Question

Problem 3.5A (Static) Preparing financial statements from T accounts. LO 3-3, 3-5, 3-6

The accountant for the firm owned by Vincent Sutton prepares financial statements at the end of each month.

Transactions:

1. Sutton invested $90,000 in cash to start the business.
2. Paid $6,000 for the current month’s rent.
3. Bought office furniture for $10,580 in cash.
4. Performed services for $8,200 in cash.
5. Paid $1,250 for the monthly telephone bill.
6. Performed services for $14,000 on credit.
7. Purchased a computer and copier for $18,000; paid $7,200 in cash immediately with the balance due in 30 days.
8. Received $7,000 from credit clients.
9. Paid $2,800 in cash for office cleaning services for the month.
10. Purchased additional office chairs for $5,800; received credit terms of 30 days.
11. Purchased office equipment for $22,000 and paid half of this amount in cash immediately; the balance is due in 30 days.
12. Issued a check for $9,400 to pay salaries.
13. Performed services for $14,500 in cash.
14. Performed services for $16,000 on credit.
15. Collected $8,000 on accounts receivable from charge customers.
16. Issued a check for $2,900 in partial payment of the amount owed for office chairs.
17. Paid $725 to a duplicating company for photocopy work performed during the month.
18. Paid $1,280 for the monthly electric bill.
19. Sutton withdrew $5,500 in cash for personal expenses.

Required:
Prepare a trial balance, an income statement, a statement of owner’s equity, and a balance sheet. Assume that the transactions took place during the month ended June 30, 20X1. Determine the account balances before you start work on the financial statements.

Analyze:
What is the change in owner’s equity for the month of June?

Complete this question by entering your answers in the tabs below.

• Trial Balance
• Income Statement
• Stmt of Owners Eqty
• Balance Sheet
• Analyze

Determine the account balances and prepare a trial balance for the month ended June 30, 20X1.

	VINCENT SUTTON, LANDSCAPE CONSULTANT Trial Balance June 30, 20X1 Account Name Debit Credit Total $0 $0

• Prepare an income statement for the month ended June 30, 20X1.

  	VINCENT SUTTON, LANDSCAPE CONSULTANT Income Statement Month Ended June 30, 20X1 Revenue Expenses Total expenses 0 $0

• Prepare a statement of owner’s equity for the month ended June 30, 20X1.

  	VINCENT SUTTON, LANDSCAPE CONSULTANT Statement of Owner’s Equity Month Ended June 30, 20X1 0 $0

• Prepare a balance sheet for the month ended June 30, 20X1.

  	VINCENT SUTTON, LANDSCAPE CONSULTANT Balance Sheet June 30, 20X1 Assets Liabilities Owner's Equity Total Assets $0 Total Liabilities and Owner's Equity $0

• What is the change in owner’s equity for the month of June?

  	Change in owner's equity

Answer 1

Change in owner's equity for the month of June = 115,745 $

First prepare the trial balance.

Identify the amounts shown in the right side of trial balance by transaction amounts.

Next prepare the income statement, statement of owner's equity and balance sheet.

1. Trial Balance Accounts Cash Vincent Sutton, Capital Rent expense Office furniture Service revenue Telephone expense Accounts receivable Computer and Copier Accounts payable Office cleaning expense Office chairs Office equipment Salaries expense Photocopy expenses Utility expense Vincent Sutton, Drawings Trial Balance Debit Credit 69,065 90,000-6,000-10,580+8,200-1,250-7,200+7,000-2,800-11,000-9,400+14,500+8,000-2,900-725-1,280-5,500 90,000 6,000 10,580 52,700 8,200+14,000+14,500+16,000 1,250 15,000 14,000-7,000+16,000-8,000 18,000 24,700 (18,000-7,200)+5,800+11,000-2,900 2,800 5,800 22,000 9,400 725 1,280 5,500 Total 167,400 167,400 52,700 A 2.Income Statement Jun-30 Revenues: Service revenue Less: Expenses Rent expense Telephone expense Office cleaning expense Salaries expense Photocopy expenses Utility expense Total expenses Net Income 6,000 1,250 2,800 9,400 725 1,280 21,455 B 31,245 A-B 3.Statement of Owners equity Jun-30 Beginning Balance Add: Capital introduced Add: Net Income Less: Withdrawals Closing Balance as on June 30 90,000 31,245 5,500 115,745 69,065 15,000 84,065 4. Balance sheet As at June 30 Assets Current Assets Cash Accounts receivable Non Current Assets Office furniture Computer and Copier Office chairs Office equipment Total Assets Liabilities and Equity Accounts payable Vincent Sutton, Capital Total Liabilities and equity 10,580 18,000 5,800 22,000 56,380 140,445 24,700 115,745 140,445