Question

Please answer the following question and answer it in the attached chart. Thanks!

1. Practice Makes Perfect Inc. was started on July 1 of the current year. Practice Makes Perfect provides piano lessons for students of all abilities. You are the founder, president, office manager, etc. You have not yet hired an accountant but your bank is asking for an income statement and balance sheet for the first month of operation. Using the following information, put each transaction into the equation format given in Table 3.14. Then, prepare a simple income state- ment and a balance sheet to present to the bank. Transactions: a. You started your company with $100,000 that you raised by selling stock in Practice Makes Perfect Inc. to your family and friends. b. Knowing that you would need additional funds, you presented your business plan to the bank and were able to get a $50,000 loan at 10 percent. c. You purchased three pianos for $16,000 each, paying cash. You believe these pianos will last five years before you replace them. At the end of the five years, you think you can sell each piano for $1,000. d. You spent $2,000 on supplies, which you charged on account. e. The newspaper bills you $500 for the advertisement you ran. You plan on paying the bill next month. f. Rent for the space you have leased is $1,000 a month, which you paid. g. The first month you billed students $2,000 for lessons. h. You paid your two part-time piano teachers $500 each at the end of the month. i. One of your students paid the $200 invoice you sent earlier in the month. j. You wrote the check for the interest owed for the month. k. You adjusted the supplies account for $300 of sheet music that you gave to students. 1. You recorded one month of depreciation on the pianos. 2. Make a list of the assets and liabilities you would want to keep track of in a company you owned. What types of revenues would you have? What types of expenses would you want to track? 3. Look on the internet for the financial statements of a publicly held company. (If you own stock in a company, look for the financial statements in the last annual report you received.) Or ask your employer if you can look at a set of the company's financial statements. a. Create the accounting equation for the balance sheet. Does it balance? b. What is the company's EBIT? c. Identify an asset or a liability you are not familiar with and look it up in an accounting or finance resource.

Answer 1

Answer A

	Assets	=	Liabilties	+	Owner's Equity
Transaction No	cash	+	Account Receivable	+	Inventory	+	Equipment	-	Accumlated Dep	=	Notes PAyable	+	Account payable	+	wages payable	+	common stock	+	Retained Earnings	+	Revenues	-	Expenses
a	100000																100000
b	50000										50000											-
c	-48000						48000
d					2000								2000
e													500									-	500
f	-1000																					-	1000
g			2000																		2000	-
h	-1000																						1000
i	200		-200
j													416.67										416.67
k					-300																		300
l									750														750
Total	100200	+	1800	+	1700	+	48000	-	750	=	50000	+	2916.67	+	0	+	100000	+		+	2000	-	3966.67
Assets		150950	=	150950		Liabilties

#Explanation for transaction( b) & (J)

Bank Loan = 50000

Interest = 50000* 10%

= 5000

for 1 month = 5000/12=416.67

##Explanation to transaction (c) &( l)

16000*3= 48000

scrap value = 1000*3=3000

life = 5 years

dep = 48000-3000/5 *1/12

=750

### explanation for transaction H

500*2= 1000

Answer b Statement showing Income Statement

Particulars	Amount($)	Amount ($)
INCOME:
Revenue from students	2000
Total income		2000
Less Expenses:
news paper bills	500
Rent	1000
Salary to teachers	1000
Interest	416.67
supplies exp	300
Depreciation	750
total expenses		-3966.67
Net loss	(2000-3966.67)	-1966.67

answer C

statement showing balance sheet

Assets	amount( $)	Liabilties	amount ($)
Fixed Assets :		Owners equity :
Equipment =48000		Stock	100000
less accum sep =-750		Retained Earnings	-1966.67
	47250	Loans:
Current Assets		Notes Payable	50000
Inventory	1700
cash	100200	current Laibilities:
Account Receivable	1800	account payable	2916.67
Total	150950	Total	150950