Question

The following is a balance sheet for Mundy Corporation at June 30, 2019.

Mundy Corporation

Balance Sheet

June 30, 2019

ASSETS		LIABILITIES
Current Assets		Current Liabilities
Cash	20,300	Accounts Payable	25,600
Accounts Receivable - Net	8,160	Wages Payable	34,300
Inventory	16,450	Interest Payable	1,350
Supplies	6,650	Unearned Revenue	5,700
Prepaid Insurance	10,000	Total Current Liabilities	66,950
Total Current Assets	61,560	Long-Term Liabilities
Property, Plant & Equipment		Notes Payable	24,700
Land	5,590	Total Liabilities	91,650
Buildings	21,000	STOCKHOLDERS' EQUITY
Equipment	44,500	Common Stock (no par)	1,350
Less: Accumulated Depreciation	(17,650)	Retained Earnings	22,000
Property, Plant & Equipment - Net	53,440	Total Stockholders' Equity	23,350
Total Assets	115,000	Total Liabilities & Stockholders' Equity	115,000

Below is a list of all July transaction:

1. Purchased inventory costing $500, paying $250 in cash and owing the rest on account.
2. Employees earned wages of $1,000. Paid employees $5,000.
3. Received $1,160 on account for a June purchase.
4. Paid $2,000 for advertising in July and August.
5. Received $200 in advance from a customer for an August sale.
6. Insurance is paid through December 1, 2019.
7. Repaid a $5,000 note to Liberty, Inc. plus $700 of interest for June and July.
8. Paid $6,000 for July rent.
9. Used $3,000 of supplies.
10. Issued common stock for $2,000.
11. Sold land, which cost $5,590, for $5,000.
12. Provided $5,000 of services to Volo, Inc. which were paid for in June.
13. Paid $750 income tax expense.
14. Purchased and paid $100 for supplies.
15. Purchased equipment on July 31 for $460, paying $200 in cash and owing the rest on account.

REQUIRED QUESTIONS:

1. Prepare T-accounts for each of the balance sheet accounts and enter the July 2019 activity. Create new accounts as necessary.
2. Complete a July 31, 2019 balance sheet for Mundy Corporation.
3. Prepare a classified income statement for the month of July. In parallel columns, show what would have been reported on an accrual basis and a cash basis.

Answer 1

Cash CR Income tax expense 20.300 Purchase Land 5,590 Cash 500 Beginning Bal. Red 5,000 Beginning Bal. Beginning Bal. Unearned revenue Common stock Land Cash 4,000 1,000 -sale Loss on sale (5590-5000) 590 1,000 1,000 5.000 350 200 Prepaid wages 2.000 Wages expense 5,000 Advertising expense Prepaid advertising expense Notes Payable Interest Payable Interest expense Rent expense Income tax expense Supplies Equipment Ending Bal. 27,500 350 6,000 100 200 7,250 27,500 Endine Bal. Endine Bal. $ $ $ 5,590 Supplies Purchase Beginning Bal. Beginning Bal. Beginning Bal. Cash 6,650 Supplies expense 100 Cash 500 Accounts payable 500 Ending Bal. Ending Ral Ending Ral. 1,000 3.750 6,750 $ 6,750 $ $ 1,000 $ 1,000 Wages expense Rent expense Advertising expense CR Beginning Bal. Beginning Bal. Cash 1,000 Cash 6,000 Beginning Bal. Cash (2000/2) 1,000 Ending Bal. Ending Bal. 6.000 Ending Bal. 1,000 1,000 $ 1,000 6,000 1,000 $ Prepaid advertising expense Insurance expense Prepaid insurance Insurance 10,000 expense Beginning Bal. Beginning Bal. Beginning Bal. 2.000 1,000 Prepaid insurance 2,000 cash (2000/2) Endine Bal. Ending Bal. Ending Bal. 1.000 1,000 $ 1,000 2.000 2.000 2,000 $ 8.000 10,000 $ 10,000 $ Interest expense Supplies expense Beginning Bal. Cash Beginning Bal. Supplies Equipment 44,500 200 3,000 Beginning Bal. Cash Accounts payable 460-200) (700/2) 260 Ending Bal. 350 Ending Bal. Ending Bal. 3,000 3.000 44,960 44,960 $ 350 $ 350 $ 3.000 $ $ 44,960 $ Common stock Beginning Bal. Cash Beginnine Ball Purchase return 1,350 2,000 25,600 500 Accounts payable 1,160 Beginning Bal. Purchase Equipment (460-200) 25,200 26,360 260 Ending Bal. Ending Bal. Ending Bal. 3.250 3,350 $ 3,350 $ 26,360 CR Notes Payable 5,000 Beginning Bal. Service revenue Unearned revenue 5,000 Beginning Bal. Cash Purchase return Beginning Bal. Accounts payable 1.160 1.160 24.700 5,700 200 1.160 Endine Bal. Endine Bal. 900 Ending Bal. 19,700 24.700 1,160 5,900 1$ 5.900 $ 21,7001 DI Dr cash Interest Payable 350 Beginning Bal. Wapes payable 4,000 Beginning Bal. 1,350 Cash 34,300 Service revenue Beginning Bal. Unearned revenue 5,000 (700/2) Ending Bal. (5000-1000) Ending Bal. Ending Bal. 1.000 1,350 30.300 34,300 1,350 $ 5,000 5,000 34,300 $ 5,000 Rest of the T-Accounts are not required to be prepared as there are no transatioon relating to them. The balance of such accounts will remain same as appearing in the last moonth balance sheet.

5,000 -160 5,160 Mundy Corporation Income Statement For the Year Ended Jume 30, 2019 Service revenue Less: Cost of goods sold Gross profit Less: Operating expenses: Wages expense 1,000 Rent expense 6,000 Advertising expense 1,000 Insurance expense 2,000 Supplies expense 3,000 Loss on sale 590 Total Operating Expenses Add: Non-Operating expense: Interest expense 350 7,250 16,450 8,160 3,750 1,000 8,000 44,610 13,590 Mundy Corporation Balance Sheet For the Year Ended Jume 30, 2019 Assets Current assets: Cash Inventory Accounts receivable Supplies Prepaid advertising expense Prepaid insurance Total current assets Fixed assets: Equipment 44,960 Less: Accumulated depreciation 17,650 Buildings Total fixed assets Total assets Liabilities and Shareholders' Equity Current liabilities: Accounts payable Unearned revenue Interest Payable Wages payable Total current liabilities Non-current liabilities: Notes payable Total non-current liabilities Shareholders' equity Common stock Retained earnings Total Shareholders' equity Total liabilities and shareholders' Equity 27,310 21,000 48,310 92,920 350 S Total Non-Operating Income Income before income tax Income tax expense Net income -8,780 750 (9,530) 25,200 900 1,000 30,300 57,400 Mundy Corporation Statement of Shareholders' Equity For the Year Ended Jume 30, 2019 Common Stock 3,350 Retained Earnings 22,000 19,700 19,700 Beginning Balance Add: Net income Ending Balance (9,530) 12,470 $ 3,350 $ 3,350 12,470 15,820 92,920 $ Calculation for Cost of Goods Sold: Beginning inventory Add: Purchases Less: Pusrchase Return Less: Ending inventory Cost of Goods Sold Amount 16,450 1,000 1,160 16,450 (160) Explanation: Since the value of both closing inventory and cost of goods sold is not given in the question, thus the opening inventoory is assumed to be the cloasing inventory. Please give as many likes for the hard work.