchange for 110 shares of $1 par value stock.

i. Paid $14,200 in wages to employees who worked in January.

j. Declared and paid a $2,000 (reduce Retained Earnings and Cash).

k. Received and paid cash for the supplies in (f).

1 & 2. Enter the following transactions for January of the second year into the T-accounts, using the letter of each transaction as the reference.

3. Using the data from the T-accounts, amounts for the following at the end of January of the second year, were:

Revenues ________ - Expenses ______ = Net Income _______

Assets ______ = Liabilities _______ + Stockholders' equity ________

4. What is net income if Stacey’s used the cash basis of accounting?

Net Income _________

Answer 1

Answer 1 & 2.
Cash					Accounts Receivable					Supplies
Beg. Bal.	6,900.00	1,540.00	g.		Beg. Bal.	30,600.00	7,500.00	d.		Beg. Bal.	1,530.00
a.	18,700.00	14,200.00	i.							k.	910.00
b.	560.00	2,000.00	j.
c.	900.00	910.00	k.
d.	7,500.00
End. Bal.	15,910.00				End. Bal.	23,100.00				End. Bal.	2,440.00
Equipment					Land.					Building
Beg. Bal.	9,800.00				Beg. Bal.	7,800.00				Beg. Bal.	26,900.00
h.	960.00
End. Bal.	10,760.00				End. Bal.	7,800.00				End. Bal.	26,900.00
Accounts Payable					Unearned Revenue					Note-Payable (Long Term)
Beg. Bal.		9,200.00			Beg. Bal.		3,740.00			Beg. Bal.		47,800.00
g.	1,540.00						560.00	b.
End. Bal.		7,660.00			End. Bal.		4,300.00			End. Bal.		47,800.00
Common Stock					Retained Earnings					Additional Paid-In Capital
Beg. Bal.		1,600.00			Beg. Bal.		14,790.00			Beg. Bal.		6,400.00
		110.00	h.		j.	2,000.00						850.00	h.
End. Bal.		1,710.00			End. Bal.		12,790.00			End. Bal.		7,250.00
Service Revenue					Rent Revenue					Utilities Payable
		18,700.00	a.				900.00	c.				510.00	e.
End. Bal.		18,700.00			End. Bal.		900.00			End. Bal.		510.00
Utilities Expense					Wages Expense
e.	510.00				i.	14,200.00
End. Bal.	510.00				End. Bal.	14,200.00

Answer 3.
Revenues $19,600 - Expenses $14,710 = Net Income $4,890
Assets $86,910 = Liabilities $60,270 + Stockholders' equity $26,640
Income Statement
For The Month Ended Jan 31
Revenues:
Service Revenue	18,700.00
Rent Revenue	900.00	19,600.00
Expenses
Utilities Expense	510
Wages Expense	14200
Total Expenses		14,710.00
Net Income (Loss)		4,890.00
Statement of Retained Earnings
For The Month Ended Jan 31
Beginning Balance, Jan 1	14,790.00
Add: Net Income	4,890.00
Less: Dividends	(2,000.00)
Ending Balance, Jan 31	17,680.00
Balance Sheet
Jan 31
Assets
Current Assets
Cash	15,910.00
Accounts Receivable	23,100.00
Supplies	2,440.00
Total Current Assets		41,450.00
Property, Plant & Equipment
Equipment	10760
Land.	7800
Building	26900
Total Property, Plant & Equipment		45,460.00
Total Assets		86,910.00
Liabilities & Shareholders' Equity
Liabilities
Current Liabilities
Accounts Payable	7,660.00
Unearned Revenue	4,300.00
Utilities Payable	510.00
Total Current Liabilities		12,470.00
Long-Term Liabilities
Note-Payable (Long Term)		47,800.00
Total Liabilities		60,270.00
Shareholders' Equity
Common Stock	1,710.00
Additional Paid-In Capital	7,250.00
Total Paid in Capital	8,960.00
Retained Earnings	17,680.00
Total Shareholders' Equity		26,640.00
Total Liabilities & Stockholders' Equity		86,910.00	-
Answer 4.
Cash Basis of Accounting
Cash Receipts	27,660.00	(Transactions a through d)
Less: Cash disbursements	16,650.00	(Transactions g, I & k)
Net Income	11,010.00