Question & Answer: Aurora Goodwin started her own consulting firm, 1 May 2016. The following transactions occurred during the month of May: May 1 Shareho…..

PSA2.2:

(b) From an analysis of the column Anahse transactions and prepare month of May: Lore inancialaiPSA2.2 Aurora Goodwin started her own consulting firmh, I May 2016. The following transactions occurred during the May1 Shareholders invested $10000 cash in the business. 2 Paid $1050 for office rent for the month 3 Purchased $250 of supplies on account. 5Paid $75 to advertise in the Auckland Neus 9 Received $1250 cash for services provided Paid $100 for telephone. Performed $3500 of services on account. 12 15 17 Paid $2000 for employee salaries. 20 Paid for the supplies purchased on account on 3 May 25 Received a cash payment of $2250 for services provided on 26 Borrowed $2500 from the bank. 29 30 Paid $125 for electricity. account on 15 May Purchased office equipment for $1200 on account. Required following format: Assets Liabilities BankAccounts Equity Accounts Office Date Cash Receivable + Supplies Equipment Loan + Payable + Capital Share Include margin explanations for any changes in Retained Earnings. (b) Prepare a statement of profit or loss for the month of May. (c) Prepare a statement of financial position as at 31 May 2016.

Aurora Goodwin started her own consulting firm, 1 May 2016. The following transactions occurred during the month of May: May 1 Shareholders invested $10000 cash in the business. 2 Paid $1050 for office rent for the month 3 Purchased $250 of supplies on account. 5 Paid $75 to advertise in the Auckland News 9 Received $1250 cash for services provided 12 Paid $100 for telephone. 15 Performed $3500 of services on account. 17 Paid $2000 for employee salaries. 20 Paid for the supplies purchased on account on 3 May. 23 Received a cash payment of $2250 for services provided on account on 15 May. 26 Borrowed $2500 from the bank. 29 Purchased office equipment for $1200 on account. 30 Paid $125 for electricity. Required (a) Show the effects of the previous transactions on the accounting equation using following format: Include margin explanations for any changes in Retained Earnings. (b) Prepare a statement of profit or loss for the month of May. (c) Prepare a statement of financial position as at 31 May 2016.

Expert Answer

 

a.

Date Cash Accounts Receivable Supplies Office Equipment = Bank Loan Accounts Payable Share Capital Retained Earnings
May $ $ $ $ $ $ $ $
1 10,000 10,000
2 (1,050) (1,050)
3 250 250
5 (75) (75)
9 1,250 1,250
12 (100) (100)
15 3,500 3,500
17 (2,000) (2,000)
20 (250) (250)
23 2,250 (2,250)
26 2,500 2,500
29 1,200 1,200
30 (125) (125)
31 12,400 1,250 250 1,200 2,500 1,200 10,000 1,400

b. Statement of Profit or Loss

For the month of May 2016

$ $
Revenue from Services 4,750
Expenses
Rent Expense 1,050
Advertising Expense 75
Telephone Expense 100
Salaries Expense 2,000
Electricity Expense 125
Total Expenses 3,350
Income from Operations 1,400

c. Statement of Financial Position

As at 31 May 2016

Assets $
Cash 12,400
Accounts Receivable 1,250
Supplies 250
Equipment 1,200
Total Assets 15,100
Liabilities and Shareholders’ Equity
Bank Loan 2,500
Accounts Payable 1,200
Share Capital 10,000
Retained Earnings 1,400
Liabilities and Shareholders’ Equity 15,100
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