Question

Judi Salem opened a law office on July 1, 2017. On July 31, the balance sheet showed Cash $5,000, Accounts Receivable $1,700, Supplies $500, Equipment $5,700, Accounts Payable $3,600, and Owner’s Capital $9,300. During August, the following transactions occurred.

1.		Collected $1,400 of accounts receivable.
2.		Paid $2,800 cash on accounts payable.
3.		Recognized revenue of $7,700, of which $2,500 is collected in cash and the balance is due in September.
4.		Purchased additional equipment for $2,100, paying $500 in cash and the balance on account.
5.		Paid salaries $1,700, rent for August $1,100, and advertising expenses $350.
6.		Withdrew $700 in cash for personal use.
7.		Received $1,600 from Standard Federal Bank—money borrowed on a note payable.
8.		Incurred utility expenses for month on account $180.

Prepare an income statement for August. JUDI SALEM, ATTORNEY AT LAW Income Statement

Answer 1

Answer

• All working forms part of the answer
• Requirements

Income Statement
For the month ended 31 Aug 2017
Revenues
Service Revenue earned		$                 7,700
Expenses
Salaries expenses	$                  1,700
Rent Expenses	$                  1,100
Advertising Expenses	$                     350
Utilities expenses	$                     180
Total Expenses		$                 3,330
Net Income		$                 4,370

Owner's Equity
at 31 Aug 2017
Owner's Capital Beginning balance 1 Aug	$          9,300
Add: Net Income	$          4,370
	$        13,670
Less: Withdarwals - Drawings	$              700
Owner's Capital ending balance 31 Aug	$        12,970

Balance Sheet
at 31 Aug 2017
Assets
Cash	$                3,350
Accounts receivables	$                5,500
Supplies	$                    500
Equipment	$                7,800
Total Assets	$              17,150
Liabilities & Owner's Equity
Liabilities:
Accounts Payable	$                2,580
Notes Payable	$                1,600
Total Liabilities	$                4,180
Owner's Equity:
Owner's Capital ending balance 31 Aug	$              12,970
Total Liabilities & Owner's Equity	$              17,150

• Working for balances of accounts used above---

	Beginning balances		Transactions								Ending Balance 31 Aug
	Debit	Credit	#1	#2	#3	#4	#5	#6	#7	#8	Debit	Credit
Cash	$                  5,000		$               1,400	$              (2,800)	$          2,500	$                         (500)	$         (3,150)	$                1,600	$                (700)		$          3,350
Accounts receivables	$                  1,700		$             (1,400)		$          5,200						$          5,500
Supplies	$                     500										$              500
Equipment	$                  5,700					$                        2,100					$          7,800
Accounts Payable		$                 3,600		$              (2,800)		$                        1,600				$        180		$          2,580
Owner's Capital		$                 9,300										$         9,300
Owner's Withdrawals									$                  700		$              700
Revenue					$          7,700							$          7,700
Salaries expenses							$            1,700				$          1,700
Rent Expenses							$            1,100				$          1,100
Advertising Expenses							$               350				$              350
Notes Payable								$                1,600				$          1,600
Utilities expenses										$        180	$              180
TOTAL	$               12,900	$               12,900									$        21,180	$        21,180