Analyzing Transactions Using the Financial Statement Effects Template and Prepar

Question

Analyzing Transactions Using the Financial Statement Effects Template and Preparing Financial Statements Kross, Inc., provides appraisals and feasibility studies. On January 1, 2015, its beginning account balances are as follows: Cash, $6,700; Accounts Receivable, $14,800; Notes Payable, $2,500; Accounts Payable, $600; Retained Earnings, $12,400; and Common Stock, $6,000. The following transactions occurred during January, and company accounts include the following: Cash, Accounts Receivable, Vehicles, Accounts Payable, Notes Payable, Services Revenue, Rent Expense, Interest Expense, Salary Expense, Utilities Expense, Common Stock, and Retained Earnings. 1. Paid $950 cash for January rent. 2. Received $8,800 cash on customers’ accounts. 3. Paid $500 cash toward accounts payable. 4. Received $1,600 cash for services performed for customers. 5. Borrowed $5,000 cash from bank and signed note payable for that amount. 6. Billed the city $6,200 for services performed, and billed other credit customers for $1,900 in services. 7. Paid $4,000 cash for salary of assistant. 8. Received $410 invoice for January utilities expense. 9. Declared and paid a $6,000 cash dividend. 10. Paid $9,800 cash to acquire a vehicle (on January 31) for business use. 11. Paid $50 cash to bank for January interest on notes payable. REQUIRED a. Using the nancial statement effects template, enter January 1 beginning amounts in the ap- propriate columns of the rst row. (Hint: Beginning balances for columns can include amounts from more than one account.) b. Report the effects for each of the separate transactions 1 through 11 in the nancial statement effects template set up in part a. Total all columns and prove that (1) assets equal liabilities plus equity at January 31, and (2) revenues less expenses equal net income for January. c. Prepare its income statement for January 2015. d. Prepare its statement of stockholders’ equity for January 2015. e. Prepare its balance sheet at January 31, 2015.

Explanation / Answer

Cash Balance as at 31st January,2015 Particulars Amount(in $) Opening Cash Balance 6700 Less:Rent Paid 950 Less:Amount ayable to accounts payable 500 Less:Salary paid for the month Jan 4000 Less:Cash Dividend 6000 Less:Payment made for purchase of Vehicle 9800 Less:Bank interest 50 Add:Amount Received from customer 8800 Add:Service Performed 1600 Add:Cash received from bank 5000 Add:Utility expenses amount received 410 Closing Cash balance 1210 Balance of Accounts receivable Particulars Amount(in $) Opening Balance 14,800 Less:Amount received in the month of Jan 8,800 Closing Balance 8,100 Balance of Notes Payable Particulars Amount(in $) Opening Balance 2,500 Add:Amount borrowed from Bank 5,000 Closing Balance 7,500 Balance of Accounts Payable Particulars Amount(in $) Opening Balance 600 Add:Amount borrowed from Bank 500 Closing Balance 100 Revenue less expenses equal net income for the month of Jan,2015 Particulars Amount(in $) Sales 9,700 Add:other Income(Utility expenses received) 410 Less:Rent Paid 950 Less:Salary 4000 Less:Bank Interest 50 Net Income for the year 5,110 Statement of stockholders’ equity for January 2015 Particulars Amounts Common Stock 6,000 Retained earning 12400 Less:Cash dividend Paid 6,000 Add:Profit for the year 5,110 Stockholders’ equity for January 2015 17,510 Assets equal liabilities plus equity at January 31 Particulars Amounts(in $) Stockholders' equity 17,510 Add:Liabilty a)Notes Payable 7500 b)Accounts payable 100 Total 25,110 Assets Cash Balance 1,210 Account Receivable 14,110 Vehicle 9,800 Total 25,110 Balance sheet as at 31st January,2015 Liabilty Amount Assets Amount Stockholders' equity 17,510 Vehicle 9,800 Notes payable 7,500 Accounts receivable 14,110 Accounts payable 100 Cash Balance 1210 Total 25,110 Total 25,110

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