Question

D’Lite Dry Cleaners is owned and operated by Joel Palk. A building and equipment are currently being rented, pending expansion to new facilities. The actual work of dry cleaning is done by another company at wholesale rates. The assets, liabilities, and common stock of the business on July 1, 2018, are as follows: Cash, $45,000; Accounts Receivable, $93,000; Supplies, $7,000; Land, $75,000; Accounts Payable, $40,000; Common Stock, $60,000. Business transactions during July are summarized as follows:

A.	Joel Palk invested additional cash in exchange for common stock with a deposit of $35,000 in the business bank account.
B.	Paid $50,000 for the purchase of land adjacent to land currently owned by D’Lite Dry Cleaners as a future building site.
C.	Received cash from cash customers for dry cleaning revenue, $32,125.
D.	Paid rent for the month, $6,000.
E.	Purchased supplies on account, $2,500.
F.	Paid creditors on account, $22,800.
G.	Charged customers for dry cleaning revenue on account, $84,750.
H.	Received monthly invoice for dry cleaning expense for July (to be paid on August 10), $29,500.
I.	Paid the following: wages expense, $7,500; truck expense, $2,500; utilities expense, $1,300; miscellaneous expense, $2,700.
J.	Received cash from customers on account, $88,000.
K.	Determined that the cost of supplies on hand was $5,900; therefore, the cost of supplies used during the month was $3,600.
L.	Paid dividends, $12,000.

Labels
Cash flows from financing activities
Cash flows from investing activities
Cash flows from operating activities
Cash flows used for financing activities
Cash flows used for investing activities
Cash flows used for operating activities
Expenses
For the Month Ended July 31, 2018
July 31, 2018
Amount Descriptions
Cash balance, July 1, 2018
Cash balance, July 31, 2018
Cash payments for expenses and payments to creditors
Cash received from customers
Cash received from issuing common stock
Change in retained earnings
Cash dividends
Net cash flows from financing activities
Net cash flows from investing activities
Net cash flows from operating activities
Net cash flows used for financing activities
Net cash flows used for investing activities
Net cash flows used for operating activities
Net decrease in cash
Net income
Net increase in cash
Net loss
Purchase of land
Retained earnings, July 1, 2018
Retained earnings, July 31, 2018
Total assets
Total expenses
Total liabilities and stockholders’ equity
Total stockholders’ equity

3.a. Prepare an income statement for the month ended July 31, 2018. Refer to the Accounts in the accounting equation grid and to the list of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. If a net loss has been incurred, enter that amount as a negative number using a minus sign. You will not need to enter colons (:) on the income statement.

D'Lite Dry Cleaners

Income Statement

1
2
3
4
5
6
7
8
9
10
11

Answer 1

Answer :

D'Lite Dry Cleaners
Statement of Cash Flows
For the Month Ended July 31,2018
	$	$
Cash Flows From Operating Activities
Cash received from customers                                                              (32,125+88,000)	120,125
Cash payments for expenses and payments to creditors                                                    (6,000 + 22,800+14,000)	(42,800)
Net cash flows used for operating activities		77,325
Cash Flows from Investing Activities
Less : Purchase of land	(50,000)
Net cash flows used for investing activities		(50,000)
Cash Flows from Financing Activities
Cash received from issuing common stock	35,000
Less Cash Dividends	(12,000)
Net cash flows used for financing activities		23,000
Net increase in cash		50,325
Cash balance, July 1, 2018		45,000
Cash balance, July 31, 2018		$ 95,325

3.a Income statement

D'Lite Dry Cleaners
Income statement
For the Month Ended July 31,2018
1	Revenue :
2	Service Revenue		$      116,875
3	Expenses :
4	Rent expense	$      6,000
5	Dry cleaning expense	29,500
6	Supplies expense	3,600
7	Wage expense	7,500
8	Truck expense	2,500
9	Utilities expense	1,300
10	Miscellaneous expense	2,700	(53,100)
11	Net income		$        63,775