P1-1A Analyze transactions and compute net income

Fredonia Repair Inc. was started on May 1. A summary of May transactions is presented below.
1. Stockholders invested $10,000 cash in the business in exchange for common stock.
2. Purchased equipment for $5,000 cash.
3. Paid $400 cash for May office rent.
4. Paid $300 cash for supplies.
5. Incurred $250 of advertising costs in the Beacon News on account.
6. Received $4,700 in cash from customers for repair service.
7. Declared and paid a $700 cash dividend.
8. Paid part-time employee salaries $1,000.
9. Paid utility bills $140
10. Performed repair services worth $1,100 on account.
11. Collected cash of $120 for services billed in transaction (10).

Instructions
(a) Prepare a tabular analysis of the transactions, using the following column headings:
Cash, Accounts Receivable, Supplies, Equipment, Accounts Payable, Common Stock,
and Retained Earnings (with separate columns for Revenues, and Expenses and Dividends.)
Include margin explanations for any changes in Retained Earnings. Revenue is called Service
Revenue.
(b) From an analysis of the Retained Earnings columns, compute the net income or net loss
for May.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .

(a) FREDONIA REPAIR INC.

S
Accounts Accounts Common
Cash + Receivable + Supplies + Equipment = Payable + Stock
1. $10,000 10,000
10,000 = 10,000
2. -5,000 $ 5,000
5,000 + 5,000 = 10,000
3. -400
4,600 + 5,000 = 10,000
4. -300 300
4,300 + 300 + 5,000 = 10,000
5. 250
4,300 + 300 + 5,000 = 250 + 10,000
6. 4,700
9,000 + 300 + 5,000 = 250 + 10,000
7. -700
 8,300 + 300 + 5,000 = 250 + 10,000
8. -1,000
7,300 + 300 + 5,000 = 250 + 10,000
9. -140
7,160 + 300 + 5,000 = 250 + 10,000
10 1,100
7,160 + 1,100 + 300 + 5,000 = 250 + 10,000
11 120 -120
$7,280 + $980 + $300 + $5,000 = $250 + $10,000

(b) Service Revenue Value

Expenses:
Salaries and wages expense Value
Rent expense Value
Advertising expense Value
Utilities expense Value ?
Net income ?

After you have completed the requirements of P1-1A, consider this additional question.
1. Assume that office rent and salaries changed to $650 and $2,100 respectively. In addition, repair services
on account changed to $1,750. Show the impact of these changes in the analysis and on net income or net
loss for the month.
ls with a "?" .

Stockholders' Equity
Retained Earnings
+ Revenues - Expenses - Dividends

-400
- -400

- -400
-250
- -650
4,700
+ 4,700 - -650
-700
 + 4,700 - -650 - -700
-1,000 `
+ 4,700 - -1,650 - -700
-140
+ 4,700 - -1,790 - -700
1,100
+ 5,800 - -1,790 - -700

+ $5,800 - ($1,790) ($700)

on, repair services

n net income or net
P1-1B Analyze transactions and compute net income
On April 1, Bill Taylor established Taylor Made Travel Agency. The following transactions were
completed during the month.
1. Stockholders invested $8,000 cash in the business in exchange for common stock.
2 Paid $400 cash for April office rent.
3. Purchased equipment for $2,500 cash.
4. Incurred $300 of advertising costs in the Chicago Tribune, on account.
5. Paid $500 cash for office supplies.
6. Performed services worth $8,500: $2,000 cash is received from customers, and the
balance of $6,500 is billed to customers on account.
7. Declared and paid a $200 cash dividend.
8. Paid Chicago Tribune amount due in transaction (4).
9. Paid employees' salaries $2,000.
10. Received $5,700 in cash from customers billed previously in transaction (6).

Instructions
(a) Prepare a tabular analysis of the transactions using the following column headings:
Cash, Accounts Receivable, Supplies, Equipment, Accounts Payable, Common Stock,
and Retained Earnings (with separate columns for Revenues, Expenses, and Dividends.)
Include margin explanations for any changes in Retained Earnings.
(b) From an analysis of the owner's equity columns, compute the net income or net loss for April.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .

(a) TAYLOR MADE TRAVEL AGENCY

Accounts Accounts
Cash + Receivable + Supplies + Equipment = Payable
1. $8,000
8,000 =
2. -400
7,600 =
3. -2,500 $ 2,500
5,100 + 2,500 =
4. $ 300
5,100 + 2,500 = 300
5. -500 500
4,600 + 500 + 2,500 = 300
6. 2,000 6,500
6,600 + 6,500 + 500 + 2,500 = 300
7. -200
6,400 + 6,500 + 500 + 2,500 = 300
8. -300 -300
 6,100 + 6,500 + 500 + 2,500 = 0
9. -2,000
4,100 + 6,500 + 500 + 2,500 = 0
10 5,700 -5,700
$9,800 + $800 + $500 + $2,500 = $0

(b) Service Revenue $8,500

Expenses:
Salaries and wages expense Value
Rent expense -400
Advertising expense -300 ?
Net income ?

After you have completed the requirements of P1-1B, consider this additional question.
1. Assume that office rent and advertising expense changed to $800 and $600 respectively. In addition, revenues changed
with $5,000 collected in cash and the balance on account. Show the impact of these changes in the analysis and on the
or loss for the month.
ells with a "?" .

DE TRAVEL AGENCY
Stockholders' Equity
Common Retained Earnings
+ Stock + Revenues - Expenses - Dividends
8,000
8,000
-400
8,000 - -400

8,000 - -400
-300
+ 8,000 - -700

+ 8,000 - -700
8,500
+ 8,000 + 8,500 - -700
-200
+ 8,000 + 8,500 - -700 - -200
 + 8,000 + 8,500 - -700 - -200
-2,000
+ 8,000 + 8,500 - -2,700 - -200

+ $8,000 + $8,500 - ($2,700) - ($200)

ddition, revenues changed to $12,000

in the analysis and on the net income
P1-2B Analyze transactions and prepare income statement, owner's equity statement, and balance sheet
Randy Coburn opened a law office, Randy Coburn, Attorney at Law, on July 1, 2015. On July 31, the balance shee
showed Cash $4,000, Accounts Receivable $1,500, Supplies $400, Equipment $5,000, Accounts Payable $4,200 ,
Common Stock $6,000, and Retained Earnings $700. During August, the following transactions occurred.
1. Collected $1,400 of accounts receivable due from clients.
2. Paid $2,700 cash on accounts payable due.
3. Recognized revenue of $7,900 of which $3,000 is collected in cash and the balance is due in September.
4. Purchased additional equipment for $1,000, paying $400 in cash and the balance on account.
5. Paid salaries $3,000, rent for August $900, and advertising expenses $250.
6. Declared and paid a $450 cash dividend.
7. Received $2,000 from Standard Federal Bank; the money was borrowed on a 4-month note payable.
8. Incurred utility expenses for month on account $180.

Instructions
(a) Prepare a tabular analysis of the August transactions beginning with July 31 balances. The column
headings should be as follows: Cash + Accounts Receivable + Supplies + Equipment = Notes Payable +
Accounts Payable + Common Stock + Retained Earnings + Revenue - Expenses - Dividends.
(b) Prepare an income statement for August, a retained earnings statement for August and a balance
sheet at August 31.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .

(a) RANDY COBURN, ATTORNEY A

Accounts
Cash + Receivable + Supplies + Equipment =
Bal. $4,000 + $1,500 + $400 + $5,000 =
1. 1,400 -1,400
5,400 + 100 + 400 + 5,000 =
2. -2,700
2,700 + 100 + 400 + 5,000 =
3. 3,000 4,900
5,700 + 5,000 + 400 + 5,000 =
4. -400 1,000
5,300 + 5,000 + 400 + 6,000 =
5. -4,150

1,150 + 5,000 + 400 + 6,000 =

6. -450
700 + 5,000 + 400 + 6,000
7. 2,000
2,700 + 5,000 + 400 + 6,000 =
8.
$2,700 + $5,000 + $400 + $6,000 =
(b) RANDY COBURN, ATTORNEY AT LAW
Income statement
For the Month Ended August 31, 2015
Revenues
Service Revenues $7,900
Expenses:
Salaries and wages expense -$3,000
Rent expense -$900
Advertising expense -$250
Utilities expense -$180
Total expenses -$4,150
Net income $3,750

RANDY COBURN, ATTORNEY AT LAW

Retained Earnings Statement
For the Month Ended August 31, 2015
Retained earnings, August 1 $700
Add: Net income 3,750
4,450
Less: Dividends -450
Retained earnings, August 31 $4,000

RANDY COBURN, ATTORNEY AT LAW

Balance Sheet
August 31, 2015
Assets
Cash $2,700
Accounts Receivable 5,000
Supplies 400
Equipment 6,000
Total assets $14,100

Liabilities and Stockholders' Equity

Liabilities
Notes payable $2,000
Accounts payable 2,280
Total liabilities 4,280
Stockholders' Equity
Common stock $6,000
Retained earnings $700 $6,700
 Total liabilities and stockholders' equity $10,980

After you have completed the requirements of P1-2B, consider this additional question.
1. Assume that the following changes occurred:
(a) Payment on accounts payment in transaction (2) changed to $2,400.
(b) Revenues collected in cash in transaction (3) changed to $3,800 with the remainder on account
(c ) Expenses paid in transaction (5) changed to $2,800, $750, and $375 for salaries, rent and
advertising expenses respectively.
Show the impact of these changes on the analysis and in the financial statements.
statement, and balance sheet
1, 2015. On July 31, the balance sheet
t $5,000, Accounts Payable $4,200 ,
owing transactions occurred.

d the balance is due in September.

he balance on account.

ed on a 4-month note payable.

uly 31 balances. The column

+ Equipment = Notes Payable +
xpenses - Dividends.
nt for August and a balance

r a formula in cells with a "?" .

RANDY COBURN, ATTORNEY AT LAW

Notes Accounts Common Retained
Payable + Payable + Stock + Earnings + Revenues -
$4,200 + $6,000 + $700

4,200 + 6,000 + 700

-2,700
1,500 + 6,000 + 700
7,900
1,500 + 6,000 + 700 + 7,900
600
2,100 + 6,000 + 700 + 7,900

2,100 + 6,000 + 700 + 7,900 -

2,100 + 6,000 + 700 + 7,900 -

2,000
2,000 + 2,100 + 6,000 + 700 + 7,900 -
180
$2,000 + $2,280 + $6,000 + $700 + $7,900 -
onal question.

remainder on account
salaries, rent and

statements.
Expenses - Dividends

-3,000
-900
-250
-4,150
-450
-4,150 - -450

-4,150 - -450
-180
-$4,330 - -450