Question

Seved Help Save & Exit Su Check my wo The following are the transactions relating to the formation of Gray Mowing Services Inc. and its first month of operations a. The firm was organized and the initial stockholders invested cash of $12,000. b. The company borrowed $18,000 from a relative of one of the initial stockholders, a short term note was signed c. Two zero-turn lawn mowers costing $7600 each and a professional trimmer costing $2,600 were purchased for cash. The original list price of each mower was $10,200, but a discount was received because the seller was having a sale, d. Gasoline, oil, and several packages of trash bags were purchased for cash of $1,800 e. Advertising flyers announcing the formation of the business and a newspaper ad were purchased. The cost of these items, $3,400, will be paid in 30 days. f. During the first two weeks of operations, 94 lawns were mowed. The total revenue for this work was $14,100; 9,300 was collected in cash, and the balance will be received within 30 days g. Employees were paid $8,400 for their work during the first two weeks, h. Additional gasoline, oil, and trash bags costing $2,200 were purchased for cash. i. In the last two weeks of the first month, revenues totaled $18.400, of which $7,500 was collected j. Employee wages for the last two weeks totaled $10,200, these will be paid during the first week of the next month. k. It was determined that at the end of the month the cost of the gasoline, oil and trash bags still on hand was $600. 1. Customers paid a total of $3,000 due from mowing services provided during the first two weeks. The revenue for these services was recognized in transaction f.

Answer 1

ACCOUNTING EQUATION

Trans. Accounts + Receivable + Supplies + Equipment = Expenses Cash 12000 Notes Accounts Paid in Retained Payable + Payable + Capital + Earnings + Revenue 12000 18000 a. + + + + + + + b. + + + + + + + 18000 -17800 C. + + + 17800 + + + + d - 1800 + + 1800 + + + + + e. + + + + 3400 + + + 3400 f. 4800 + + + + + + 14100 9300 -8400 09 + + + + + + 8400 h. + + 2200 + + + + + -2200 7500 + 10900 + + + + + 18400 i. j. k. + + + + 10200 + + 10200 + + -3400 + + + + 3400 1. + -3000 + + + + 3000 19600 12700 600 + 17800 18000 13600 12000 0 + 32500 25400

Income statement

32500 Income Statement Effect Service Revenue Supplies Expenses Advertising Expense Wages Expense -3400 -3400 -18600 Net Income 7100

Balance sheet

Balance Sheet Assets: Cash Accounts Receivable Supplies 19600 12700 600 Total Current Assets Equipment Total Assets 32900 17800 50700 Liabilities Accounts Payable Notes Payable 18000 13600 Total Liabilities 31600 Stockholders Equity: Paid in Capital Retained Earnings 12000 7100 19100 Total Stockholders Equity Total Liabilities & Stockholders Equity 50700

Assets	50700
Liabilities	31600
Stock Holders Equity	19100
Net income	7100