Question

You form a new company, FSA Inc., to sell horse racing tips and betting advice on the internet. You will also create a weekly publication for distribution to racetracks. For the month of June, FSA reported the following transactions:

1. 06/01/10: Issued 1,000 shares of $100 par common stock in exchange for cash.
2. 06/01/10: You sign a lease for office space and pay the first month’s rent of $1,200. You also pay a security deposit of $3,600 that is refundable at the end of the lease.
3. 06/03/10: You purchase office equipment in the amount of $36,000. The equipment has an estimated life of three years and no salvage value. You also purchase $140 of office supplies such as pens, paper, etc. All of the supplies were used up during the month.
4. 06/04/10: You purchase internet and newspaper advertising in the amount of $16,000.
5. 06/05/10: You pay $12,000 to a website developer.
6. 06/05 – 06/21: 350 customers sign up for a subscription to your monthly web-publication, Ehorse Daily. A subscription costs $150 annually which the customers pay upfront. The first publication is delivered electronically on 06/30/10.
7. 06/01/10: You borrow $60,000 from a local bank. Interest is payable every 90 days at an annual rate of 9%. The principal is due in three years. Assume a 360-day count.
8. 06/21/10: A local publisher produces 5,000 of your racetrack booklets at a cost of $1.20 each and delivers them to you. You agree to pay the publisher in 30 days.
9. 06/27/10: You ship the booklets to a local racetrack and pay an $80 delivery fee.
10. 06/28/10: The racetrack sells 4,300 booklets and agrees to pay you $4 for each booklet sold. The remaining 700 booklets are destroyed. The racetrack agrees to pay you on 07/03/10 when you deliver the next set of books.
11. 06/29/10: You pay $1,200 for work provided by a part-time office assistant.   

Prepare FSA’s balance sheet and income statement at the end of June. Use your completed financial statements answer the following questions. Note that your answers will most likely not match any of the values provided as answers. You are to choose the answer that is “closest” in value.

11. On the balance sheet, the ending cash balance would be closest to:

	120,000
	130,000

	140,000
	150,000

12. On the balance sheet, unearned revenue would be closest to

	0
	30,000

	40,000
	50,000

13. On the balance sheet, total assets would be closest to

	125,000
	160,000

	195,000
	225,000

14. On the income statement, net income would be closest to

	-16,000
	-6,000

	0
	6,000

15. On the income statement, rent expense would be closest to

	1,100
	1,500

	1,900
	2,300

Answer 1

I am attaching both income statement and balance sheet for convenience

Income statement
Revenue fro racetrack		17200
Rent expense	1200
depreciation	1000
office supplies	140
internet newspaper	16000
website developer	12000
Interest expense	450
racetrack	6000
delivery fee	80
worker	1200	38070
Net Income		-20870

Balance sheet
Cash	143780
Accounts receivable	17200
Security deposit	3600
Office equipment	35000
Total	199580
Common stock	100000
Net income	-20870
long term loan	60000
Interest Payable	450
Accounts payable	6000
unearned revenue	54000
Total	199580

Ques 11

Second Option is correct

Ques 12

Fourth option is correct

Ques 13

Third option is correct.

Ques 14

Option A is correct

Ques 15

Option A is correct.