Question

Gabi Gram started The Gram Co., a new business that began operations on May 1. The Gram Co. completed the following transactions during its first month of operations.

May		1		G. Gram invested $40,500 cash in the company in exchange for its common stock.
		1		The company rented a furnished office and paid $2,600 cash for May’s rent.
		3		The company purchased $1,930 of office equipment on credit.
		5		The company paid $750 cash for this month’s cleaning services.
		8		The company provided consulting services for a client and immediately collected $6,000 cash.
		12		The company provided $3,000 of consulting services for a client on credit.
		15		The company paid $740 cash for an assistant’s salary for the first half of this month.
		20		The company received $3,000 cash payment for the services provided on May 12.
		22		The company provided $3,400 of consulting services on credit.
		25		The company received $3,400 cash payment for the services provided on May 22.
		26		The company paid $1,930 cash for the office equipment purchased on May 3.
		27		The company purchased $75 of office equipment on credit.
		28		The company paid $740 cash for an assistant’s salary for the second half of this month.
		30		The company paid $300 cash for this month’s telephone bill.
		30		The company paid $280 cash for this month’s utilities.
		31		The company paid $1,800 cash in dividends to the owner (sole shareholder).

2-c. Prepare balance sheet for May 31.
3. Prepare statement of cash flows for May.

Answer 1

Balance Sheet
Assets
Cash			$ 43,760.00
Office Equipment			$   2,005.00
Total			$ 45,765.00
Liabilities
Accounts Payable			$        75.00
Equity
Common Stock			$ 40,500.00
Retained Earnings			$   5,190.00
Total Liabilities and Equity			$ 45,765.00

Workings:

Income Statement
Service Revenue			$ 12,400.00
Office Rent		$ 2,600.00
Cleaning Services		$    750.00
Salary Expense		$ 1,480.00
Telephone expense		$    300.00
Utilities Expense		$    280.00	$   5,410.00
Net Income			$   6,990.00

Retained Earnings = $ 6990 - $ 1800 (Dividend) = $ 5190

	Statement of cash flow
	Cash flow from operating activities
	Collection from customers					$ 12,400.00
	Cash paid for
	Office Rent					$ (2,600.00)
	Cleaning Services					$     (750.00)
	Salary Expense					$ (1,480.00)
	Telephone expense					$     (300.00)
	Utilities Expense					$     (280.00)
	Net cash generated from operating activities (A)					$   6,990.00
	Cash flow from investing activities
	Purchase of office equipment					$ (1,930.00)
	Net cash generated from investing activities (B)					$ (1,930.00)
	Cash flow from financing activities
	Issue of common sock					$ 40,500.00
	Dividend paid					$ (1,800.00)
	Net cash generated from financing activities				(C)	$ 38,700.00
	Net increase in cash				(A+B+C)	$ 43,760.00
Add:	Beginning balance					$               -
	Ending balance					$ 43,760.00