Question

Smith Contractors, Inc. began operations on October 1, 2017. The first three business transactions for the company have already been recorded as reflected in the transactions below and on the financial statement tabular analysis on page 3. For transactions 4-16, record the effect on the accounting equation and then on the tabular analysis on page 3. You will then write Financial Statements on pages 4 and 5.

1. Received $50,000 cash in exchange for common stock

	Asset=	liabilities	Stockholder equity
ACCT NAMES	cash		common stock
AMount +/-	+50,000		+50,000

2. Borrowed $10,000 from First National Bank to finance operations, signing a 3 year, 6% N/P

	ASsest=	liabilities+	SE
ACCT NAMES	cash	notes payable
Amount+/-	+10,000	+10,000

3. Purchased equipment for $15,000 cash

	Asset=	LIAbilities+	SE
ACCT NAMES	cash equipment
AMOUNT+/_	-15,000 +15,000

4.Purchased $2,000 of supplies on account

	Asset=	liabilities	Stockholder Equity
Acct NAMES
Amount +/-

5. Received a $5,000 cash advance from a customer for services not yet performed.

	Assest=	liabilities+	S.E
Account names
Amount +/-

6.Purchased on October 1 a 1-year insurance policy for $1,200

	Assest=	liabilites+	SE
ACCt NAMES
AMount+/-

7.Provided services to customers during October and received $30,000 cash

	Assest =	liabilities+	SE
ACCT NAMES
amount+/-

8.Paid wages of $2,650 to employees for the month of October

	A=	L+	SE
ACCT NAMES
AMOUNt+/-

9. Paid $1,000 for the October utility bill

	A=	L+	SE
ACCT NAMEs
Amount+/-

10.Paid rent of $2,500 for October’s office rental

	A=	L+	SE
ACCT NAMES
Amount+/-

11. Paid dividends of $3,000 during October

	A=	L+	SE
ACCT NAMES
AMOUNT +/-

At the end of the month, Smith Contractors, Inc. needs to record the following adjusting transactions to update their accounting records:

12. The company completed a physical count of supplies and determined that $1,000 of supplies are still on hand. Record the use of supplies.

	A	L	SE
ACCT NAMES
AMOUnt +/-

13. The company provided services of $1,000 to the customer that paid in advance (in #5)

	A	L	SE
ACCT NAMES
Amount+/-

14. Depreciation expense on equipment of $500 needs to be recorded

	A	L	SE
ACCT NAMES
Amount+/-

15.Record insurance expense for the month of October

	A	L	SE
ACCT NAMES
AMount+/-

16.Record accrual of interest expense on Note Payable for the month of October

	A	L	SE
ACCT NAMES
amount+/-

Using the tabular analysis on the next page, summarize transactions 4-16 above to determine the ending balance in each account. Write the account names in the top row and the dollar amount increase or decrease of each transaction that effects that account in each row underneath. If Retained Earnings has been effected, be sure to note the specific revenue, expense, or dividend account. You will need that information to complete the Income Statement. Total up all of the transactions (#1-16) on the tabular analysis to determine the ending balance in each account and note it in the bottom row. You will use these totals to write the financial statements.

Assets = liabilities + Stockholder equity

4
On the next 2 pages, summarize the information from the table above by preparing Smith Contractors, Inc.’s Income Statement and Statement of Retained Earnings for the month ended October 31, 2017 and a Classified Balance Sheet as of October 31, 2017. Be sure you include all labels, totals, and subtotals. You may not need all the lines given.

Smith Contractors, Inc.
Income Statement
For the Month Ended October 31, 2017

Smith Contractors, Inc.
Statement of Retained Earnings
For the Month Ended October 31, 2017

Be sure to include all the necessary subtotals and totals as outlined in Chapter 2 for a Classified Balance Sheet.

Smith Contractors, Inc.
Balance Sheet
As of October 31, 2017

Answer 1

Purchased $2,000 of supplies on account

	Asset=	liabilities	Stockholder Equity
Acct NAMES
Amount +/- (supplies is a current asset)	+current assets $2000	+ accounts payable $2000
Amount +/- (supplies is an expense)		+ accounts payable $2000	-net income $ 2000

5. Received a $5,000 cash advance from a customer for services not yet performed.

	Assest=	liabilities+	S.E
Account names
Amount +/-	+ cash $5000	+Customer Advances $5000

6.Purchased on October 1 a 1-year insurance policy for $1,200

	Assest=	liabilites+	SE
ACCt NAMES
AMount+/-	1 year policy purchased +$1200 -$1200

7.Provided services to customers during October and received $30,000 cash

	Assest =	liabilities+	SE
ACCT NAMES
amount+/-	+cash $30,000		+net income $ 30,000

8.Paid wages of $2,650 to employees for the month of October

	A=	L+	SE
ACCT NAMES
AMOUNt+/-	-cash or bank $ 2650		-net income $2650