Question

GloArt, Inc. entered into the following transactions during January a) Received $30,000 for January services. b) Provided S10,000 in design services on account c) Collected $8,000 from customers on account. d) Collected $10,000 in advance on a prepaid contract. e) Provided $3,000 of design services under contract in itemd f) Used $450 of supplies on the work described in item e. g) Paid $26,000 for January salaries. h) Paid $3,000 for one year's insurance coverage, and $12,000 for six months' rent. i) Received a $50 January telephone bill. j) Purchased $400 of supplies on account k) Paid $3,500 for office chairs.

Answer 1

1) T-accounts:
ASSETS			LIABILITIES			STOCKHOLDERS' EQUITY
Cash			Accounts Payable			Common Stock
9100	g) 26000		CB 950	500			16000
a)30000	h) 3000			i) 50
c)8000	h) 12000			j) 400		Retained Earnings
d)10000	k) 3500						4500
	CB 12600		Notes Payable
				15000		Design Revenue
Accounts Receivable						CB 43000	a)30000
5000	c)8000		Unearned Revenue				b)10000
b)10000	CB 7000		e)3000	d) 10000			e)3000
			CB 7000
supplies						Wage Expense
900	f) 450					g) 26000
j) 400	CB 850
						Insurance expense
Prepaid Rent						h) 250
h)10000
						Utilities expense
Prepaid Insurance						i) 50
h) 2750
						Supplies expense
Furniture						f) 450
21000	CB 24500
k) 3500						Rent expense
						h) 2000

2) Income Statement:
	Amount $
Design Revenue	43000
Less: Expenses:
wage	26000
Insurance	250
Utilities	50
supplies	450
rent	2000
Total Expenses	28750
Net Operating Income	14250
3) Operating section of Cash Flow:
Net Operating income	14250
less:increase in AR	-2000
add:decrease in supplies	50
less:increase in Prepaid rent	-10000
less: increase in Prepaid insurance	-2750
add: increase in AP	450
Cash flow of Operating Activities	0