PSA2.2:
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 |