The Gorman Group is a financial planning services firm owned and operated by Nic

Question

The Gorman Group is a financial planning services firm owned and operated by Nicole Gorman. As of October 31, 2019, the end of the fiscal year, the accountant for The Gorman Group prepared an end-of-period spreadsheet, part of which follows:

Required:

1. Prepare an income statement.

Prepare a statement of owner's equity (no additional investments were made during the year.)

Prepare a balance sheet.

2. Journalize the entries that were required to close the accounts at October 31. For a compound transaction, if an amount box does not require an entry, leave it blank.

3. If the balance of Nicole Gorman, Capital had instead increased $115,000 after the closing entries were posted and the withdrawals remained the same, what would have been the amount of net income or net loss?

The Gorman Group
End-of-Period Spreadsheet
For the Year Ended October 31, 2019 Adjusted Trial Balance Account Title Dr. Cr. Cash $11,670 Accounts Receivable 25,410 Supplies 3,970 Prepaid Insurance 8,580 Land 90,000 Buildings 325,000 Accumulated Depreciation-Buildings 105,800 Equipment 235,000 Accumulated Depreciation-Equipment 137,800 Accounts Payable 30,050 Salaries Payable 2,980 Unearned Rent 1,350 Nicole Gorman, Capital 386,010 Nicole Gorman, Drawing 22,500 Service Fees 428,560 Rent Revenue 4,530 Salaries Expense 307,240 Depreciation Expense—Equipment 16,700 Rent Expense 14,000 Supplies Expense 9,890 Utilities Expense 8,930 Depreciation Expense—Buildings 5,960 Repairs Expense 4,920 Insurance Expense 2,700 Miscellaneous Expense 4,610 1,097,080 1,097,080

Explanation / Answer

Part-1

Part-2

Part-3

The Gorman Group Income Statement For the year ended on October 31, 2019 Revenue Services Fees $428,560.00 Rent Revenues $4,530.00 Total Revenue $433,090.00 Less: Expense Salaries Expense $307,240.00 Depreciation Expense- Equipment $16,700.00 Rent Expense $14,000.00 Supplies Expense $9,890.00 Utilities Expense $8,930.00 Depreciation Expense-Building $5,960.00 Repair Expense $4,920.00 Insurance Expense $2,700.00 Miscellaneous Expense $4,610.00 Total Expense $374,950.00 Net Income $58,140.00 The Gorman Group Statement of Owner's Equity For the year ended on October 31, 2019 Beginning Capital Balance $386,010.00 Add Net Income for the year $58,140.00 Less Drawing -$22,500.00 $35,640.00 Closing Capital Balance $421,650.00 The Gorman Group Balance Sheet for Year ended on 31 Oct 2019 Assets Current Asset Cash $11,670.00 Account Receivable $25,410.00 Office Supllies $3,970.00 Prepaid Insurance $8,580.00 Total Current Asset $49,630.00 Property, Plant & Equipment Land $90,000.00 Building 325000 Less: Accumulated Depreciation -105800 $219,200.00 Office Equipment $235,000.00 Less: Accumulated Depreciation -$137,800.00 $97,200.00 Total Asset $456,030.00 Liability & Equity Current Liabilities Account Payable $30,050.00 Salaries Payable $2,980.00 Unearned Rent $1,350.00 $34,380.00 Owner's Equity $421,650.00 Total Liability & Equity $456,030.00

Part-2

Journal Entries in the books of The Gorman Group Date Account Title & Explantation Debit Credit 31-Oct Service fees $428,560.00 Rent Revenue $4,530.00 Income Statement $433,090.00 To record Income 31-Oct Income Statement $374,950.00 Salaries Expense $307,240.00 Depreciation Expense- Equipment $16,700.00 Rent Expense $14,000.00 Supplies Expense $9,890.00 Utilities Expense $8,930.00 Depreciation Expense-Building $5,960.00 Repair Expense $4,920.00 Insurance Expense $2,700.00 Miscellaneous Expense $4,610.00 To record Expenses 31-Oct Income Statement $58,140.00 Nicole Gorman, Capital $58,140.00 To Close Income Statement

Part-3

Computation of Income /Loss Net Income For the year $58,140.00 Capital Increased by $115,000.00 Net Loss will be -$56,860.00 ( $58140-115000)

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