Question

Eric Wood, CPA, was organized on January 1 as a proprietorship. The financial statements for Eric Wood, CPA are shown below for three months ended March 31.

Eric Wood, CPA

Income Statement

For the Three Months Ended March 31

1	Fees earned		$42,000.00
2	Expenses:
3	Salary expense	$9,735.00
4	Rent expense	5,200.00
5	Advertising expense	3,950.00
6	Utilities expense	3,225.00
7	Miscellaneous expense	4,000.00
8	Answering service expense	2,550.00
9	Supplies expense	4,000.00
10	Total expenses		28,000.00
11	Net income		$14,000.00

Eric Wood, CPA

Statement of Owner’s Equity

March 31

1	Eric Wood, capital, January 1		$0.00
2	Investment on January 1	$20,000.00
3	Net income for three months	14,000.00
4	Withdrawals	(5,000.00)
5	Increase in owner’s equity		31,000.00
6	Eric Wood, capital, March 31		$31,000.00

Eric Wood, CPA

Balance Sheet

For the Three Months Ended March 31

1	Assets
2	Land	$13,000.00
3	Cash	10,860.00
4	Accounts payable	2,670.00
5	Supplies	925.00
6	Total assets	$33,225.00
7	Owner’s Equity
8	Eric Wood, capital	$31,000.00
9	Liabilities
10	Accounts receivable	2,225.00
11	Total liabilities and owner’s equity	$33,225.00

a)

Eric Wood, CPA

Statement of Owner’s Equity

(Label)

1
2
3
4
5
6

b)

Eric Wood, CPA

Balance Sheet

(label)

1	Assets
2
3
4
5
6
7	Liabilities
8
9	Owner’s Equity
10
11

Answer 1

Income Statement
Fees earned		42,000
Operating expenses:
Salary expense	9,735
Rent expense	5,200
Advertising expense	3,950
Utilities expense	3,225
Answering service expense	2,550
Supplies expense	4,000
Miscellaneous expense	4,000
Total operating expenses		32,660
Net income		9,340

Statement of Owner's Equity
Eric Wood, capital, January, 1	20,000
Investment on January 1	9,340
Net income for three months	29,340
Minus: Withdrawals	5,000
Increase in owner's equity		24,340
Eric Wood, capital, March 31		24,340

Balance Sheet
Assets
Cash	10,860
Accounts receivable	2,225
Supplies	925
Land	13,000
Total assets	27,010
Liabilities
Accounts payable	2,670
Owner's Equity
Eric Wood, Capital	24,340
Total liabilities and owner's equity	27,010