Question

D’Lite Dry Cleaners is owned and operated by Joel Palk. A building and equipment are currently being rented, pending expansion to new facilities. The actual work of dry cleaning is done by another company at wholesale rates. The assets, liabilities, and common stock of the business on July 1, 2018, are as follows: Cash, $17,850; Accounts Receivable, $46,550; Supplies, $3,400; Land, $42,500; Accounts payable, $15,300; Common Stock, $10,000. Business transactions during July are summarized as follows:

Joel Palk invested additional cash in exchange for common stock with a deposit of $32,000 in the business bank account.

Paid $16,000 for the purchase of land adjacent to land currently owned by D’Lite Dry Cleaners as a future building site.

Received cash from customers for dry cleaning revenue, $19,550.

Paid rent for the month, $5,870.

Purchased supplies on account, $2,740.

Paid creditors on account, $14,470.

Charged customers for dry cleaning revenue on account, $39,100.

Received monthly invoice for dry cleaning expense for July (to be paid on August 10), $15,640.

Paid the following: wages expense, $8,600; truck expense, $3,130; utilities expense, $3,320; miscellaneous expense, $1,490.

Received cash from customers on account, $31,280.

Determined that the cost of supplies on hand was $2,150; therefore, the cost of supplies used during the month was $3,990.

Paid dividends, $9,000.

Print 1. PR.01-05.ALGO (Algorithmic) eBook Spreadsheet Transactions; Financial Statements DLite Dry Cleaners is owned and operated by Joel Poik. A building and equipment are currently being rented, pending expansion to new facilities. The actual work of ery clearing is done by another company at wholesale rates. The assets, babes, and common stock of the business on July 1, 2018, are as follows: Cash, 517,850, Accounts Recev ,546,550, Supplies, $3,400, Land, 542,500, Accounts payable, 515,300; Common Stock, 510,000. Business transactions during July are summarized as follows: 3. Joel Palk invested additional cash in exchange for common stock with a deposit $32,000 in the business bank account b. Paid $16,000 for the purchase of land adjacent to and currently owned by Duit Dry Cleaners as a future building site c. Received cash from customers for dry cleaning revenue, 519,550. d. Paid rent for the month, 55,870. e. Purchased supplies on account, $2,740. F. Paid creditors on account, $14,470. g. Charged customers for dry cleaning revenue on account, $39,100 h. Received monthly invoice for dry cleaning expense for July (to be paid on August 10), 515,640 1. Paid the following: wages expense, 58,600; truck expense, $3,130; utilities expense, $3,320, miscellaneous expense, 51,490 J. Received cash from customers on account, $1,280. k. Determined that the cost of supplies on hand was $2,150; therefore, the cost of supplies used during the month was $3,990. 1. Paid dividends, $9.000. Required: 1. Determine the amount of retained earnings as of July 1, 2018

Answer 1

Analysis of Transactions 26 Particulars Cash + Assets Accounts + Receivable Liabilities Accounts + Payable Owner's Equity + Retained - Earnings Common Stock Dividend Supplies Land 28 Balance 1-Jul 17,850 + 46,550 + 3,400 + 42,500 = 15,300 + 10,000 + Retained Earnings 110,300 = 25,300 + Retained Earnings 1-Jul 85,000 = Retained (110300-25300) Earnings

Cash Assets + Accounts + Receivable Supplies + Liabilities Owner's Equity Accounts + Common + Retained - Dividend + Dry Cleaning - Dry Cleaning - Wages - Rent - Supplies - Payable Stock Earnings Revenue Expense Expense Expense Expense Truck - Utilities - Misc. Expense Expense Expense Land + 46,550 + 3,400 + 42,500 = 15,300 + + 85,000 10,000 32,000 42,000 46,550 3,400 15,300 85,000 17,850 32,000 49,850 (16,000) 33,850 19,550 53,400 (5,870) 47,530 42,500 16,000 58,500 46,550 3,400 15,300 42,000 85,000 19,550 19,550 46,550 3,400 58,500 15,300 42,000 45 46 Particular 47 48 49 Balance 50 a 51 Balance 52 53 Balance 54 C 55 Balance 56 57 Balance 58 e 59 Balance 60 f 61 Balance 62 g 63 Balance 64 h 65 Balance 66 i 67 Balance 68 j 69 Balance 85,000 (5,870) (5,870) 46,550 58,500 42,000 85,000 19,550 3,400 2,740 6,140 46,550 58,500 15,300 2,740 18,040 (14,470) 3,570 42,000 85,000 19,550 47,530 (14,470) 33,060 (5,870) 6,140 58,500 42,000 85,000 19,550 (5,870) 46,550 39,100 85,650 39,100 58,650 33,060 6,140 58,500 42,000 85,000 (5,870) 3,570 15,640 19,210 (15,640) (15,640) 85,650 6,140 58,500 42,000 85,000 58,650 (5,870) 33,060 (16,540) 16,520 31,280 47,800 (8,600) (8,600) (3,130) (3,130) (3,320) (3,320) -1490 - 1490 6,140 58,500 19,210 42,000 85,000 58,650 (15,640) (5,870) 85,650 (31,280) 54,370 6,140 58,500 19,210 42,000 85,000 58,650 (15,640) (8,600) (5,870) - (3,130) (3,320) -1490

(3,990) 2,150 54,370 58,500 19,210 42,000 70 k 71 Balance 72 T 73 Balance (3,990) (3,990) 85,000 58,650 (15,640) (8,600) (5,870) (3,130) (3,320) -1490 47,800 (9,000) 38,800 + (9,000) 9,000) + 54,370 + 2,150 + 58,500 = 19,210 + 42,000 + 85,000 - 58,650 - (15,640) (8,600) - (5,870) - (3,990) - (3,130) - (3,320) - -1490 153,820 153,820

D'LITE DRY CLEANERS Income Statement For the Month Ended July 31, 2018 58,650 Dry cleaning revenue Expenses: Dry cleaning expense Wages expense Rent expense Supplies expense Truck expense Utilities expense Miscellaneous expense Total expenses Net income 15,640 8,600 5,870 3,990 3,130 3,320 1,490 42,040 16,610

99 3.b. Prepare aretained earnings statement for the month ended July 31, 2018. 100 D'LITE DRY CLEANERS Retained Earnings Statement For the Month Ended July 31, 2018 Retained earnings, July 1, 2017 85,000 Net income for July 16,610 Less dividends (9,000) Increase in retained earnings 7,610 Retained earnings, July 31, 2018 92,610 109 110 3.c. Prepare abalance sheet as of July 31, 2018. 111 108 113 114 D'LITE DRY CLEANERS Balancesheet July 31, 2018 116 118 Assets Cash Accounts receivable Supplies Land Total Assets 38,800 54,370 2,150 58,500 153,820 120

123 19,210 125 Liabilities Accounts Payable Stockholder's Equity Common Stock 42.000 Retained earnings 92.610 Total Stockholder's Equity Total Liabilities & Stockholder's Equity 128 134,610 153,820 129 130 136 137 139 131 4. Prepare astatement of cash flows for July D'LITE DRY CLEANERS Statement of Cash Flows 134 For the Month Ended July31, 2018 Cash flows from operating activities: Cash received from customers 50,830 Deduct cash payments for expenses and 138 payments to creditors (36,880) Net cash flows from operating activities 13,950 Cash flows used for investing activities: Purchase of land (16,000) 142 Cash flows from financing activities: 143 Cash received from issuing car 32,000 Deduct cash dividends (9,000) Net cash flows from financing activities 23.000 Net Increase in cash during July 20,950 147 Cash balance, July 1, 2016 17.850 Cash balance, July 31, 2016 38,800 140 141 145 146 148