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Financial and Managerial Accounting

This document provides instructions for preparing financial statements for two different companies based on transaction information provided. For the first company, Sunrise Realty, students are asked to record transactions from October 2014 in a T-account format to show the effect on accounts. They are then instructed to prepare an income statement, retained earnings statement, and balance sheet based on the transactions. For the second company, D'Lite Dry Cleaners, similar instructions are given to record transactions from July 2014 and prepare the corresponding financial statements based on the information provided.

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362 views1 page

Financial and Managerial Accounting

This document provides instructions for preparing financial statements for two different companies based on transaction information provided. For the first company, Sunrise Realty, students are asked to record transactions from October 2014 in a T-account format to show the effect on accounts. They are then instructed to prepare an income statement, retained earnings statement, and balance sheet based on the transactions. For the second company, D'Lite Dry Cleaners, similar instructions are given to record transactions from July 2014 and prepare the corresponding financial statements based on the information provided.

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40

Chapter 1 Introduction to Accounting and Business

Instructions
1. Prepare an income statement for the month ended July 31, 2014.
2. Prepare a retained earnings statement for the month ended July 31, 2014.
3. Prepare a balance sheet as of July 31, 2014.
4. (Optional). Prepare a statement of cash flows for the month ending July 31, 2014.

PR 1-4A  Transactions; financial statements OBJ. 4, 5


2. Net income: On October 1, 2014, Kevin Bosley established Sunrise Realty. Kevin completed the fol-
$23,650 lowing transactions during the month of October:
a. Opened a business bank account with a deposit of $18,000 in exchange for capital
stock.
b. Purchased office supplies on account, $3,200.
c. Paid creditor on account, $1,800.
d. Earned sales commissions, receiving cash, $36,750.
e. Paid rent on office and equipment for the month, $4,000.
f. Paid dividends, $3,000.
g. Paid automobile expenses (including rental charge) for month, $2,500, and miscel-
laneous expenses, $1,200.
h. Paid office salaries, $3,750.
i. Determined that the cost of supplies on hand was $1,550; therefore, the cost of supplies
used was $1,650.

Instructions
1. Indicate the effect of each transaction and the balances after each transaction, using
the following tabular headings:

Assets 5 Liabilities 1 Stockholders’ Equity


Accounts Capital Sales Rent Salaries Auto Supplies Misc.
Cash + Supplies = Payable + Stock – Dividends + Commissions – Expense – Expense – Expense – Expense – Expense

2. Prepare an income statement for October, a retained earnings statement for October,
and a balance sheet as of October 31.

PR 1-5A  Transactions; financial statements OBJ. 4, 5


3. Net income: D’Lite Dry Cleaners is owned and operated by Joel Palk. A building and equipment are
$63,775 currently being rented, pending expansion to new facilities. The actual work of dry clean-
ing is done by another company at wholesale rates. The assets, liabilities, and capital
stock of the business on July 1, 2014, are as follows: Cash, $45,000; Accounts Receiv-
able, $93,000; Supplies, $7,000; Land, $75,000; Accounts Payable, $40,000; Capital Stock,
$60,000. Business transactions during July are summarized as follows:
a. Joel Palk invested additional cash in exchange for capital stock with a deposit of
$35,000 in the business bank account.
b. Paid $50,000 for the purchase of land adjacent to land currently owned by D’Lite Dry
Cleaners as a future building site.
c. Received cash from cash customers for dry cleaning revenue, $32,125.
d. Paid rent for the month, $6,000.
e. Purchased supplies on account, $2,500.
f. Paid creditors on account, $22,800.
g. Charged customers for dry cleaning revenue on account, $84,750.
h. Received monthly invoice for dry cleaning expense for July (to be paid on August 10),
$29,500.

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