Q3 / On July 31, 2018, the general ledger of Sandhill Inc. showed these balances: Cash...

Q3 / On July 31, 2018, the general ledger of Sandhill Inc. showed these balances: Cash $3,980; Accounts Receivable $1,490; Supplies $550; Equipment $4,970; Accounts Payable $4,090; Common Shares $3,500; and Retained Earnings $3,400. During August, the following transactions occurred:

Aug.	2	Collected $1,190 of accounts receivable due from customers.
	3	Received $1,300 for issuing common shares to new investors.
	6	Paid $2,680 on accounts payable owing.
	7	Earned fees of $6,500, of which $3,000 was collected in cash and the remainder was due on account.
	13	Purchased additional equipment for $1,200, paying $430 in cash and the balance on account.
	17	Paid salaries, $3,500, rent, $900, and advertising expenses, $275, for the month of August.
	17	Collected the balance of the fees earned on August 7.
	20	Declared and paid $500 of dividends to shareholders.
	22	Billed a client $1,000 for legal services provided.
	24	Received $2,000 from Laurentian Bank; the money was borrowed on a bank loan payable that is due in six months.
	27	Signed an engagement letter to provide legal services to a client in September for $4,530.
	28	Received the utility bill for the month of August in the amount of $275; it is due September 15.
	31	Paid income tax for the month, $500.

A/ Beginning with the July 31 balances, prepare an equation analysis of the effects of the opening balances and above transactions on the expanded accounting equation. (If a transaction causes a decrease in Assets, Liabilities or Shareholders' Equity, place a negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced. See Illustration 3-2 for example.)

B/Prepare an income statement as at August 31.

C/Prepare a statement of changes in equity as at August 31. (If an amount reduces the account balance then enter with negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

D/Prepare a statement of financial position as at August 31. (List Current Assets in order of liquidity.

Solutions

Expert Solution

Answer-A:

Assets = Liabilities + equity

$14,205 = $4,455 + $9,750

$14,205 = $14,205

Note: Net income is calculated as Revenue – Expenses and is added to Equity under retained earnings.

Answer-B:

Answer-C:

Answer-D:

ekkarill92 answered 1 year ago

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