Question

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Use the following information for exercise 15 to 18 LO P2 The following information applies to the questions displayed below.) On October 1, Ebony Ernst organized Ernst Consulting on October 3, the owner contributed $84.000 in assets in exchange for its common stock to launch the business. On October 31, the company's records show the following items and amounts. Retained earnings, October 1 as $0. Cash Accounts receivable Office Supplies Land Office equipment Accounts payable Common stock $11,360 14,000 3.250 46.000 18.000 3.500 14.000 Cash dividends Consulting revenue Rent expense salaries expense Telephone expense Miscellaneous expenses $ 2,000 14,000 3.550 7.000 760 Exercise 1.17 Preparing a balance sheet LO P2

Answer 1

ERNST CONSULTING
Balance sheet
As of Oct 31
Assets		Liabilities
Cash	$11360	Accounts payable	$8500
Accounts receivable	$14000
Office supplies	$3250	Equity
Land	$46000	Common stock	$84000
Office equipment	$18000	Retained earnings	$110
Total Assets	$92610	Total Liabilities and Equity	$92610

Solution :

Income statement -

ERNST CONSULTING
Income statement
For month ended October 31
	Amount	Amount
Consulting revenue		$14000
(-) Expenses :
Rent expense	$3550
Salaries expense	$7000
Telephone expense	$760
Miscellaneous expenses	$580
Total expenses		($11890)
Net income		$2110

Statement of retained earnings -

ERNST CONSULTING
Statement of retained earnings
As of Oct 31
	Amount
Opening balance retained earnings	$0
(+) net income	$2110
(-) cash dividends	($2000)
Closing balance of retained earnings	$110