Question

Transactions and Financial Statements

James Nesbitt established Up-Date Computer Services on August 1, 20Y4. The effect of each transaction and the balances after each transaction for August are shown below in the integrated financial statement framework.

Statement of Cash Flows	Balance Sheet
	Assets			=	Liabilities	+	Stockholders' Equity
	Cash	+	Land	=	Notes Payable	+	Common Stock	+	Retained Earnings
a. Issued common stock	25,000						25,000
b. Fees earned	27,000								27,000
Balances	52,000						25,000		27,000
c. Rent expense	(2,500)								(2,500)
Balances	49,500						25,000		24,500
d. Issued notes payable	10,000				10,000
Balances	59,500				10,000		25,000		24,500
e. Purchased land	(40,000)		40,000
Balances	19,500		40,000		10,000		25,000		24,500
f. Paid expenses	(1,900)								(1,900)
Balances	17,600		40,000		10,000		25,000		22,600
g. Paid salary expense	(4,600)								(4,600)
Balances	13,000		40,000		10,000		25,000		18,000
h. Paid dividends	(3,000)								(3,000)
Balances, Aug. 31	10,000		40,000		10,000		25,000		15,000
Statement of Cash Flows							Income Statement
a. Financing	25,000						b. Fees earned		27,000
b. Operating	27,000						c. Rent expense		(2,500)
c. Operating	(2,500)						f. Auto expense		(1,200)
d. Financing	10,000						f. Misc. expense		(700)
e. Investing	(40,000)						g. Salary expense		(4,600)
f. Operating	(1,900)						Net income		18,000
g. Operating	(4,600)
h. Financing	(3,000)
Increase in cash	10,000

Instructions:

1. Prepare an income statement for the month ended August 31, 20Y4.

Up-Date Computer Services
Income Statement
For the Month Ended August 31, 20Y4
		$
Operating expenses:
	$
Total operating expenses
Net income		$

2. Prepare a statement of stockholders’ equity for the month ended August 31, 20Y4. If your answer is zero enter "0".

Up-Date Computer Services
Statement of Stockholders' Equity
For the Month Ended August 31, 20Y4
	Common Stock	Retained Earnings	Total
Balances, August 1, 20Y4	$	$	$
			$
Balances, August 31, 20Y4	$	$	$

3. Prepare a balance sheet as of August 31, 20Y4.

Up-Date Computer Services
Balance Sheet
August 31, 20Y4
Assets
		$
Total assets		$
Liabilities
		$
Stockholders' Equity
	$
Total stockholders' equity
Total liabilities and stockholders' equity		$

4. Prepare a statement of cash flows for the month ended August 31, 20Y4. Use the minus sign to indicate cash out flows, decreases in cash, or cash payments. If your answer is zero enter "0".

Up-Date Computer Services
Statement of Cash Flows
For the Month Ended August 31, 20Y4
Cash flows from operating activities:
	$
		$
Cash flows from investing activities:
Cash flows from financing activities:
	$
		$
		$

Answer 1

1.

Up-Date Computer Services
Income Statement
For the Month Ended August 31, 20Y4
Fees earned		27000
Operating expenses:
Rent expense	2500
Auto expense	1200
Salary expense	4600
Miscellaneous expense	700
Total operating expenses		9000
Net income		18000

2.

Up-Date Computer Services
Statement of Stockholders' Equity
For the Month Ended August 31, 20Y4
	Common Stock	Retained Earnings	Total
Balances, August 1, 20Y4	0	0	0
Add: Capital invested	25000	0	25000
Add: Net income	0	18000	18000
Less: Dividends	0	-3000	-3000
Balances, August 31, 20Y4	25000	15000	40000

3.

Up-Date Computer Services
Balance Sheet
August 31, 20Y4
Assets
Cash		10000
Land		40000
Total assets		50000
Liabilities
Notes payable		10000
Stockholders' Equity
Common stock	25000
Retained earnings	15000
Total stockholders' equity		40000
Total liabilities and stockholders' equity		50000

4.

Up-Date Computer Services
Statement of Cash Flows
For the Month Ended August 31, 20Y4
Cash flows from operating activities:
Cash collected from customers	27000
Cash paid for expenses	-9000
Cash flows from investing activities:		18000
Purchase of land		-40000
Cash flows from financing activities:
Issuance of common stock	25000
Issuance of notes payable	10000
Payment of cash dividends	-3000
		32000
Net increase (decrease) in cash		10000
Cash balance, August 1, 20Y4		0
Cash balance, August 31, 20Y4		10000

Cash paid for expenses = 2500 + 1900 + 4600 = 9000