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Balance Sheet and Income Statement

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Assume that you began a small business by (1) investing $10000 and (2) borrowing $30000 from a bank. You (3) purchased equipment for $25000 cash and (4) purchased merchandise for $12000 on credit. During the first month of operations, your company (5) sold merchandise for $24000 in cash. (6) Credit sales were $3000. (7) The cost of merchandise sold during the month was $10000. By the end of the month, (8) $8000 had been paid to the supplier of the merchandise. In addition, you (9) repaid $300 of the amount borrowed from the bank. You (10) withdrew $800 from the business for personal use.

A) Set up a simple accounting system and record transactions (1) through (10).
B) Prepare an income statement for the first month of operations.
C) Prepare a balance sheet as of the end of the first month.

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Solution Summary

Records transactions and prepares balance sheet and income statement.