Question

Month of April

Date
April-01	Acquired $55000 to establish the company, $33000 from an initial investment through the issue of common stock to themselves and $22000 from a bank loan by signing a note. The entire note is due in 5 years and has 7 per cent annual interest rate. Interest is payable in cash on March 31 of each year.
April-01	Paid $4200 (represents 3 months) in advance rent for a one-year lease on kitchen space.
April-01	Paid $35000 to purchase a refrigerator. The refrigerator is expected to have a useful life of 5 years and a salvage value of $5000 at the end of 5 years.
April-06	Purchased supplies for $500 for cash.
April-09	Received $700 cash as an advance payment from a client to be served in May.
April-10	Recorded sale to customers. Cash receipts were $700 and invoices for sales on account were $1500.
April-15	Paid $1460 cash for employee semi-monthly salaries.
April-16	Collected $400 from accounts receivable.
April-23	Received monthly utility bills amounting to $340. The bills are to be paid in May.
April-25	Paid advertising expense for advertisements run during April, $260.
April-30	Recorded services to customers . Cash receipts were $1300 and invoices for services on account were $1800.
April-30	Paid $1460 cash for employer salaries

Required:

1. Prepare an adjusted trial balance for the month of April.

2. Prepare an income statement, statement of retained earnings, and balance sheet for April.

Answer 1

Income Statement for the month of April:

Expense	Amount in $	Incomes	Amount in $
Accrued Interest on bank note (22000*7%*1/12)	128	Sale - Cash	700
Rent (4200/3)	1400	Sale - On account	1500
Depreciation on fridge [{(35000-5000)/5}/12]	500	Service Sale - Cash	1300
Purchases - supplies	500	Service sale - credit	1800
Salaries (1460 + 1460)	2920	Loss c/f	748
Utility Bills	340
Advertisement Expenses	260
Total	6048	Total	6048

Cash Account for the month of April:

Debit	Amount (in $)	Credit	Amount ($)
Share capital - Common stock	33000	Advance Rent	4200
Funds from bank Note	22000	Fridge Purchase	35000
Advance from customers	700	Purchase - supplies	500
Sale - cash	700	Salaries (1460 *2 )	2920
Receipt from accounts receivable	400	Advertising Expenses	260
Service sale - cash	1300	Cash balance c/f	15220
	58100		58100

Balance Sheet as on 30th April

Assets	Amount in $	Liabilities	Amount in $
Fixed Assets - Fridge 35000 Less: Accumulated Depreciation 500	34500	Share Capital - common stock	33000
current Assets - Accounts Receivable (1500-400+1800)	2900	Bank Note 22000 Add: Accrued Interest 128	22128
current Assets - cash	15220	Current Liabilities - Utility bills payable	340
Current Asset - Advance Rent	2800	Current Liabilities - Advance from customer	700
Profit and Loss A/c (loss c/f)	748
	56168		56168

Assumption : No inventory on 30th April.