Question

In: Accounting

Cecil Jameson, Attorney-at-Law, is organized as a corporation and operated by Cecil Jameson. On July 1,...

Cecil Jameson, Attorney-at-Law, is organized as a corporation and operated by Cecil Jameson. On July 1, 2018, the company has the following assets, liabilities, and common stock: cash, $1,000; accounts receivable, $3,200; supplies, $850; land $10,00; accounts payable, $1,530; common stock, $10,00. Office space and office equipment are currently being rented, pending the construction of an office complex on land purchased last year. Business transactions during July are summarized as follows:

A. Received cash from clients for services, $3,928.
B. Paid creditors on account, $1055.
C. Received cash from Cecil Jameson as additional investment in exchange for common stock, $3,700.
D. Paid office rent for the month, 1,200.
E. Charge clients for legal services on account, $2,025.
F. Purchased supply on account, $245.
G. Received cash from clients on account, $3,000.
H. Received invoice for paralegal service from Legal Aid Inc. for July (to be paid on August 10), $1,635.
I. Paid the following: wages expense, $850; utilities expense, $325; answering service expense, $250; and miscellaneous expense, $75.
J. Determined that the cost of supplies on hand was $980; therefore, the cost of supplies used during the month was $115.
K. Paid dividends, $1,000.

Instructions

1. Determine the amount of retained earnings as of July 1, 2018.
2. State the assets, liabilities and stockholders’ equity as of July 1 in equation form similar to that shown in this chapter. In tabular form below the equation, indicate the increases and decreases resulting from each transaction and the new balances after each transaction.
3. Prepare an income statement for July, a retained earnings statement for July, and a balance sheet as of July 31, 2018.
4. (Optional) prepare a star menu of cash flows for July.



Solutions

Expert Solution

Cash + Accounts Receivable + Supplies + Land = Accounts Payable + Common Stock + Retained Earning
01-Jul-18 1000 3200 850 10000 1530 10000 3520 =1000+3200+850+10000-1530-10000
A 3928 3928
Bal 4928 3200 850 10000 1530 10000 7448
B -1055 -1055
Bal 3873 3200 850 10000 475 10000 7448
C 3700 3700
Bal 7573 3200 850 10000 475 13700 7448
D -1200 -1200
Bal 6373 3200 850 10000 475 13700 6248
E 2025 2025
Bal 6373 5225 850 10000 475 13700 8273
F 245 245
Bal 6373 5225 1095 10000 720 13700 8273
G 3000 -3000
Bal 9373 2225 1095 10000 720 13700 8273
H 1635 -1635
Bal 9373 2225 1095 10000 2355 13700 6638
I -1500 -1500 =-850-325-250-75
Bal 7873 2225 1095 10000 2355 13700 5138
J -115 -115
Bal 7873 2225 980 10000 2355 13700 5023
K -1000 -1000
Closing 6873 2225 980 10000 2355 13700 4023
Income Statement
Revenue 5953 =3928+2025
Less: Expenses
Office Rent 1200
Legal Expense 1635
Wages Expense 850
Utility expense 325
Answering service expense 250
Miscellaneous Expense 75
Supply Expense 115
Total Expense 4450
Net Income 1503 =5953-1618
Statement of Retained Earning
Opening bal 3520
Add: Net income 1503
Less: Dividend 1000
4023 =3520+1618-1000
Balance Sheet
Assets Amount Liability Amount
Cash 6873 Accounts Payable 2355
Accounts Receivable 2225 Common Stock 13700
Supplies 980 Reatined Earning 4023
Land 10000
20078 20078
4
Cash flow
Cash Flow from operating activities
Received from operation 6928 =3928+3000
Paid for expenses -3755 =-1055-1200-850-325-250-75
Cash flow from operations 3173
Cash flow from financing activity
Issue of common stock 3700
Dividend Paid -1000
Cash flow from financing activity 2700
Net cash flow during the period 5873
Add:Opening balance 1000
Closing Balance 6873

ekkarill92 answered 2 years ago
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