Question

The Gorman Group is a financial planning services firm owned and operated by Nicole Gorman. As of October 31, 2019, the end of the fiscal year, the accountant for The Gorman Group prepared an end-of-period spreadsheet, part of which follows:

The Gorman Group End-of-Period Spreadsheet For the Year Ended October 31, 2019
	Adjusted Trial Balance
Account Title	Dr.	Cr.
Cash	$11,670
Accounts Receivable	25,410
Supplies	3,970
Prepaid Insurance	8,580
Land	90,000
Buildings	325,000
Accumulated Depreciation-Buildings		105,800
Equipment	235,000
Accumulated Depreciation-Equipment		137,800
Accounts Payable		30,050
Salaries Payable		2,980
Unearned Rent		1,350
Nicole Gorman, Capital		386,010
Nicole Gorman, Drawing	22,500
Service Fees		428,560
Rent Revenue		4,530
Salaries Expense	307,240
Depreciation Expense—Equipment	16,700
Rent Expense	14,000
Supplies Expense	9,890
Utilities Expense	8,930
Depreciation Expense—Buildings	5,960
Repairs Expense	4,920
Insurance Expense	2,700
Miscellaneous Expense	4,610
	1,097,080	1,097,080

Required:

1. Prepare an income statement.

Prepare a statement of owner's equity (no additional investments were made during the year.)

Prepare a balance sheet.

2. Journalize the entries that were required to close the accounts at October 31. For a compound transaction, if an amount box does not require an entry, leave it blank.

3. If the balance of Nicole Gorman, Capital had instead increased $115,000 after the closing entries were posted and the withdrawals remained the same, what would have been the amount of net income or net loss?

Answer 1

Part-1

The Gorman Group
Income Statement
For the year ended on October 31, 2019
Revenue
	Services Fees	$428,560.00
	Rent Revenues	$4,530.00
	Total Revenue		$433,090.00
Less: Expense
	Salaries Expense	$307,240.00
	Depreciation Expense- Equipment	$16,700.00
	Rent Expense	$14,000.00
	Supplies Expense	$9,890.00
	Utilities Expense	$8,930.00
	Depreciation Expense-Building	$5,960.00
	Repair Expense	$4,920.00
	Insurance Expense	$2,700.00
	Miscellaneous Expense	$4,610.00
	Total Expense		$374,950.00
Net Income			$58,140.00
The Gorman Group Statement of Owner's Equity For the year ended on October 31, 2019 Beginning Capital Balance $386,010.00 Add Net Income for the year $58,140.00 Less Drawing -$22,500.00 $35,640.00 Closing Capital Balance $421,650.00 The Gorman Group Balance Sheet for Year ended on 31 Oct 2019 Assets Current Asset Cash $11,670.00 Account Receivable $25,410.00 Office Supllies $3,970.00 Prepaid Insurance $8,580.00 Total Current Asset $49,630.00 Property, Plant & Equipment Land $90,000.00 Building 325000 Less: Accumulated Depreciation -105800 $219,200.00 Office Equipment $235,000.00 Less: Accumulated Depreciation -$137,800.00 $97,200.00 Total Asset $456,030.00 Liability & Equity Current Liabilities Account Payable $30,050.00 Salaries Payable $2,980.00 Unearned Rent $1,350.00 $34,380.00 Owner's Equity $421,650.00 Total Liability & Equity $456,030.00 Part-2 Journal Entries in the books of The Gorman Group Date Account Title & Explantation Debit Credit 31-Oct Service fees $428,560.00 Rent Revenue $4,530.00 Income Statement $433,090.00 To record Income 31-Oct Income Statement $374,950.00 Salaries Expense $307,240.00 Depreciation Expense- Equipment $16,700.00 Rent Expense $14,000.00 Supplies Expense $9,890.00 Utilities Expense $8,930.00 Depreciation Expense-Building $5,960.00 Repair Expense $4,920.00 Insurance Expense $2,700.00 Miscellaneous Expense $4,610.00 To record Expenses 31-Oct Income Statement $58,140.00 Nicole Gorman, Capital $58,140.00 To Close Income Statement Part-3 Computation of Income /Loss Net Income For the year $58,140.00 Capital Increased by $115,000.00 Net Loss will be -$56,860.00 ( $58140-115000)