In: Accounting
Problem 4-5B Record transactions, post to the Cash T-account, and prepare the statement of cash flows (LO4-7)
[The following information applies to the questions
displayed below.]
Peter loves dogs and cats. For the past several years, he has
owned and operated Homeward Bound, which temporarily houses pets
while their owners go on vacation. For the month of June, the
company has the following transactions:
1. | June | 2 | Obtain cash by borrowing $21,000 from the bank by signing a note. | |||
2. | June | 3 | Pay rent for the current month, $1,500. | |||
3. | June | 7 | Provide services to customers, $4,100 for cash and $2,400 on account. | |||
4. | June | 11 | Purchase cages and equipment necessary to maintain the animals, $7,300 cash. | |||
5. | June | 17 | Pay employees’ salaries for the first half of the month, $5,400. | |||
6. | June | 22 | Pay dividends to stockholders, $1,275. | |||
7. | June | 25 | Receive cash in advance from a customer who wants to house his two dogs (Chance and Shadow) and cat (Sassy) while he goes on vacation the month of July, $1,550. | |||
8. | June | 28 | Pay utilities for the month, $2,200. | |||
9. | June | 30 |
Record salaries earned by employees for the second half of the month, $5,400. Payment will be made on July 2. |
Cash Account | |||
Description | Debit | Credit | Date |
Beginning Balance | |||
Note Payable | $ 21,000.00 | Jun-02 | |
Rent Expense | $ 1,500.00 | Jun-03 | |
Service Revenue | $ 4,100.00 | Jun-07 | |
Equipment | $ 7,300.00 | Jun-11 | |
Salaries Expense | $ 5,400.00 | Jun-17 | |
Dividend | $ 1,275.00 | Jun-22 | |
Unearned Service Revenue | $ 1,550.00 | Jun-25 | |
Utilities Expense | $ 2,200.00 | Jun-28 | |
Ending Balance | $ 8,975.00 |
Beginning Balance taken as $0,
Only transaction involving cash are recorded in cash book, other
transactions like Sales on account and payable not entered.
Cash Flow Statement | |||
Direct Method | |||
Cash Flow from Operating Activities | |||
Cash paid for rent | $ (1,500) | ||
Cash collected for performance of service | $ 4,100.00 | ||
Cash paid for Salaries | $ (5,400.00) | ||
Cash collected for service to be performed | $ 1,550.00 | ||
Cash paid for Utilities | $ (2,200.00) | ||
Cash used in Operating Activities | $ (3,450.00) | ||
Cash flow from Investing Activities | |||
Purchase of Equipment | $ (7,300.00) | ||
Net cash used In investing activities | $ (7,300.00) | ||
Cash flow from Financing Activities | |||
Issue of Notes Payable | $ 21,000.00 | ||
Dividend Paid | $ (1,275.00) | ||
Net cash used in financing activities | $ 19,725.00 | ||
Increase in Cash | $ 8,975.00 | ||
Opening Balance of Cash | $ - | ||
Closing Balance of Cash | $ 8,975.00 |