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Transaction recording and financial statements

Below describes Company A's first month of operations. Prepare and answer sheet with the columns shown. Record each transaction in the appropriate columns of your answer sheet. Show the amounts involved and indicate how each amount is affected ( + or -) After all transactions have been recorded, calculate total assets, liabilities, and owners equity at the end of the month and calculate the amount of net income for the month.

A. The firm was organized and the owners invested cash of $600.
B. The company borrowed $900 from a relative of the owners; a short-term note was signed.
C. Two lawn mowers costing $480 each and a trimmer costing $130 were purchased for cash. The original list price of each mower was $610, but a discount was received because the seller was having a sale.
D. Gasoline, oil, and several packages of trash bags were purchased for cash of $90.
E. Advertising flyers announcing the formation of the business and a newspaper ad were purchased. The cost of these items, $170, will be paid in 30 days.
F. During the first two weeks of operations, 47 lawns were mowed. The total revenue for this work was $705; $465 was collected in cash and the balance will be received within 30 days.
G. Employees were paid $420 for their work during the first two weeks.
H. Additional gasoline, oil and trash bags costing $110 were purchased for cash.
I. In the last 2 weeks of the first month, revenues totaled $920, of which $375 was collected.
J. Employee wages for the last 2 weeks totaled $510; these will be paid during the first week of the next month.
K. It was determined that at the end of the month the cost of the gasoline, oil, and trash bags still on hand was $30.
L. Customers paid a total of $150 due from mowing services provided during the first 2 weeks. The revenues for these services was recognized in transaction F.

****Record the transactions above on the Assets = Liabilities + Owners Equity sheet that is attached (MS Excel Document).

Also, prepare an income statement for Company A for the month presented and a balance sheet as at the end of the month using the captions shown on the answer sheet. These can be added to the Excel answer sheet.


Solution Summary

The solution explains how to record the transactions using the accounting equation and prepare the income statement and balance sheet.