Question

The following are the transactions relating to the formation of Cardinal Mowing Services, Inc., and its first month of operations. a. The firm was organized and the initial stockholders invested cash of $840 b. The company borrowed $1,260 from a relative of one of the initial stockholders, a short-term note was signed c. Two zero-turn lawn mowers costing $672 each and a professional trimmer costing $182 were purchased for cash. The original list price of each mower was $854, but a discount was received because the seller was having a sale d. Gasoline, oil, and several packages of trash bags were purchased for cash of $126. e. Advertising flyers announcing the formation of the business and a newspaper ad were purchased. The cost of these items, $238, will be paid in 30 days f. During the first two weeks of operations, 47 lawns were mowed. The total revenue for this work was $987, $651 was collected in cash, and the balance will be received within 30 days. g. Employees were paid $588 for their work during the first two weeks h. Additional gasoline, oil, and trash bags costing $154 were purchased for cash i. In the last two weeks of the first month, revenues totaled $1,288, of which $525 was collected. j. Employee wages for the last two weeks totaled $714; these will be paid during the first week of the next month k. It was determined that at the end of the month the cost of the gasoline, oil, and trash bags still on hand was $42 L. Customers paid a total of $210 due from mowing services provided during the first two weeks. The revenue for these services was recognized in transaction f

Answer 1

A. Recording transactions:-

					Assets				Liabilities				Stockholders Equity
Transaction	Cash	+	Accounts receivable	+	Supplies	+	Equipment	=	Notes payable	+	Accounts Payable	+	Paid - in - capital	+	Retained earnings	+	Revenue	-	Expenses
a	840	+		+		+		=		+		+	840	+		+		-
b	1,260	+		+		+		=	1,260	+		+		+		+		-
c	(1,526)	+		+		+	1,526	=		+		+		+		+		-
d	(126)	+		+	126	+		=		+		+		+		+		-
e		+		+		+		=		+	238	+		+		+		-	238
f	651	+	336	+		+		=		+		+		+		+	987	-
g	(588)	+		+		+		=		+		+		+		+		-	588
h	(154)	+		+	154	+		=		+		+		+		+		-
i	525	+	763	+		+		=		+		+		+		+	1,288	-
j		+		+		+		=		+	714	+		+		+		-	714
k		+		+	(238)	+		=		+		+		+		+		-	238
l	210	+	(210)	+		+		=		+		+		+		+		-
Balance	1,092	+	889	+	42	+	1,526	=	1,260	+	952	+	840	+		+	2,275	-	1,778

CARDINAL MOWING SERVICES INC.

Income Statement

Items	Amount
Service Revenue	2,275
Less:- Expenses:-
Advertising expenses	(238)
Supplies expenses	(238)
Wages Expenses (588+714=1,302)	(1,302)
Net Income	497

CARDINAL MOWING SERVICES INC.

Balance Sheet

Items	Amount
Assets:-
Cash	1,092
Accounts Receivable	889
Supplies	42
Equipment	1,526
Total Assets	3,529
​​​​​​Liabilities:-
Notes Payable	1,260
Accounts Payable	952
Total Liabilities	2,212
Stockholders Equity:-
Paid - in - capital	840
Retained Earnings	497
Total Stockholders Equity	1,337
Total Liabilities & Stockholders Equity	3,549