Question

Q2. Kiki's Famous Desserts Corporation was formed on July 1, 2018. On July 31, the balance shhet showed Cash $7,000, Accounts Receivable (A/R) $2,000, Supplies $500, Office Equipment $5,000, Accounts Payable (A/P) $5,500, Common Stock (CS) $7,500, and Retained Earnings (R/E) $1,500. During August, the following transactions occurred.

(a) Prepare a tabular analysis of the August transactions beginning with July 31 balances. The first row headings should be as follows: Cash + A/R + Supplies + Office Equipment = N/P + A/P + CS + R/E

(b) Prepare an income statement for August, a retained earnings staement for August, and a Balance sheet at August 31

1. Collected $1,000 of accounts receivable

2. Paid $1,200 cash on accounts payable

3. Earned revenues of $10,000, of which $3,000 is collected in cash and the balance is due in September

4. Purchased additional office equipment for $2,000, paying $250 in cash and the balance on account

5. Paid salaries $2,000, rent for August $1,500, and advertising expenses $450

6. Paid dividends of $550

7. Received $1,000 from Allied Bank- money borrowed on a note payable

8. Incurred utility expenses for month on account $500

Answer 1

(a) Tabular analysis of August transactions

Number	Particulars	Cash	+	A/R	+	Supplies	+	Office Equipment	=	N/P	+	A/P	+	CS	+	R/E
0	Opening Balance	$7,000		$2,000		$500		$5,000				$5,500		$7,500		$1,500
1	Collected $1,000 of accounts receivable Journal Entry Cash A/C - Dr---- $1000 To Accounts Receivable A/C ----$1000	$1,000		-$1,000
2	Paid $1,200 cash on accounts payable Journal Entry Accounts Payable A/C - Dr---- $1000 To Cash A/C ----$1000	-$1,000										-$1,000
3	Earned revenues of $10,000, of which $3,000 is collected in cash and the balance is due in September Journal Entry Accounts Receivable A/C - Dr---- $7000 Cash A/C ----$3000 To Revenue A/C ----$10000	$3,000		$7,000
4	Purchased additional office equipment for $2,000, paying $250 in cash and the balance on account Journal Entry Office Equipment - Dr---- $2000 To Cash A/C ----$250 To Accounts Payable A/C -----$1750 To Revenue A/C ----$10000	-$250						$2,000				$1,750
5	Paid salaries $2,000, rent for August $1,500, and advertising expenses $450 Journal Entry Salaries A/C - DR --- $2000 Rent A/C - Dr --- $1500 Advertising Expenses A/C - Dr---- $500 To Cash A/C ---- $3950	-$3,950
6	Paid dividends of $550 Journal Entry Retained Earning A/C - Dr ----$550 To Cash A/C ---$550	-$550														-$550
7	Received $1,000 from Allied Bank- money borrowed on a note payable Journal Entry Cash A/C - Dr--- $1000 To Notes Payable A/c ---$1000	$1,000								$1,000
8	Incurred utility expenses for month on account $500 Journal Entry Utilities Expenses A/C - Dr ----$500 To Accounts Payable A/C ---$500											$500
9	Transfer from Income Statement to retained earnings															$5,550
	Totals	$6,250		$8,000		$500		$7,000		$1,000		$6,750		$7,500		$6,500

Number Particulars o Opening Balance Collected $1,000 of accounts receivable Cash + A/R + Supplies $7,000 $2,000 $500 Office Equipment = N/P $5,000 + A/P + CS + R/E $5,500 $7,500 $1,500 Journal Entry Cash A/C-Dr---- $1000 1 To Accounts Receivable A/C ----$1000 Paid $1,200 cash on accounts payable $1,000 -$1,000 Journal Entry Accounts Payable A/C-Dr---- $1000 2 To Cash A/C ----$1000 Earned revenues of $10,000, of which $3,000 is collected in cash and the balance is due in September -$1,000 -$1,000 Journal Entry Accounts Receivable A/C-Dr----$7000 Cash A/C ----$3000 3 To Revenue A/C ---- $10000 $3,000 $7,000

Purchased additional office equipment for $2,000, paying $250 in cash and the balance on account Journal Entry Office Equipment - Dr---- $2000 To Cash A/C ----$250 To Accounts Payable A/C -----$1750 4 To Revenue A/C ----$10000 Paid salaries $2,000, rent for August $1,500, and advertising expenses $450 -$250 $2,000 $1,750 Journal Entry Salaries A/C- DR --- $2000 Rent A/C- Dr --- $1500 Advertising Expenses A/C-Dr---- $500 5 To Cash A/C ---- $3950 Paid dividends of $550 -$3,950 Journal Entry Retained Earning A/C - Dr ----$550 6 To Cash A/C --- $550 -$550 -$550

Received $1,000 from Allied Bank-money borrowed on a note payable Journal Entry Cash A/C-Dr--- $1000 7 To Notes Payable A/c ---$1000 Incurred utility expenses for month on account $500 $1,000 $1,000 Journal Entry Utilities Expenses A/C - Dr ----$500 8 To Accounts Payable A/C ---$500 9 Transfer from Income Statement to retained earnings $500 $5,550 Totals $6,250 $8,000 $500 $7,000 $1,000 $6,750 $7,500 $6,500

2(b) Income Statement for the month of August

Income Statement	Amount
Revenues	$10,000
Less- Expenses
Salaries	$2,000
Rent	$1,500
Avertising Expenses	$450
Utilities Expenses	$500
Net income	$5,550

Retained Earning Statement for the month of August

Particulars	Amount
Opening Balance	$1,500
Less- Dividends	$550
Add- Net Income	$5,550
Closing Balance	$6,500

Balance Sheet at 31st August

Equity & Liabilities	Amount	Assets	Amount
Common Stock	$7,500	Office Equipment	$7,000
Retained Earnings	$6,500	Supplies	$500
Accounts Payable	$6,750	Accounts receivable	$8,000
Notes Payable	$1,000	Cash	$6,250
Total	$21,750	Total	$21,750