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Carla Quentin started her own consulting firm, Quentin Consulting, on May 1, 2012. The following
transactions occurred during the month of May.
May 1 Carla invested $7,000 cash in the business.
2 Paid $900 for office rent for the month.
3 Purchased $600 of supplies on account.
5 Paid $125 to advertise in the County News.
9 Received $4,000 cash for services provided.
12 Withdrew $1,000 cash for personal use.
15 Performed $5,400 of services on account.
17 Paid $2,500 for employee salaries.
20 Paid for the supplies purchased on account on May 3.
23 Received a cash payment of $4,000 for services provided on account on May 15.
26 Borrowed $5,000 from the bank on a note payable.
29 Purchased office equipment for $4,200 on account.
30 Paid $275 for utilities.
Instructions
(a) Show the effects of the previous transactions on the accounting equation using the following
format.
(b) Prepare the income statement, owner’s equity statement, and balance sheet at May 31 and a
cash flow statement for Quentin Consulting.
Solution: a. In excel file: Solution Statement from tabular analysis Carla Quentin.xls
(b) Prepare the income statement, owner’s equity statement, and balance sheet at May 31 and a cash
flow statement for Quentin Consulting.
CARLA QUENTIN
Income Statement
For the Month Ended May 31, 2012
_____________________________________________________________________________
Revenues
Service revenue ................................................................................. $9,400
Expenses
Rent expense ...................................................................................... $900
Advertising expense ........................................................................... 125
Salaries expense ................................................................................ 2,500
Utilities expense ................................................................................ 275
Total expenses ............................................................................. 3,800
Net income .................................................................................. $5,600
CARLA QUENTIN
Owner's Equity Statement
For the Month Ended May 31, 2012
CARLA QUENTIN
Balance Sheet
As of May 31, 2012
_____________________________________________________________________________
Assets
Cash ...................................................................................................... $ 14,600
Accounts receivable ................................................................................ 1,400
Supplies ................................................................................................... 600
Equipment ............................................................................................... 4,200
Total assets ........................................................................................ $20,800
Ans:
a) Make payment of previously due amount.
Solution
Proprietorship X ($45,000)
Beginning Capital balance ($460,000 – $250,000) $210,000
Additional investments ($290,000 – $210,000 – $35,000) 45,000
Net income for year ($195,000 – $160,000) 35,000
290,000
Less withdrawals 90,000
Ending Capital balance ($480,000 – $280,000) $200,000
Proprietorship Y ($172,000)
Beginning Capital balance ($180,000 – $105,000) $ 75,000
Additional investments 79,000
Net income for year 59,000
[Revenues = $172,000 ($113,000 + $59,000)] 213,000
Less withdrawals 83,000
Ending Capital balance ($225,000 – $95,000) $130,000
Proprietorship Z ($77,000)
Beginning Capital balance ($189,000 – $168,000) $ 21,000
Additional investments 80,000
Net income for year ($187,000 – $185,000) 2,000
103,000
Less withdrawals ($103,000 – $26,000) 77,000
Ending Capital balance ($195,000 – $169,000) $ 26,000
Exercise
The following transactions represent part of the activities of Lyon Company for the first month of
its existence. Indicate the effect of each transaction upon the total assets of the business by one of
the following phrases: increased total assets, decreased total assets, or no change in total assets.
(a) The owner invested cash to start the business.
(b) Purchased a computer for cash.
(c) Purchased office equipment with money borrowed from the bank.
(d) Paid the first month's utility bill.
(e) Collected an accounts receivable.
(f) Owner withdrew cash from the business.
Solution
(a) Increased total assets.
(b) No change in total assets.
(c) Increased total assets.
(d) Decreased total assets.
(e) No change in total assets.
(f) Decreased total assets.
Exercise
Prepare an income statement, an owner's equity statement, and a balance sheet for the dental
practice of Carl Craft, DDS, from the items listed below for the month of September.
Assets
Cash ...................................................................................................... $ 6,000
Accounts receivable ................................................................................ 14,000
Dental supplies ........................................................................................ 2,800
Equipment ............................................................................................... 30,000
Total assets ........................................................................................ $52,800
Ex
At the beginning of the year, Yates Company had total assets of $550,000 and total
liabilities of $200,000. Answer the following questions viewing each situation as being
independent of the others.
(1) If total assets increased $200,000 during the year, and total liabilities decreased
$75,000, what is the amount of owner's equity at the end of the year?
(2) During the year, total liabilities increased $230,000 and owner's equity decreased
$90,000. What is the amount of total assets at the end of the year?
(3) If total assets decreased $40,000 and owner's equity increased $130,000 during the
year, what is the amount of total liabilities at the end of the year?
Ex