Question

Gabi Gram started The Gram Co., a new business that began operations on May 1. The Gram Co. completed the following transactions during its first month of operations. May 1 G. Gram invested $42,500 cash in the company in exchange for its common stock. 1 The company rented a furnished office and paid $2,300 cash for May’s rent. 3 The company purchased $1,910 of office equipment on credit. 5 The company paid $730 cash for this month’s cleaning services. 8 The company provided consulting services for a client and immediately collected $5,400 cash. 12 The company provided $2,700 of consulting services for a client on credit. 15 The company paid $760 cash for an assistant’s salary for the first half of this month. 20 The company received $2,700 cash payment for the services provided on May 12. 22 The company provided $3,600 of consulting services on credit. 25 The company received $3,600 cash payment for the services provided on May 22. 26 The company paid $1,910 cash for the office equipment purchased on May 3. 27 The company purchased $80 of office equipment on credit. 28 The company paid $760 cash for an assistant’s salary for the second half of this month. 30 The company paid $350 cash for this month’s telephone bill. 30 The company paid $290 cash for this month’s utilities. 31 The company paid $1,800 cash in dividends to the owner (sole shareholder). 2.1. Prepare the income statement for May. 2.2. Prepare the statement of retained earnings for May. 2.3. Prepare the balance sheet as of May 31. 3. Prepare the statement of cash flows for the month of May..

Answer 1

The Gram Co. Income Statement
Service revenue:
Consulting services (May 8)	$5,400
Consulting services (May 12)	2,700
Consulting services (May 22)	3,600
Total revenue		$11,700
Expenses:
Rent	2,300
Cleaning services	730
Assistant's salary ($760+760)	1,520
Telephone bill	350
Utilities	290
Total expenses		-5,190
Net income		$6,510

The Gram Co. Statement of Retained Earnings
Beginning retained earnings	$0
Add: Net income	6,510
Less: Dividends	-1,800
Ending retained earnings	$4,710

The Gram Co. Balance Sheet
Assets		Liabilities
Current assets:		Current liabilities
Cash	$45,300	Accounts payable	$80
Accounts receivable	0	Total current liabilities	80
Total current assets	45,300	Stockholder's equity:
Property,plant and equipment:		Common stock	42,500
Office equipment ($1,910+80)	1,990	Retained earnings	4,710
		Total stockholder's equity	47,210
Total assets	$47,290	Total stockholder's equity and liabilities	$47,290

Cash
Common stock	$42,500	Rent	2,300
Consulting services	5,400	Cleaning services	730
Accounts receivable	2,700	Assistant salary	760
Accounts receivable	3,600	Office equipment	1,910
		Assistant salary	760
		Telephone bill	350
		Utilities	290
		Dividends	1,800
End.Bal.	$45,300
Accounts payable
Cash	$1,910	Office equipment	$1,910
		Office equipment	80
End.Bal.			$80
Accounts receivable
Consulting services	$2,700	cash	2,700
Consulting services	3,600	cash	3,600
End.Bal.	$0

The Gram Co. Statement of Cash Flow
Cash flow from operating activities:
Cash receipts from clients	$11,700
Cash payment for rent	-2,300
Cash payment for cleaning services	-730
Cash payment for assistant's salary	-1,520
Cash payment for telephone bill	-350
Cash payment for utilities	-290
Net cash flow from operating activities		$6,510
Cash flow from investing activities:
Cash purchases of office equipment	-1,910
Net cash flow from investing activities		-1,910
Cash flow from financing activities:
Proceeds from issue of common stock	42,500
Dividends paid	-1,800
Net cash flow from investing activities		40,700
Net increase / decrease in cash		45,300
Beginning cash balance		0
Ending cash balance		$45,300