Question

The following amounts summarize the financial position of Little Red Dog Inc. on May 31, 2020: Cash – Balance 3840 Accounts 1920 Assets Liabilities - Computers + Supplies + Land - Accounts + Note 600 15600 10320 0 + - Salaries + Interest . 0 Shareholders' Equity Common – Retained 5520 6120 During June 2020, the business completed these transactions June 1: Received cash of $9600 and issued common shares June 1. Bought two computers for a total of $9600 by paying $2700 down and signing a note payable for the rest. Interest of 5% to be paid with the note payable on March 1, 2021. The computers are expected to last 5 years June 5. Performed services for a client and received cash of $10800 June 9: Paid $1200 on accounts payable June 13. Purchased supplies on account, S7200 June 20: Collected cash from a customer on account. $120 June 23. Consulted on the design of a business report, and billed the client for services rendered, $1200 June 25 Declared and paid a cash dividend of $1560 June 30. Recorded the following business expenses for the month: paid office rent, $360; paid advertising, $1560 June 30: Accrued $5400 in employee salaries Employees are paid on the first day of each month June 30: A count revealed that $360 worth of supplies are still on hand Other Information: 1) In the past, Little Red Dog Inc. has used the following accounts on their income statement Revenue, Depreciation Expense, Supplies Expense, Interest Expense, Rent Expense, Salaries Expense. Advertising Expense, and Supplies Expense. They use the Dividends account to record dividends. Not all accounts have been used each period Required: 1) Create all necessary journal entries for the month of June 2020. Place your answer under "Requirement 1" in the "Answer tab. Note that the dates have been pre populated. Ensure your journal entries match the appropriate date. Explanations are not required 2) Analyze the effects of the above transactions on the accounting equation. Place your answer under "Requirement 2" in the 'Answer" tab. 3) Prepare the Income Statement for the month ended June 30, 2020. List expenses in decreasing order by amount. Place your answer under Requirement 3' in the "Answer tab. 4) Prepare the Statement of Retained Earnings for the month ended June 30, 2020. Place your answer under "Requirement 4' in the "Answer tab." 5) Prepare the Balance Sheet at June 30, 2020 Place your answer under "Requirement 5' in the 'Answer tab.

Answer 1

1. Prepare Journal Entries. S.No Particulars Debit Credit 9,600 June. 1 Cash Common Shares 9,600 9,600 June. 1 Computers Cash Notes Payable A 2,700 6,900 A $ 10,800 June. 5 Cash Revenue 10,800 A 1,200 June. 9 Accounts Payables Cash 1,200 7,200 June. 13 Supplies Accounts Payables . 7,200 120 June. 20 Cash Accounts Receivables 120 1,200 June. 23 Accounts Receivables Revenue 1,200 1,560 June. 25 Dividends Cash 4 1,560 360 June. 30 Rent Expense Advertising Expense Cash 1,560 1,920 5,400 June. 30 Salaries Expense Salaries Payable 5,400 7,440 June. 30 Supplies Expense Supplies 7,440

Explanation : All the Expenses shall be debited. All the Revenues shall be Credited. Cash Inflow shall be debited to Cash Account Cash Outflow shall be credited to Cash Account Any Increase in Asset shall be debited to Asset Account. Any Decrease in Asset shall be credited to Asset Account. Any Increase in Liability shall be credited to Liability Account. Any Decrease in Liability shall be debited to Liability Account.

+ Cash Cash + Accounts + + Receivables + Liabilities _ Accounts . Notes Salaries Interest Land = Davables + Pavables Pavables. Payables 15,600 = $ 10,320 + Shareholders' Equity Common Retained Stock Earnings $ 5,520 + $ 6,120 $ 9,600 + + + + + + + + + + + + + $ 6,900 + + + + + + + + + + $ 10,800 + + + + 2. Transactions in Accounting Equation : Assets Date TIL + Computers + Supplies + Bal. $ 3,840 + $ 1,920 + + $ 600 + $ June. 1 $ 9,600 June. 1 $ -2,700 + + $ 9,600 + June. 5 $ 10,800 June. 9 $ -1,200 + June. 13 + $ 7,200 June. 20 $ 120 + $ -120 June. 23 + $ 1,200 + June. 25 $ -1,560 June. 30 $ -1,920 + June. 30 June. 30 + $ -7,440 + $ 16,980 + $ 3,000 + $ 9,600 + $ 360 + $ + + + + + + + + = $ = $ -1,200 7,200 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + $ $ + $ $ + $ + $ 15,120 + $ + $ 5,400 + 1,200 -1,560 -1,920 -5,400 -7,440 1,800 + + + + + + + + + + + + + 15,600 = $ 16,320 + $ 6,900 + $ 5,400 + $ - + + + Note : Normally, Interest Payable and Depreciation Entries are passed at the year-end. If those are required for this month, these are as follows: Interest Expense $ 28.75 [6900*5% * 1/12] Interest Payable $ 28.75 Depreciation Expense $ 160.00 Accum. Depreciation - Computers [9600/5 * 1/12] $ 160.00

3. Preparation of Income Statement. Particulars Amount ($) $ 12,000 Revenue A A Less : Expenses Rent Expense Advertising Expense Salaries Expense Supplies Expense Total Expenses 360 1,560 5,400 7,440 14,760 A A A Net Income / (Loss) $ (2,760) 4. Prepare a Statement of Retained Earnings. Particulars Amount ($) Opening Balance 6,120 Add / Less : Net Income / (Net Loss) (2,760) Less : Dividends (1,560) Closing Balance 1,800 A A A A