Question

Sanyu Sony started a new business and completed these transactions during December.

Dec. 1 Sanyu Sony transferred $67,400 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 $1,400 cash for the December rent.

3 The company purchased $14,500 of electrical equipment by paying $6,300 cash and agreeing to pay the $8,200 balance in 30 days.

5 The company purchased office supplies by paying $800 cash.

6 The company completed electrical work and immediately collected $1,100 cash for these services.

8 The company purchased $2,560 of office equipment on credit.

15 The company completed electrical work on credit in the amount of $4,500.

18 The company purchased $410 of office supplies on credit.

20 The company paid $2,560 cash for the office equipment purchased on December 8.

24 The company billed a client $900 for electrical work completed; the balance is due in 30 days.

28 The company received $4,500 cash for the work completed on December 15.

29 The company paid the assistant’s salary of $1,400 cash for this month.

30 The company paid $530 cash for this month’s utility bill.

31 The company paid $970 cash in dividends to the owner (sole shareholder).

3-a. Prepare an income statement for the current month.  

3-b. Prepare a statement of retained earnings for the current month.

3-c. Prepare a statement of cash flows for the current month. (Cash outflows should be indicated with a minus sign.)

3-d. Prepare a balance sheet as of the end of the month.

Answer 1

Trial Balance
Particulars	Dr. Amt.	Cr. Amt.
Cash	59,040.00
Office Supplies	1,210.00
Accounts Receivable	900.00
Electrical Equipment	14,500.00
Office Equipment	2,560.00
Accounts Payable		410.00
Notes Payable		8,200.00
Common Stock		67,400.00
Dividends	970.00
Service Revenue		6,500.00
Rent Expenses	1,400.00
Salary Expenses	1,400.00
Utility Expenses	530.00
Total	82,510.00	82,510.00
		-
Answer 3-a.
Income Statement
For the Month Ended Dec 31
Revenue
Service Revenue		6,500.00
Expenses
Rent Expenses	1,400.00
Salary Expenses	1,400.00
Utility Expenses	530.00
Total Expenses		3,330.00
Net Income		3,170.00
Answer 3-b.
Statement of Retained Earnings
For the Month Ended Dec 31
Beginning Balance	-
Net Income	3,170.00
Sub-total	3,170.00
Dividends	970.00
Ending Balance, Dec 31	2,200.00
Answer 3-c.
Statement of Cash Flows (Indirect Method)
For the Month ended Dec 31
Cash Flow from opearating activities:
Net Income		3,170
Add/(Less) non cash effects on operating activities
Increase in Accounts Receivables	(900)
Increase in Supplies	(1,210)
Increase in Accounts Payables	410	(1,700)
Net Cash provided by operating activities		1,470
Cash flow from Investing Activities
Purchase of Electrical Equipment	(6,300)
Purchase of Office Equipment	(2,560)
Net Cash used by Investing activities		(8,860)
Cash Flow from Financing Activities
Issue of Common Stock	67,400
Cash dividend paid	(970)
Net Cash provided by Financing activities		66,430
Net Increase / (Decrease) in Cash		59,040
Cash balance at the beginning - Dec 1		-
Cash balance at the end - Dec 31		59,040
Answer 3-d.
Balance Sheet
As on Dec 31
Assets
Current Assets
Cash	59040
Office Supplies	1210
Accounts Receivable	900	61,150.00
Property, Plant & Equipment
Electrical Equipment	14500
Office Equipment	2560	17,060.00
Total Assets		78,210.00
Liabilities & Stockholders' Equity
Liabilities
Current Libilities
Accounts Payable	410.00
Notes Payable	8,200.00	8,610.00
Long-Term Liabilities		-
Total Liabilities		8,610.00
Stockholders' Equity
Common Stock	67,400.00
Retained Earnings	2,200.00
Total Stockholders' Equity		69,600.00
Total Liabilities & Stockholders' Equity		78,210.00