Question

On March 1, S. Penman (owner) launched AniFoods, Inc., an organic foods retailing company.

Following are the transactions for its first month of business.

1. S. Penman (owner) contributed $100,000 cash to the company in return for common stock. Penman also lent the company $55,000. This $55,000 note is due one year hence.

2. The company purchased equipment in the amount of $50,000, paying $10,000 cash and signing a note payable to the equipment manufacturer for the remaining balance.

3. The company purchased inventory for $80,000 cash in March.

4. The company had March sales of $100,000 of which $60,000 was for cash and $40,000 on credit. Total cost of goods sold for its March sales was $70,000.

5. The company purchased future advertising time from a local radio station for $10,000 cash.

6. During March, $7,500 worth of radio spots purchased in transactions 5 are aired. The remaining spots will be aired in April.

7. Employee wages earned and paid during March total $17,000 cash.

8. Prior to disclosing the financial statements, the company recognized that employees had earned an additional $1,000 in wages that will be paid in the next period.

9. The company recorded $2,000 of depreciation for March relating to its equipment.

Required:

a) Record the effect of each transaction in the Financial Statement Effects Template

b) Prepare a March income statement and a balance sheet as of the end of March for AniFoods, Inc.

FINANCIAL STATEMENT EFFECTS TEMPLATE

Balance Sheet Income Statement Cash Asset Noncash Assets Liabil- ities Contrib. Capital Eamed Capital Net Income Transaction + = + Revenues - Expenses = SO SO SO SO SO SO SO $0 SO SO SO SO $0 . . SO TOTAL SO 50 50 Assets Liab.&S/E

Answer 1

	balance sheet								income statement
S.No	cash assets	Non cash assets	=	liabilities	+	capital contribution	+	Earned Capital	Revenue	-	expenses	=	Net income
1	100000					100000
	55000			55000
2	-10000	50000		40000
3	-80000	80000
4	60000	40000							100000		70000		30000
		-70000
5	-10000	10000
6		-7500									7500
7	-17000										17000
8				1000							1000
9		-2000									2000
								2500
	98000	100500		96000		100000		2500	100000		97500		2500	profit
	Assets	198500					Lia & S/E	198500
		income statements Expense RS Incomes Rs purchases 80000 sales 100000 Radio spots 7500 Closing stock 10000 wages earned 18000 depreciation 2000 profit 2500 110000 110000 Balance sheet Liablities Rs Assets Rs capital 100000 cash 98000 Add : Profit 2500 stock 10000 Equipement 48000 liabilties 96000 (50000-2000) Debtors 40000 Radio spots 2500 198500 198500