Question

In August 2020, Angela Martin started her new contracting business: Stair at Me Inc. The business focused on building staircases. The following transactions occurred during August:

August 1                Angela invested $1,000 cash in exchange for 250 common shares.

August 2                The company borrowed $5,000 in the form of a long-term bank loan. The money was planned to purchase much of the equipment that would be needed.

August 5                Purchased equipment: $4,000. Paid $1,000 cash with the rest payable at the end of August.

August 10             Received and completed first staircase job – a building on TRU Campus. Received $4,000 cash.    

August 12             Purchased supplies on account: $200.

August 13             Completed second job: A chocolate maple staircase for a wealthy business man: $6,000 on account.

August 14             Took a dividend of $500 to pay for personal expenses.

August 19             Received and paid the utilities bill, $250.

August 20             Paid for the August 5 equipment purchase.

August 24             Received a $4,500 payment for the August 13^th job.

August 27             Completed third staircase job: A steep walnut staircase with a slide: $2,500. Received payment.

August 30             Paid $600 for the month of August’s rent.

August 30             Received August’s telephone bill: $300. Did not pay yet.

August 31             Paid salaries of $5,000 for work completed by her employees.

Required:

1. Record all necessary journal entries based on the transactions above.
2. Post the transactions to T-Accounts.
3. Prepare a trial balance dated August 31.
4. Prepare an Income Statement, for the month ended August 31.
5. Prepare a Statement of Changes in Shareholders’ Equity, for the month ended August 31.
6. Prepare a Balance Sheet, as at August 31.

   In August 2020, Angela Martin started her new contracting business: Stair at Me Inc. The business focused on building staircases. The following transactions occurred during August:

   August 1                Angela invested $1,000 cash in exchange for 250 common shares.

   August 2                The company borrowed $5,000 in the form of a long-term bank loan. The money was planned to purchase much of the equipment that would be needed.

   August 5                Purchased equipment: $4,000. Paid $1,000 cash with the rest payable at the end of August.

   August 10             Received and completed first staircase job – a building on TRU Campus. Received $4,000 cash.    

   August 12             Purchased supplies on account: $200.

   August 13             Completed second job: A chocolate maple staircase for a wealthy business man: $6,000 on account.

   August 14             Took a dividend of $500 to pay for personal expenses.

   August 19             Received and paid the utilities bill, $250.

   August 20             Paid for the August 5 equipment purchase.

   August 24             Received a $4,500 payment for the August 13^th job.

   August 27             Completed third staircase job: A steep walnut staircase with a slide: $2,500. Received payment.

   August 30             Paid $600 for the month of August’s rent.

   August 30             Received August’s telephone bill: $300. Did not pay yet.

   August 31             Paid salaries of $5,000 for work completed by her employees.

   Required:

7. Record all necessary journal entries based on the transactions above.
8. Post the transactions to T-Accounts.
9. Prepare a trial balance dated August 31.
10. Prepare an Income Statement, for the month ended August 31.
11. Prepare a Statement of Changes in Shareholders’ Equity, for the month ended August 31.
12. Prepare a Balance Sheet, as at August 31.

Answer 1

Journal entries
Date	Particulars	Debit	Credit
01-Aug	Cash Dr.	1,000
	To Share Capital		1,000
	(Being capital invested.)
02-Aug	Cash Dr.	5,000
	To Borrowings		5,000
	(Being borrowings taken.)
05-Aug	Equipment Dr.	4,000
	To Cash		1,000
	To Creditors		3,000
	(Being equipment purchased)
10-Aug	Cash Dr.	4,000
	To Revenue		4,000
	(Being revenue generated.)
12-Aug	Suppplies Dr.	200
	To Creditors		200
	(Being supplies purchased.)
13-Aug	Debtors Dr.	6,000
	To Revenue		6,000
	(Being revenue generated.)
	Retained Earnings Dr.	500
14-Aug	To Cash		500
	(Being dividend paid.)
19-Aug	Utilities Dr.	250
	To Cash		250
	(Being utilities paid.)
20-Aug	Creditors Dr.	3,000
	To Cash		3,000
	(Being rest payment for equipment purchase.)
24-Aug	Cash Dr.	4,500
	To Debtors		4,500
	(Being collection made.)
27-Aug	Cash Dr.	2,500
	To Revenue		2,500
	(Being revenue generated.)
30-Aug	Rent Dr	600
	To Cash		600
	(Being rent paid.)
30-Aug	Telephone Dr	300
	To Creditors		300
	(being outstanding telephone bills.)
31-Aug	Salaries Dr	5,000
	To Cash		5,000
	(Being salaries paid.)
		36,850	36,850

Ledger posting / T-Accounts
	Dr.		Cr.
Particulars	Amount	Particulars	Amount
Cash A/c
To Share Capital	1000	By Equipment	1000
To Borrowings	5000	By utilities	250
To Revenue	4000	By Creditors	3000
To Debtors	4500	By rent	600
		By Retained Earnings	500
To Revenue	2500	By salaries	5000
		Clg. Bal	6650
	17000		17000
Share Capital A/c
Clg. Bal	1000	By Cash	1000
	1000		1000
Borrowings A/c
Clg. Bal	5000	By Cash	5000
	5000		5000
Equipment A/c
To Cash	1000
To Creditors	3000	Clg. Bal	4000
	4000		4,000
Creditors A/c
To Cash	3000	By Equipment	3000
		By Supplies	200
Clg. Bal	500	By telephone	300
	3500		3500
Revenue A/c
		By Cash	4000
		By Debtors	6000
Clg. Bal	12500	By Cash	2500
	12500		12500
Supplies A/c
To Creditors	200	Clg. Bal	200
	200		200
Debtors A/c
To Revenue	6000	By Cash	4500
		Clg. Bal	1500
	6000		6000
Retained Earnings A/c
To Dividend	500	Clg. Bal	500
	500		500

Utilities A/c
To Cash	250	Clg. Bal	250
	250		250
Rent A/c
To Cash	600	Clg. Bal	600
	600		600
Telephone A/c
To Creditors	300	Clg. Bal	300
	300		300
Salaries A/c
To Cash	5000	Clg. Bal	5000
	5000		5000

Trial Balance as on 31 August

Particulars	Debit	Credit
Cash	6,650
Share Capital		1,000
Borrowings		5,000
Equipment	4,000
Creditors		500
Revenue		12,500
Supplies	200
Debtors	1,500
Retained Earnings	500
Utilities	250
Rent	600
Telephone	300
salaries	5,000
	19,000	19,000

Income Statement
Particulars	Amount
Revenue	12,500
	12,500
Supplies	200
Utilities	250
Rent	600
Telephone	300
salaries	5,000
	6,350
Retained Earnings	6,150

Statement of changes in Shareholder's Equity
Share Capital	1,000
Add: Retained Earnings	6,150
Less: Dividend	500
Shareholder's Equity	6,650

Balance Sheet
Particulars	Amount
Cash	6,650
Equipment	4,000
Debtors	1,500
Total Assets	12,150
Shareholder's Equity		6,650
Borrowings		5,000
Creditors		500
Total Liabilities		12,150