Northwest Termite Specialists Inc. was started when its owners invested $23,000
ID: 2487601 • Letter: N
Question
Northwest Termite Specialists Inc. was started when its owners invested $23,000 in the businesss in exchange for common stock on January 1, 2011. The cash received by the company was immediately used to purchase a $16,500 heavy duty chemical truck, which had no residual value and an expected useful life of five years. The company earned $13,000 of cash revenue during 2011 and had cash expenses of $4,000. Prepare an income statement, statement of changes in shareholder equity, and statement of cash flow for the year ending in December 31,2011, and a balance sheet at December 31, 2011.
Explanation / Answer
Income statement:
Revenue=13000
expense=4000
dep=16500/5=3,300
net income=13000-4000-3300=$5700
Shareholder equity:
Common equity=23,000
retaines earnigns=5700
total equity=28,799
statement of cash flows:
net income=5700
depreciation=3300
total=9000
Balance sheet:
assets:
cash (db)13000+23000-4000-16500=15500
equipment (db) 16500
acc dep (cr) 3300
total assets (db) $28,700
liability and equity:
common stock (cr)23,000
retained earning (cr) 5700
Total (cR) 28,700
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