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Transaction analysis and financial statements

The two entrepreneurs plan to rent bicycles and in-line skates to week-
End visitors to the lakefront. The following transactions occurred during
The first month of operations:

May 1 received contribution of 9,000 from each of the two principal owners
of the new business in exchange for shares of stock.

May 1 Purchased ten bicycles for $300 each on an open account. The company
has 30 days to pay for the bicycles.

May 9 Purchased 20 pair of in-line skates at $125 per pair, 20 helmets at 50 each.
And 20 set of protective gear (knee and elbow pads and wrist guards) at $45 per
Set for cash.

May 10 Purchased $100 in miscellaneous supplies on account. The company has
30 days to pay for the supplies.

May 15 Paid $125 bill from local radio station for advertising for the last two
Week of may.

May 17 Customers rented in-line skates and bicycles for cash of $ 1,800.

May 24 Billed the local park district 1,200 for in line skating lessons provided to
Neighborhood children.The park district is to pay one-half of the bill within five
Working days and the rest within 30 days.

May 29 Received 50% of the amount billed to the park district.
May 30 customers rented in-line skates and bicycles for cash of $3,000.
May 30 paid wages of 4160 to a friend who helped over the weekend.
May 31 paid the balance due on the bicycles.

Required
1. prepare a table to summarize the preceding transactions as they affect the accounting equation. Use the format in Exhibit 3-1.Identify each transaction
with the date.

Exhibit 3-1 example
Trans accounts accounts notes capital retained
No. cash receivable equipment building land payable payable stock earnings
1 10,000 10,000
2.Prepare an income statement month ended May 31, 2010
3. prepare a classified balance sheet at may 31,2010.

Solution Preview

Your transactions are posted to an expanded accounting equation in Excel and ...

Solution Summary

Your transactions are posted to an expanded accounting equation in Excel and then the financial statements are linked to the amounts in the accounting equation so you can see how the amounts are connected. A comment is made about one expense that is missing (depreciation) and why. Click on cells to see the links.

$2.19