Question

Following are dated August 31, 2018

1.When the corporation was formed on September 1, 2017, common shares were sold to the sole shareholder, Uncle Bob, for $10,000 cash.

2.Uncle Bob added up all of the invoices the company issued to its customers and the total came to $229,400. All of these were issued on credit.

3.The company received $190,000 cash from customers when they paid their invoices.

4.The company rents a small repair shop for $3,500 per month. The shop was rented for the full year and all rent was paid in cash. In addition, the landlord required the company to pay one month's rent in advance.

5.Salaries to employees totalled $120,000 for the year and were paid in cash.

6.Uncle Bob determined from a review of numerous invoices that the office expenses for the year were $36,400. Of these, all were paid except $4,000 that was still owing.

7.In late August, a new customer approached the company and signed a contract for service to be done to its computers starting in October 2018. The customer paid the company $2,000 in advance to secure the service.

8.Uncle Bob estimated that, given the net income earned by the company this year, income tax  

   expense should be $6,200 but this would not have to be paid for another two months.

9.The company declared and paid $1,000 of dividends to shareholders at the end of the year.

Question:

a)  Prepare an equation analysis of the effects of the above transactions on the expanded accounting equation.

b) Prepare an income statement, statement of changes in equity, and statement of financial position for the year.

Answer 1