Question

REQUIREMENT #7

Okay, I have a case study I need to complete by the end of this week but I am stuck. Plus, I need to make sure that I am doing this correctly. It is a layered challenge. I will have to send the study in pieces because I could not attach the actual document.   

Requirement #7:                                  
                                  
Prepare the financial statements for the Quick Tax Corporation as of July 31 in the space below.                                  
You will only be preparing the income statement, statement of retained earnings, and the balance sheet.                                  
The statement of cash flows is a required financial statement, but is not required for this case study.                                  
                                  
Quick Tax Corporation               Quick Tax Corporation           Quick Tax Corporation      
Income Statement               Statement of Retained Earnings           Balance Sheet      
For the Month Ending July 31               For the Month Ending July 31           July 31      
  
During its first month of operation, the Quick Tax Corporation, which specializes in tax preparation,                                              
completed the following transactions.                                              
                                              
July 1   Began business by making a deposit in a company bank account of $60,000, in exchange                                          
   for 6,000 shares of $10 par value common stock.                                          
                                              
July 3   Paid the current month's rent, $3,500                                          
                                              
July 5   Paid the premium on a 1-year insurance policy, $4,200                                          
                                              
July 7   Purchased supplies on account from Little Company, $1,000.                                          
                                              
July 10   Paid employee salaries, $3,500                                          
                                              
July 14   Purchased equipment from Lake Company, $10,000. Paid $2,500 down and the balance was                                          
   placed on account. Payments will be $500.00 per month until the equipment is paid. The first payment is due 8/1.                                          
   Note: Use accounts payable for the balance due.                                          
                                              
July 15   Received cash for preparing tax returns for the first half of July, $8,000                                          
                                              
July 19   Made payment on account to Lake Company, $500.                                          
                                              
July 31   Received cash for preparing tax returns for the last half of July, $9,000                                          
                                              
July 31   Declared and paid cash dividends of $600.                     

Answer 1

Quick Tax Corporation
Income statement
For the month ended July 31
Particulars	$	$
Revenue		17,000
Less-Operating expense
Salary expense	3,500
Rent expense	3,500
Total Operating expense		7,000
Operating income		10,000

Quick Tax Corporation
Statement of retained earnings
For the month ended July 31
Particulars	$
Retained earnings at the beginning of the month	-
Add-Net Income for the month	10,000
Less-Dividends	600
Retained earnings at the end of the month	9,400

Quick Tax Corporation
Balance sheet
For the month ended July 31
Particulars	$
Assets
Bank	62,200
Prepaid Insurance	4,200
Supplies	1,000
Equipment	10,000
Total Assets	77,400
Liabilities and Stockholder equity
Accounts payable	500
Notes payable	7,500
Total Liabilities	8,000
Common stock	60,000
Retained earnings	9,400
Total Stockholder equity	69,400
Total Liabilities and Stockholder equity	77,400

Note - Equipment has not been depreciated since the life of the equipment is not provided similarly prepaid insurance has not been amortized since the policy cover period has not been provided. Notes payable can be bifurcated as current and non current since there would be 15 monthly payments starting from 8/1.It has not been done so since the accounting period is not provided in the question.

Journal entries

Date	Particulars	Debit ($)	Credit ($)
1-Jul	Bank	60,000
	Common stock		60,000
	(To record capital brought in)
3-Jul	Rent expense	3,500
	Bank		3,500
	(To record payment of rent)
5-Jul	Prepaid Insurance	4,200
	Bank		4,200
	(To record payment of premium for a year)
7-Jul	Supplies	1,000
	Accounts payable		1,000
	(To record purchase on account)
10-Jul	Salary expense	3,500
	Bank		3,500
	(To record payment of salary)
14-Jul	Equipment	10,000
	Bank		2,500
	Notes payable		7,500
	(To record purchase of equipment)
15-Jul	Bank	8,000
	Service revenue		8,000
	(To record receipt of cash for the service provided)
19-Jul	Accounts payable	500
	Bank		500
	(To record payment of dues)
31-Jul	Bank	9,000
	Service revenue		9,000
	(To record receipt of cash for the service provided)
31-Jul	Dividend	600
	Bank		600
	(To record payment of dividend)