Question

Financial information related to the proprietorship of Ebony Interiors for February and March 2016 is as follows:

Accounts	February 29, 2016	March 31, 2016
Accounts payable	$310,000	$392,000
Accounts receivable	800,000	951,000
Cash	321,000	384,000
Justin Berk, capital	?	?
Supplies	35,000	33,000

	Required:
1.	Prepare balance sheets for Ebony Interiors as of February 29 and March 31, 2016. Refer to the lists of Accounts, Labels, and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading.
2.	Determine the amount of net income for March, assuming that the owner made no additional investments or withdrawals during the month.
3.	Determine the amount of net income for March, assuming that the owner made no additional investments but withdrew $44,000 during the month.

Answer 1

• All working forms part of the answer
• Capital balances have been calculated as “Total Assets (-) Accounts payables”
• Requirement 1

ASSETS	Feb 29, 2016	Mar 31, 2016
Cash	$              3,21,000.00	$             3,84,000.00
Accounts receivables	$              8,00,000.00	$             9,51,000.00
Supplies	$                 35,000.00	$                 33,000.00
Total Assets	$           11,56,000.00	$           13,68,000.00
LIABILITIES & EQUITY	Feb 29, 2016	Mar 31, 2016
Accounts payable	$              3,10,000.00	$             3,92,000.00
Justin Berk, Capital	$              8,46,000.00   [1156000 – 310000]	$             9,76,000.00   [1368000 – 392000]
Total Liabilities & Equity	$           11,56,000.00	$           13,68,000.00

• Requirement 2

Capital balance on Mar 31, 2016 [Ending balance]	$              9,76,000.00
Less: capital balance on Feb 29, 2016 [Beginning balance]	$              8,46,000.00
Net income	$              1,30,000.00

• Requirement 3

Capital balance on Mar 31, 2016 [Ending balance]	$              9,76,000.00
Add: Drawings during the month	$                 44,000.00
Less: capital balance on Feb 29, 2016 [Beginning balance]	$              8,46,000.00
Net income	$              1,74,000.00