Question

Problem 1-1A

Fredonia Repair Inc. was started on May 1. A summary of May transactions is presented below.

1. Stockholders invested $15,500 cash in the business in exchange for common stock.

2. Purchased equipment for $5,500 cash.

3. Paid $200 cash for May office rent.

4. Paid $600 cash for supplies.

5. Incurred $300 of advertising costs in the Beacon News on account.

6. Received $5,000 in cash from customers for repair service.

7. Declared and paid a $1,000 cash dividend.

8. Paid part-time employee salaries $1,000.

9. Paid utility bills $140.

10. Performed repair services worth $990 on account.

11. Collected cash of $140 for services billed in transaction (10).

Part 1.

Prepare a tabular analysis of the transactions. Revenue is called Service Revenue.

Part 2.

From an analysis of the Retained Earnings columns, compute the net income or net loss for May.

Answer 1

Answer to part 1
	Cash	+	Accounts Receivable	+	Supplies	+	Equipment	=	Accounts Payable	+	Common Stock	+	Retained Earnings
1	15500										15500
	15500	+		+		+		=		+	15500	+
2	-5500						5500
	10000	+		+		+	5500	=		+	15500	+
3	-200												-200
	9800	+		+		+	5500	=		+	15500	+	-200
4	-600				600
	9200	+		+	600	+	5500	=		+	15500	+	-200
5									300				-300
	9200	+		+	600	+	5500	=	300	+	15500	+	-500
6	5000												5000
	14200	+		+	600	+	5500	=	300	+	15500	+	4500
7	-1000												-1000
	13200	+		+	600	+	5500	=	300	+	15500	+	3500
8	-1000												-1000
	12200	+		+	600	+	5500	=	300	+	15500	+	2500
9	-140												-140
	12060	+		+	600	+	5500	=	300	+	15500	+	2360
10			990										990
	12060	+	990	+	600	+	5500	=	300	+	15500	+	3350
11	140		-140
	12200	+	850	+	600	+	5500	=	300	+	15500	+	3350

Answer to Part 2:

Service revenue						5990
Expenses:
Salaries and wages expenses					1000
Rent expense					200
Advertising expense					300
Utilities expense					140
Total Expense						1640
Net Income (5990 - 1640)						4350