2. BetterToKnow Testing Lab After several months of planning, Denise Murphy star

Question

2. BetterToKnow Testing Lab After several months of planning, Denise Murphy started a structural lab-test business for the civil engineering and construction industries called BetterToKnow. The following events occurred during its first month Murphy started the firm, investing $3,000 cash and $15,000 of equipment BetterToKnow paid $500 cash to rent space in a strip mall for the current month BetterToKnow paid $500 cash for furniture for the shop The company obtained S1,200 of equipment for the shop and received an invoice for this purchase. BetterToKnow opened for business. Cash received from consulting services (part of their main business) was $850 The firm provided $100 of lab-test services on account (IE: it issued the customer an invoice) a. b. c. d. e. f. g. The firm paid S150 cash to an assistant for working during the grand opening h. The firm received a $100 check for the lab-test services previously rendered on account. i. Cash received from additional consulting services was $930 j. It paid a $400 on the invoice it received in d) above k. The firm paid $1,000 cash dividends to Murphy Global Page 273 Find i. Create a Transaction Table for the above events. You may wish to use some or all of the following accounts: Cash; Accounts Receivable; Furniture; PPE; Accounts Payable; Paid in Capital; Dividends; Revenues; and Expenses. ii. Prepare a set of Journal entries, using the dr/cr sign convention ii. Prepare an Income Statement for this period. iv. Prepare a direct method Cash Flow Statement. v. Prepare a Balance Sheet as of the end of the period vi. Prepare an Owners Equity Statement. vii. During the above firm's 2nd month of operations, Cash increases by $1,000, Revenue increases by $2,000, and Accounts Receivable increases by $1,000. Also, Accounts Payable increases by $500 and Rent Expense of S500 is incurred (but not paid). Nothing else happens in the month Create a Balance Sheet for the firm's 2nd month of operations

Explanation / Answer

Transactions Debit Credit a Cash $3,000 Equipment $15,000 To Murphy, Capital $18,000 (Being capital invested in form of cash and equipment) b Rent Expense $500 To Cash $500 (Being rent expense paid) c Furniture $500 To Cash $500 (Being furniture purchased) d Equipment $1,200 To Accounts Payable $1,200 (Being equipment purchased on account) e Cash $850 To Service revenue $850 (Being cash received for services rendered) f Accounts Receivable $100 To Service revenue $100 (Being services provided on account) g Wages $150 To Cash $150 (Being cash paid to assistant) h Cash $100 To Accounts receivable $100 (Being cash received from customers on account) i Cash $930 To Service Revenue $930 (Being service revenue provided for cash) j Accounts Payable $400 To Cash $400 (Being cash paid on account) k Dividend $1,000 To Cash $1,000 BETTER TO KNOW TESTING LAB BALANCE SHEET Assets Cash 2330 Fixed Assets Furniture $500 Equipment 16200 Total Assets 19030 Liabilities and Owners Equity Accounts Payable 800 Murphy, Capital 18000 Add: Net Income 1230 Less : Dividends 1000 18230 Total Liabilities and Owners Equity 19030 Cash 3000-500-500+850-150+100+930-400-1000 Equipment 15000+1200 Accounts Payable 1200-400 Net Income (850+100+930)-150-500 BETTER TO KNOW TESTING LAB BALANCE SHEET Assets Cash $3,330 (2330+1000) Accounts Receivable $1,000 Fixed Assets Furniture $500 Equipment 16200 Total Assets 21030 Liabilities and Owners Equity Accounts Payable 1300 (800+500) Rent Expense Payable 500 Murphy, Capital 18230 Add: Net Income 3380 21610 Total Liabilities and Owners Equity 23410 Revenue 3880 1880+2000 Less : Rent 500 3380

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