Seth Feye established Reliance Financial Services on July 1, 2019. Reliance Financial Services offers financial planning advice to its clients. The effect of each transaction and the balances after each transaction for July follow:
Assets 5Liabilities1 Owner’s Equity
Cash + Accounts Receivable + Supplies = Accounts Payable + Seth Feye, Capital Seth Feye, − Drawing + Fees Earned − Salaries Expense − Rent Expense − Auto Expense − Supplies Expense − Misc. Expense a. +50,000 +50,000 b. +7,000 +7,000 Bal. 50,000 7,000 7,000 50,000 c. –3,600 −3,600 Bal. 46,400 7,000 3,400 50,000 d. +110,000+110,000
Bal. 156,400 7,000 3,400 50,000 110,000 e. –33,000–33,000 Bal. 123,400 7,000 3,400 50,000 110,000 –33,000 f. −20,800–16,000 –4,800
Bal. 102,600 7,000 3,400 50,000 110,000 –33,000 –16,000 –4,800 g. −55,000–55,000 Bal. 47,600 7,000 3,400 50,000 110,000 –55,000 –33,000 –16,000 –4,800 h. –4,500–4,500 Bal. 47,600 2,500 3,400 50,000 110,000 –55,000 –33,000 –16,000 –4,500 –4,800 i. +34,500+ 34,500 Bal. 47,600 34,500 2,500 3,400 50,000 144,500 –55,000 –33,000 –16,000 –4,500 –4,800 j. –15,000–15,000 Bal. 32,600 34,500 2,500 3,400 50,000 –15,000 144,500 –55,000 –33,000 –16,000 –4,500 –4,800
Instructions
1. Prepare an income statement for the month ended July 31, 2019.
2. Prepare a statement of owner’s equity for the month ended July 31, 2019.
3. Prepare a balance sheet as of July 31, 2019.
4. (Optional) Prepare a statement of cash flows for the month ending July 31, 2019.
Answer:
1.
Fees earned$144,500
Expenses:
Salaries expense$55,000
Rent expense33,000
Auto expense16,000
Supplies expense4,500
Miscellaneous expense4,800
Total expenses113,300
Net income$ 31,200
2.
Seth Feye, capital, July 1, 2019$ 0
Investment on July 1, 2019$ 50,000
Net income for July31,200
Withdrawals(15,000)
Increase in owner’s equity66,200
Seth Feye, capital, July 31, 2019$66,200
3.
Cash$32,600
Accounts receivable34,500
Supplies2,500
Total assets$69,600
Accounts payable$ 3,400
Seth Feye, capital66,200
Total liabilities and owner’s equity$69,600
4. (Optional)
Cash flows from operating activities:
Cash receipts from customers$ 110,000
Cash payments for expenses and payments to
creditors*(112,400)
Net cash flow used for operating activities$ (2,400)
Cash flows from investing activities0
Cash flows from financing activities:
Cash receipt of owner’s investment $ 50,000
Cash withdrawal by owner(15,000)
Net cash flow from financing activities35,000
Net increase in cash and July 31, 2019, cash balance $32,600
* $3,600 + $33,000 + $20,800 + $55,000; these amounts are taken from the cash column
shown in the problem.