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The accountant for the firm owned by Randy Guttery prepares financial statements at the end of...

The accountant for the firm owned by Randy Guttery prepares financial statements at the end of each month. The following transactions for Randy Guttery, Landscape Consultant took place during the month ended June 30, 2019.

Transactions:

Guttery invested $140,000 in cash to start the business.

Paid $4,000 for the current month’s rent.

Bought office furniture for $14,720 in cash.

Performed services for $9,200 in cash.

Paid $1,050 for the monthly telephone bill.

Performed services for $15,000 on credit.

Purchased a computer and copier for $34,000; paid $11,000 in cash immediately with the balance due in 30 days.

Received $7,500 from credit clients.

Paid $2,000 in cash for office cleaning services for the month.

Purchased additional office chairs for $3,800; received credit terms of 30 days.

Purchased office equipment for $20,000 and paid half of this amount in cash immediately; the balance is due in 30 days.

Issued a check for $7,400 to pay salaries.

Performed services for $15,500 in cash.

Performed services for $17,000 on credit.

Collected $6,000 on accounts receivable from charge customers.

Issued a check for $1,900 in partial payment of the amount owed for office chairs.

Paid $500 to a duplicating company for photocopy work performed during the month.

Paid $1,020 for the monthly electric bill.

Guttery withdrew $7,000 in cash for personal expenses.

Required:
Prepare a trial balance, an income statement, a statement of owner’s equity, and a balance sheet. Assume that the transactions took place during the month ended June 30, 2019. Determine the account balances before you start work on the financial statements.

Analyze:
What is the change in owner’s equity for the month of June?

Solutions

Expert Solution

Landscape Consultant

Journal Entries

(For the month June,2019)

Particular Debit Credit
Cash 140,000
Capital 140,000
Rent expenses 4,000
Cash 4,000
Furniture 14,720
Cash 14,720
Cash 9,200
Service revenue 9,200
Telephone Expenses 1,050
Cash 1,050
Accounts receivable 15,000
Service revenue 15,000
Computer & copier 34,000
Cash 11,000
Accounts payable 23,000
Cash 7,500
Accounts receivable 7,500
Cleaning Expenses 2,000
Cash 2,000
Chairs 3,800
Accounts payable 3,800
Office equipment 20,000
Cash 10,000
Accounts payable 10,000
Salaries Expenses 7,400
Bank 7,400
Cash 15,500
Service revenue 15,500
Accounts receivable 17,000
Service revenue 17,000
Cash 6,000
Accounts receivable 6,000
Accounts payable 1,900
Bank 1,900
Photocopy Expenses 500
Cash 500
Electric bill Expenses 1,020
Cash 1,020
Drawings 7,000
Cash 7,000

Ledger accounts

Cash

Items amount Items amount
Capital 140,000 Rent Expenses 4,000
Service revenue 9,200 Furniture 14,720
Service revenue 15,500 Telephone expenses 1,050
Accounts receivable 6,000 computer& copier 11,000
Accounts receivable 7,500 Cleaning Expenses 2,000
Office equipment 10,000
Photocopy Expenses 500
Electric bill 1,020
Drawings 7,000

Balance CD 126,910

Capital

Cash 140,000
Balance CD 140,000

Rent expenses

Cash 4,000
Balance CD 4,000

Furniture

Cash 14,720
Balance CD 14,720

Service revenue

Cash 9,200
Accounts receivable 15,000
Cash 15,500
Accounts receivable 17,000
Total 56,700
Balance CD 56,700

Accounts payable

Computer & copier 23,000
Bank 1,900 Chairs 3,800
Balance 34,900 Office equipment 10,000
Total 36,800 Total 36,800
Balance CD 34,900

Accounts receivable

Service revenue 15,000 Cash 7,500
Service revenue 17,000 Cash 6,000
Balance 18500
Total 32,000 Total 32,000

Balance CD 18,500

Bank

Salaries expenses 7,400
Accounts payable
Balance CD 9300

Trial balance

items Debit Credit
Cash 126,910
Bank 9,300
Furniture 14,720
Computer& copier 34,000
Chairs 3,800
Accounts receivable 18,500
Rent expenses 4,000
Telephone expenses 1,050
Cleaning Expenses 2,000
Office equipment 20,000
Salaries expenses 7,400
Photocopy Expenses 500
Electric bill Expenses 1,020
Capital 140,000
Accounts payable 34,900
Service revenue 56,700
Drawings 7,000
Total 240,900 240,900

Income statement

Items amount
Service revenue 56,700
Less:- Expenses
Rent expenses (4,000)
Telephone expenses (1,050)
Cleaning Expenses (2,000)
Salaries expenses (7,400)
Photocopy Expenses (500)
Electric bill Expenses (1,020)
Total Expenses (15,970)
Net Income 40,730

Changes in owner's Equity

Items amount
Capital in the beginning 140,000
Add:- Net income 40,730
Total 180,730
Less:- Drawings (7,000)
Closing balance of owner's equity 173,730

Balance sheet

Items amount
Assets:-
Cash 126,910
Furniture 14,720
Computer& copier 34,000
Chairs 3,800
Office equipment 20,000
Accounts receivable 18,500
Total Assets 217,930
Liabilities:-
Owner's equity 173,730
Bank 9,300
Accounts payable 34,900
Total Liabilities 217,930

Analysis of owner's equity is important for business,it should be done analysing on the basis of assets and liabilities, Net income and other tools.

In the above mentioned consultant firm owner's equity changes positive there is not any decreases in capital in the June month.


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