Use the information in Exercise 1-15 to prepare an October 31 balance sheet for Ernst Consulting. Hint: The solution to Exercise 1-16 can help.
The balance sheet shows assets, liabilities, and equity and the total of the balance sheet is $92,610.
The balance sheet is defined as the financial statement which shows the financial position of the business organization.
Total liabilities and equity
Lita Lopez started Biz Consulting, a new business, and completed the following transactions during its first year of operations.
a. Lita Lopez invested $70,000 cash and office equipment valued at $10,000 in the company in exchange for its common stock.
b. The company purchased an office suite for $40,000 cash.
c. The company purchased office equipment for $15,000 cash.
d. The company purchased $1,200 of office supplies and $1,700 of office equipment on credit.
e. The company paid a local newspaper $500 cash for printing an announcement of the office’s opening.
f. The company completed a financial plan for a client and billed that client $2,800 for the service.
g. The company designed a financial plan for another client and immediately collected a $4,000 cash fee.
h. The company paid $3,275 cash in dividends to the owner (sole shareholder).
i. The company received $1,800 cash as partial payment from the client described in transaction f.
j. The company made a partial payment of $700 cash on the equipment purchased in transaction d.
k. The company paid $1,800 cash for the office secretary’s wages for this period.
Required 1. Create the following table similar to the one in Exhibit 1.9 Use additions and subtractions within the table to show the dollar effects of each transaction on individual items of the accounting equation. Show new balances after each transaction.
Use the information in Exercise 1-15 to prepare an October 31 statement of cash flows for Ernst Consulting. Assume the following additional information.
a. The owner’s initial investment consists of $38,000 cash and $46,000 in land in exchange for its common stock.
b. The company’s $18,000 equipment purchase is paid in cash.
c. The accounts payable balance of $8,500 consists of the $3,250 office supplies purchase and $5,250 in employee salaries yet to be paid.
d. The company’s rent, telephone, and miscellaneous expenses are paid in cash.
e. No cash has been collected on the $14,000 consulting fees earned
Nina Niko launched a new business Niko’s Maintenance Co. that began operations on June 1. The following transactions were completed by the company during that first month.
1 Nina Niko invested $130000 cash in the company in exchange for its common stock.
2 The company rented a furnished office and paid $6000 cash for June’s rent.
4 The company purchased $2400 of equipment on credit.
6 The company paid $1150 cash for this month’s advertising of the opening of the business.
8 The company completed maintenance services for a customer and immediately collected $850 cash.
14 The company completed $7500 of maintenance services for City Center on credit.
16 The company paid $800 cash for an assistant’s salary for the first half of the month.
20 The company received $7500 cash payment for services completed for City Center on June 14.
21 The company completed $7900 of maintenance services for Paula’s Beauty Shop on credit.
24 The company completed $675 of maintenance services for Build-It Coop on credit.
25 The company received $7900 cash payment from Paula’s Beauty Shop for the work completed on June 21.
26 The company made payment of $2400 cash for equipment purchased on June 4.
28 The company paid $800 cash for an assistant’s salary for the second half of this month.
29 The company paid $4000 cash in dividends to the owner (sole shareholder).
30 The company paid $150 cash for this month’s telephone bill.
30 The company paid $890 cash for this month’s utilities.
Required 3. Prepare the statement of cash flows for the month of June
All business decisions involve aspects of risk and return. Required Rank order the following investment activities from 1 through 4, where “1” reflects the highest expected return and “4” the lowest expected return. a. Low-risk corporate bond b. Stock of a successful company c. Money stored in a fireproof vault d. U.S. Treasury bond
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