Question

Meg Mckinney opened a public relations firm called Solid Gold on August 1, 2018. The following amounts summarize her business on August 31, 2018: AUST LAMUTES EQUITY o l and Cal M RUNEB I N HAN Axxounts Payable 15000 McKinney. - McKinney, • Service - Rent Capital Withdrawals Revenue Expense $11.900 33,200 Advertising Expense Just 50 B *15000 During September 2018, the business completed the following transactions: a. Meg Mckinney contributed $17,000 cash in exchange for capital. b. Performed service for a client and received cash of $800. C Pald or the beginning balance of accounts payable. d. Purchased office supplies from OfficeMax on account, $1,200. c. Collected cash from a customer on account, $2,000. McKinney withdrew $1,600. 9. Consulted for a new band and billed the client for services rendered, $4,500. h. Recorded the following business expenses for the month: Paid office rent: $1,000. Paid advertising: $500. Requirements: R1. Analyze the effects of the transactions on the accounting equation of Solid Gold using the format presented in Exhibit 1-5. R2. Prepare the income statement of Solid Gold for the month ended August 31, 2018. R3. Prepare the entity's statement of retained earnings for the month ended August 31, 2018. RAL Prepare the balance sheet at August 31, 2018.

Answer 1

Answer- SOLID GOLD

ACCOUNTING EQUATION

			Assets					=	Liabilities	+	Equity
	Cash	+	Accounts Receivable	+	Office Equipment	+	Land	=	Accounts Payable	+	Mckinney Capital	-	Mckinney Withdrawals	+	Service Revenue	-	Rent Expenses	-	Advertising Expenses
Bal.	$1,900	+	$3,200	+	$0	+	$15,000	=	$5,000	+	$11,900`	-		+	$3,200	-		-
(a)	$17,000										$17,000
Bal.	$18,900	+	$3,200	+	$0	+	$15,000	=	$5,000	+	$28,900	-		+	$3,200	-		-
(b)	$800														$800
Bal.	$19,700	+	$3,200	+	$0	+	$15,000	=	$5,000	+	$28,900	-		+	$4,000	-		-
(c)	-$5,000								-$5,000
Bal.	$14,700	+	$3,200	+	$0	+	$15,000	=	$0	+	$28,900	-		+	$4,000	-		-
(d)					$1,200				$1,200
Bal.	$14,700	+	$3,200	+	$1,200	+	$15,000	=	$1,200	+	$28,900	-		+	$4,000	-		-
(e)	$2,000		-$2,000
Bal.	$16,700	+	$1,200	+	$1,200	+	$15,000	=	$1,200	+	$28,900	-		+	$4,000	-		-
(f)	-$1,600												$1,600
Bal.	$15,100	+	$1,200	+	$1,200	+	$15,000	=	$1,200	+	$28,900	-	$1,600	+	$4,000	-		-
(g)			$4,500												$4,500
Bal.	$15,100	+	$5,700	+	$1,200	+	$15,000	=	$1,200	+	$28,900	-	$1,600	+	$8,500	-		-
(h)	-$1,500																$1,000		$500
Bal.	$13,600	+	$5,700	+	$1,200	+	$15,000	=	$1,200	+	$28,900	-	$1,600	+	$8,500	-	$1,000	-	$500

SOLID GOLD

INCOME STATEMENT

AS ON AUGUST 31,2018

REVENUE		$8,500
Less: Operating Expenses
Rent Expenses	$1,000
Advertisement Expenses	$500	$1,500
Net Operating Income		$7,000

SOLID GOLD

Statement of Retained Earnings

As on August 31,2018

Opening Balance of Retained Earnings	$0
Add: Net Operating Income Current Year	$7,000
Less: Withdrawals during the year	-$1,600
Retained Earnings at the end	$5,400

SOLID GOLD

Balance Sheet

At 31 August 2018

Assets	Amount	Liabilities	Amount
Current Assets:		Current Liabilities:
Cash	$13,600	Accounts Payable	$1,200
Accounts Receivable	$5,700
Total Current Assets	$19,300	Total Current Liabilities	$1,200
Equipment	$1,200	Shareholders Fund
Land	$15,000	Capital $28,900
		Retained Earnings $5,400	$34,300
Total Assets	$35,500		$35,500

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