Exercise 1-15 On October 1, Ebony Ernst organized Ernst Consulting; on October 3
ID: 2603673 • Letter: E
Question
Exercise 1-15 On October 1, Ebony Ernst organized Ernst Consulting; on October 3, the owner contributed S84,000 in assets to launch the business. On October 31, the company's records show the following items and amounts. Use this information to prepare an October income statement for the business. ring an income state P2 $11.360 . .14,000 3,250 46,000 8,000 8,500 84,000 Cash Cash withdrawals by owner.... Consulting fees earned Rent expense Salaries expense Telephone expense 2,000 14,000 3,550 7,000 760 580 Accounts receivable Office supplies Office equipment Accounts payable Owner investments.... Check Net income, $2,110 Exercise 1-16 Use the information in Exercise -15 to prepare an October statement of owner's equity for Ernst Consulting aring a statement of er's equity P2 Use the information in Exercise 1-15 (if completed, you can also use your solution to Exercise 1-16) to prepare an October 31 balance sheet for Ernst Consulting Exercise 1-17 reparing a balance P2Explanation / Answer
Solution:
Exercise 1-15 – Income Statement for October Month
Ernst Consulting
Income Statement for the month October
$$
Consulting fees earned (Service Revenue)
$14,000
Less: Expenses
Rent Expense
$3,550
Salaries Expense
$7,000
Telephone Expense
$760
Miscellaneous Expenses
$580
Total Expenses
$11,890
Net Income (14,000 - 11,890)
$2,110
Exercise 1-16 – Owner’s Equity
Ernst Consulting
Owner's Equity
$$
Owner's Investment
$84,000
Less: Drawings (Cash Withdrawal by owner for personal use)
-$2,000
Net Owner's Investment
$82,000
Plus: Net Profit earned during October (Refer Income Statement)
$2,110
Total Owner's Investment
$84,110
Exercise 1-17 – Balance Sheet
Ernst Consulting
Balance Sheet
Assets:
Current Assets:
Cash
$11,360
Accounts Receivable
$14,000
Office Supplies
$3,250
Total Current Assets
$28,610
Property, Plant and Equipment
Land
$46,000
Office Equipment
$18,000
Total Property Plant and Equipment
$64,000
Total Assets
$92,610
Equity & Liabilities
Current Liabilities:
Accounts Payable
$8,500
Total Liabilities
$8,500
Owner's Equity (Refer Exercise 1-16)
$84,110
Drawings Account
Total Equity and Liabilities
$92,610
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Ernst Consulting
Income Statement for the month October
$$
Consulting fees earned (Service Revenue)
$14,000
Less: Expenses
Rent Expense
$3,550
Salaries Expense
$7,000
Telephone Expense
$760
Miscellaneous Expenses
$580
Total Expenses
$11,890
Net Income (14,000 - 11,890)
$2,110
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