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Required information Problem 1-7A Analyzing transactions and preparing financial statements LO C4, P1, P2 The following information applies to the questions displayed below. Gabi Gram started The Gram Co, a new business that began operations on May 1. The Gram Co. completed the following transactions during its first month of operations Hay 1 G. Gram invested $43,000 cash in the company in exchange for its coemon stock 1 The company rented a furnished office and paid $2,300 cash for Mays rent 3 The company purchased $5,410 of office equipment on eredit. 5 The company paid $730 cash for this morths cleaning services 8 The company provided consulting servicee for a alient and immediately collected $5,700 cash. 12 The company provided $2,900 of consulting services for a alient on credit 15. The company paid $790 cash for an assistant s salary for the first half of this month 20 The company received $2,900 cash payment for the services provided on Kay 12. 22 The company provided $3,900 of consulting services on credit 25 The company 26 The company paid $5,410 cash for the office equipmont purchased on Hay 3 27 The received $3,900 cash payment for the services provided on May 22 company purchased 585 of advertia ing in this montha (May) local paper on aredit; caah due June 1 28 The company paid $790 eash for an assintants salary for the second half of this month 30 The company pald $300 cash for this months telephone bil1. 30 The company paid $280 cash for thin months utilitios. 31 The company paid $1,900 cash in dividenda to the owner (sole shareholder). Problem 1-7A Part 2 and 3 2.1. Prepare income statement for May. THE GRAM co. income Statement For Month Ended May 31 < Prev 7 of 7 Next
Problem 1-7A Part 2 and 3 2.1. Prepare income statement for May THE GRAM co. Income Statement For Month Ended May 31 Revenues: Expenses Total expenses < Prev
Required information 2.2. Prepare statement of retained earnings for May THE GRAM CO Statement of Retained Earnings For Month Ended May 31 Retained earnings, May 1 Retained earnings, May 31 nces 2.3. Prepare Balance Sheet for May 31 THE GRAM CO Balance Sheet May 31 < Prev 7017 i
0 Required information Statement of Cash Flows For Month Ended May 31 Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Cash balance, May 1 Cash balance, May 31 < Prev 7 of 7
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Answer #1

Requirement 2.1:

THE GRAM CO.
Income Statement
For Month Ended May 31
Revenues:
Service revenue $12,500
Expenses:
Rent expense $2,300
Cleaning expenses $730
Salaries expense $1,580
Advertising expense $85
Telephone expense $300
Utilities expense $280
Total expenses $5,275
Net income $7,225

Requirement 2.2:

THE GRAM CO.
Statement of Retained Earnings
For Month Ended May 31
Retained earnings, May 1 $0
Net income $7,225
Balance $7,225
Dividends ($1,900)
Retained earnings, May 31 $5,325

Requirement 2.3:

THE GRAM CO.
Balance Sheet
May 31
Assets Liabilities
Cash $43,000 Accounts payable $85
Equipment $5,410
Stockholder's equity:
Common stock $43,000
Retained earnings $5,325
Total assets $48,410 Total liabilities and stockholders equity $48,410

Requirement 2.4:

THE GRAM CO.
Statement of Cash Flows
For Month Ended May 31
Cash flows from operating activities:
Payment for rent ($2,300)
Cash paid for cleaning services ($730)
Cash received for services provided $5,700
Cash paid for salaries (790+790) ($1,580)
Cash collections from customers (2900+3900) $6,800
Cash paid for telephone bill ($300)
Cash paid for utilities ($280)
Net cash flows from operating activities (i) $7,310
Cash flows from investing activities:
Purchase of equipment ($5,410)
Net cash flows from Investing activities (ii) ($5,410)
Cash flows from financing activities:
Issuance of common stock $43,000
Payment of cash dividends ($1,900)
Net cash flows from financing activities (iii) $41,100
Net increase(decrease) in cash (i+ii+iii) $43,000
Cash balance, May 1 $0
Cash balance, May 31 $43,000

Calculations:

T-Accounts:

Cash Service revenue
$43,000 $2,300 $5,700
$5,700 $730 $2,900
$2,900 $790 $3,900
$3,900 $5,410 Bal. $12,500
$790
$300 Salaries expense
$280 $790
$1,900 $790
Bal. $43,000 Bal. $1,580
Accounts receivable
$2,900 $2,900
$3,900 $3,900
Bal. $0
Accounts payable
$5,410 $5,410
$85
Bal. $85
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