P1-3. Huang Trucking Company was organized on January 1, 2016. At the end of the

Question

P1-3. Huang Trucking Company was organized on January 1, 2016. At the end of the first quarter (three months) of operations, the owner prepared a summary of its activities: a. Cash was borrowed from the local bank, $56,000 (one-year note) b. Services performed for customers totaled $66,000, of which $11,000 remained uncollected at the end of the quarter C. A small service truck purchased at the end of the quarter to be used in the business for two years starting the next quarter: Cost, $12,500 cash d. Wages earned by employees totaled $25,000, of which one-half remained unpaid at the end of the quarter e. Supplies were purchased for use in the business for $3,800 cash. At the end of the quarter, $900 worth of supplies were unused (still on hand) f. Other operating expenses were $38,000, of which $6,500 remained unpaid at the end of the quarter.

Explanation / Answer

Note:

1. Expenses are deducted in income cloumn. hence, shown with (-) sign.

2. Cash payout is deducted to reduce the cash. hence, shown with (-) sign.

Transactions Income ($) Cash ($) Change in Asset (other than cash )or Liability Explanation a 0 $ 56000 Notes Payable (Liability) increased by $ 56000 Cash borrowed from bank is a liability which will increase cash. b 66000 55000 Accounts Receivable (Assets) increased by $ 11000 (66000-11000) By accuring method of accounting income of complete $ 66000 shall be taken into account. $ 11000 will be received in the next quarter , hence it’s a asset c 0 -12500 vehicles (assets) increased by $ 12500 purchase of vehicle will decrease the cash since cash will be paid d -25000 -12500 wages Payable (Liability) increased by $ 12500 Entire wages for the quarter will be deducted from the income , and which is not paid will be payble in the next quarter and hence become the liability e -2900 -3800 stock (asset) increased by $ 900 Purchase of stock will decrease the cash , and the one which is not sold will increase the assets f -38000 -31500 expenses Payable (Liability) increased by $ 6500 (38000-6500) Entire expenses for the quarter will be deducted from the income , and which is not paid will be payble in the next quarter and hence become the liability Net income (or net loss) ignoring taxes net change in cash 100 50700

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