Problem 1-4. An Analysis of the transactions made by Acme
Consulting for the month of July
1. Explain each transaction.
1) $20,000 is the amount invested by the owner/s into the business 2) $7,000 is the cost of the equipment purchased for the business. $5,000 has been paid. $2,000 is the amount still owed for the purchase. 3) $1,000 is the amount expended to purchase inventories and supplies for the business. 4) $4,500 is the amount paid for salaries of the business’ employees. 5) $10,000 is the revenue of the business. $5,000 has been paid in cash, while $5,000 is still yet to be received. 6) $1,500 is the amount further paid for the purchase of the equipment referred to in (2). 7) $1,000 of the $5,000 in number (5), account receivable, has been paid. 8) $750 is the amount paid for rent
9) $500 is the amount paid for utilities
10) $200 is the amount expended for travel which has been through credit. 11) $200 is the worth of supplies that has been used by the business.
2. List the changes in the company’s balance sheet during the month of July
|Acme Consulting | |Balance Sheet | |July | | | | | | | |Assets | |Liabilities | | | | | | | |Cash |12,750 | |Accounts Payable |700 | |Equipment |7000 | |Owner's Equity |23,850 | |Net |19,750 | | | | |Supplies |800 | | | | |Accounts Receivable |4000 | | | | |Total Assets |24,550 | |Total Liabilities |24,550 |
• Changes are purchase of equipment worth $7000, ($6500 of which has been paid), purchase of supplies, payment of operating costs such as salaries worth $4,500, rent worth $700, utilities worth $500, travel expenses that was initially paid on credit, and revenue in the amount of $10,000 half of which is still to be paid.
3. Prepare an income statement for the month (ignore taxes)
|Income Statement |
|Sales |10,000 |
|Expenses | |
|Salaries |-4500 |
|Rent |-750 |
|Utilities |-500 |
|Travel |-200 |
|Inv Cost |-200 |
|Total Exp |-6150 |
|Net |3,850 |
4. Explain the changes in the Cash account
|Acme Consulting |
|Cash Flow Statement |
| | |
|Receipts | |
|Investment |20,000 |
|Revenues |5,000 |
|Collection of AR |1,000 |
|Total |26,000 |
| | |
|Disbursements | |
|Purchase of Equipment |6,500...