Answers are on page 48.

Page 31
1. Which of the following is not a step in the accounting
process?
(a) Identification. (c) Recording.
(b) Verification. (d) Communication.

2. Which of the following statements about users of accounting information is

incorrect?
(a) Management is an internal user.
(b) Taxing authorities are external users.
(c) Present creditors are external users.
(d) Regulatory authorities are internal users.

3. The historical cost principle states that:

(a) assets should be initially recorded at cost and
adjusted when the fair value changes.
(b) activities of an entity are to be kept separate and distinct from its owner.
(c) assets should be recorded at their cost.
(d) only transaction data capable of being expressed
in terms of money be included in the accounting
records.
4. Which of the following statements about basic assumptions is correct?
(a) Basic assumptions are the same as accounting principles.
(b) The economic entity assumption states that there should be a particular
unit of accountability.
(c) The monetary unit assumption enables accounting to measure employee
morale.
(d) Partnerships are not economic entities.

5. The three types of business entities are:

(a) proprietorships, small businesses, and partnerships.
(b) proprietorships, partnerships, and corporations.
(c) proprietorships, partnerships, and large businesses.
(d) financial, manufacturing, and service companies.

6. Net income will result during a time period when:

(a) assets exceed liabilities.
(b) assets exceed revenues.
(c) expenses exceed revenues.
(d) revenues exceed expenses.
7. As of December 31, 2014, Kent Company has assets of $3,500 and owner’s
equity of $2,000. What are the liabilities for Kent Company as of December 31,
2014?
(a) $1,500. Solution:
(b) $1,000. Asset 3,500 – Owners Equity
(c) $2,500. 2,000 = Liability 1,500

(d) $2,000.
8. Performing services on account will have the following effects on the
components of the basic accounting
equation:
(a) increase assets and decrease owner’s equity.
(b) increase assets and increase owner’s equity.
(c) increase assets and increase liabilities.
(d) increase liabilities and increase owner’s equity.

9. Which of the following events is not recorded in the accounting records?

(a) Equipment is purchased on account.
(b) An employee is terminated.
(c) A cash investment is made into the business.
(d) The owner withdraws cash for personal use.

10. During 2014, Bruske Company’s assets decreased

$50,000 and its liabilities decreased $90,000. Its owner’s equity therefore:
(a) increased $40,000. (c) decreased $40,000.
(b) decreased $140,000. (d) increased $140,000.

11. Payment of an account payable affects the components of the accounting

equation in the following way.
(a) Decreases owner’s equity and decreases liabilities.
(b) Increases assets and decreases liabilities.
(c) Decreases assets and increases owner’s equity.
(d) Decreases assets and decreases liabilities.
12. Which of the following statements is false?
(a) A statement of cash flows summarizes information about the cash inflows
(receipts) and outflows (payments) for a specific period of time.
(b) A balance sheet reports the assets, liabilities, and
owner’s equity at a specific date.
(c) An income statement presents the revenues, expenses, changes in owner’s
equity, and resulting net income or net loss for a specific period of time.
(d) An owner’s equity statement summarizes the changes in owner’s equity
for a specific period of
time.

13. On the last day of the period, Alan Cesska Company

buys a $900 machine on credit. This transaction will affect the:
(a) income statement only.
(b) balance sheet only.
(c) income statement and owner’s equity statement only.
(d) income statement, owner’s equity statement, and balance sheet.

14. The financial statement that reports assets, liabilities, and owner’s equity
is the:
(a) income statement.
(b) owner’s equity statement.
(c) balance sheet.
(d) statement of cash flows.
15. Services performed by a public accountant include:
(a) auditing, taxation, and management consulting.
(b) auditing, budgeting, and management consulting.
(c) auditing, budgeting, and cost accounting.
(d) internal auditing, budgeting, and management.

Questions:
1. “Accounting is ingrained in our society and it is vital
to our economic system.” Do you agree? Explain.
2. Identify and describe the steps in the accounting process;
- Analyze business transaction
- Journal
- Posting to ledger
- Unadjusted Trial Balance
- Adjustments
- Adjusted Trial Balance
- Financial Statements
- Closing entries
- Post-closing Trial Balance
- Reversing Entries

3. (a) Who are internal users of accounting data?

- Manager, employee, business owner, and investor
(b) How does accounting provide relevant data to these users?
- By providing financial reports or financial statements.

4. What uses of financial accounting information are

made by (a) investors and (b) creditors?

5. “Bookkeeping and accounting are the same.” Do you

agree? Explain.
- Bookkeeping is only a part of accounting that is keeping records of
transactions that are financial in nature. Accounting is the process of
identifying, summarizing, and preparing reports that are financial in
nature.

6. Trenton Travel Agency purchased land for $90,000 cash on December 10,
2014. At December 31, 2014, the land’s value has increased to $93,000. What
amount should be reported for land on Trenton’s balance sheet at December
31, 2014? Explain.

7. What is the monetary unit assumption?

8. What is the economic entity assumption?

9. What are the three basic forms of business organizations for profit-
oriented enterprises?
 10. Rachel Hipp is the owner of a successful printing shop. Recently, her
business has been increasing, and Rachel has been thinking about changing
the organization of her business from a proprietorship to a corporation.
Discuss some of the advantages Rachel would enjoy if she were to incorporate
her business.

11. What is the basic accounting equation?

Asset = Liability + Owners Equity

12. (a) Define the terms assets, liabilities, and owner’s equity.
(b) What items affect owner’s equity?

13. Which of the following items are liabilities of Siebers

Jewelry Stores?
(a) Cash.
(b) Accounts payable.
(c) Owner’s drawings.
(d) Accounts receivable.
(e) Supplies.
(f) Equipment.
(g) Salaries and wages payable.
(h) Service revenue.
(i) Rent expense.

14. Can a business enter into a transaction in which only

the left side of the basic accounting equation is
affected? If so, give an example.
Debit. Salaries Expense Credit Salaries Payable

15. Are the following events recorded in the accounting

records? Explain your answer in each case.
(a) The owner of the company dies.
(b) Supplies are purchased on account.
(c) An employee is fired.
(d) The owner of the business withdraws cash from
the business for personal use.

16. Indicate how the following business transactions affect the basic
accounting equation.
(a) Paid cash for janitorial services. Decrease Cash Increase Salaries Expense
(b) Purchased equipment for cash. Decrease Cash Increase Asset (Equipment)
(c) Invested cash in the business. Increase Cash (Asset) Increase OE
(d) Paid accounts payable in full. Decrease Asset and Decrease Liability
17. Listed below are some items found in the financial statements of Tony
Gruber Co. Indicate in which financial statement(s) the following items would
appear.
(a) Service revenue = Income Statement
(b) Equipment = Balance Sheet or Statement of Financial Position
(c) Advertising expense. = Balance Sheet or Statement of Financial Position
(d) Accounts receivable = Balance Sheet or Statement of Financial Position
(e) Owner’s capital = Statement of Owners Equity or Statement of Changes in
Owners Equity
(f) Salaries and wages payable = Balance Sheet or Statement of Financial
Position

18. In February 2014, Maria Osgood invested an additional $10,000 in her

business, Osgood’s Pharmacy, which is organized as a proprietorship.
Osgood’s accountant, Carl Sota, recorded this receipt as an increase in cash
and revenues. Is this treatment appropriate? Why or why not?
- The entry should be Debit Cash or Inventory or Equipment and Credit
Owners Equity for the Investment.

19. “A company’s net income appears directly on the income statement and
the owner’s equity statement, and it is included indirectly in the company’s
balance sheet.” Do you agree? Explain.
- The net income is directly included in the income statement and statement of
owner’s equity. However, it is not directly included in the balance sheet
because only the total amount of Owner’s capital will be presented in the
balance sheet.

20. Saylor Enterprises had a capital balance of $168,000 at the beginning

of the period. At the end of the accounting period, the capital balance was
$198,000.
(a) Assuming no additional investment or withdrawals during the period,
what is the net income for the period?
(b) Assuming an additional investment of $13,000 but no withdrawals during
the period, what is the net income for the period?
21. Summarized operations for Bayles Co. for the month of July are as
follows.
Revenues recognized: for cash $20,000; on account $70,000.
Expenses incurred: for cash $26,000; on account $40,000.
 Indicate for Bayles Co. (a) the total revenues, (b) the total expenses, and
(c) net income for the month of July.

22. The basic accounting equation is Assets = Liabilities +

Owner’s Equity. Replacing the words in that equation with dollar amounts,
what is Apple’s accounting equation at September 24, 2011? (Hint: Owner’s
equity is equivalent to shareholders’ equity.)

Brief Exercises page 33

BE1-1 Presented below is the basic accounting equation. Determine the
missing amounts.
Assets 5 Liabilities 1 Owner’s Equity
(a) $90,000 $50,000?
(b) ? $40,000 $70,000
(c) $94,000? $53,000

BE1-2 Given the accounting equation, answer each of the following questions.
(a) The liabilities of Grieg Company are $120,000 and the owner’s equity is
$232,000. What is the amount of Grieg Company’s total assets? $352,000
(b) The total assets of Grieg Company are $190,000 and its owner’s equity is
$91,000. What is the amount of its total liabilities? $99,000
(c) The total assets of Grieg Company are $800,000 and its liabilities are equal
to one-half of its total assets. What is the amount of Grieg Company’s owner’s
equity? $400,000
BE1-3 At the beginning of the year, Sielert Company had total assets of
$800,000 and total liabilities of $300,000. Answer the following questions.
(a) If total assets increased $150,000 during the year and total liabilities
decreased $80,000, what is the amount of owner’s equity at the end of the
year? $730,000.
(b) During the year, total liabilities increased $100,000 and owner’s equity
decreased $70,000. What is the amount of total assets at the end of the year?
$830,000
(c) If total assets decreased $80,000 and owner’s equity increased $120,000
during the year, what is the amount of total liabilities at the end of the year?
$100,000 (Continuios pag may date, end of the year meaning independent)

BE1-4 Use the expanded accounting equation to answer each of the

following questions.
(a) The liabilities of Roman Company are $90,000. Owner’s capital account is
$150,000; drawings are $40,000; revenues, $450,000; and expenses,
$320,000. What is the amount of Roman Company’s total asset?

(b) The total assets of Dylan Company are $57,000. Owner’s capital account is
$25,000; drawings are $7,000; revenues, $52,000; and expenses, $35,000.
What is the amount of the company’s total liabilities?

(c) The total assets of Capp Co. are $600,000 and its liabilities are equal to
two-thirds of its total assets. What is the amount of Capp Co.’s owner’s
equity?

BE1-5 Indicate whether each of the following items is an asset (A), liability
(L), or part of owner’s equity (OE).
Asset (a) Accounts Receivable
Liability (b) Salaries and wages payable
Asset (c) Equipment
Asset (d) Supplies
Owner’s Equity (e) Owner’s capital
Liability (f) Notes payable

BE1-6 Presented below are three business transactions. On a sheet of paper,

list the letters (a), (b), and (c) with columns for assets, liabilities, and
owner’s equity. For each column, indicate whether the transactions
increased (1), decreased (2), or had no effect (NE) on assets, liabilities, and
owner’s equity.
(a) Purchased supplies on account.
(b) Received cash for performing a service.
(c) Paid expenses in cash.

BE1-7 Follow the same format as in BE1-6. Determine the effect on assets,
liabilities, and owner’s equity of the following three transactions.
(a) Invested cash in the business.
(b) Withdrawal of cash by owner.
(c) Received cash from a customer who had previously been billed for services
performed.
BE1-8 Classify each of the following items as owner’s drawings (D), revenue
(R), or expense (E).
Expense (a) Advertising expense Owner’s Drawing (e) Owner’s drawings
Revenue (b) Service revenue Revenue (f) Rent revenue
Expense (c) Insurance expense Expense (g) Utilities expense
Expense (d) Salaries and wages expense

BE1-9 Presented below are three transactions. Mark each transaction as

affecting owner’s investment (I), owner’s drawings (D), revenue (R), expense
(E), or not affecting owner’s equity (NOE).
Revenue (a) Received cash for services performed
Expense (b) Paid cash to purchase equipment
Expense(c) Paid employee salaries

BE1-10 In alphabetical order below are balance sheet items for Fritz
Company at December 31, 2014. Molly Fritz is the owner of Fritz Company.
Prepare a balance sheet, following the format of Illustration 1-9.
Accounts payable $90,000
Accounts receivable $72,500
Cash $49,000 and Owner’s capital $31,500
BE1-11 Indicate whether the following items would appear on the income
statement (IS), balance sheet (BS), or owner’s equity statement (OE).
BS (a) Notes payable BS (d) Cash
IS (b) Advertising expense IS (e) Service revenue
OE (c) Owner’s capital

DO IT! Review
DO IT!1-1 Indicate whether each of the five statements presented below is
true or false.
1. The three steps in the accounting process are identification, recording, and
examination.
2. The two most common types of external users are investors and creditors.
3. Congress passed the Sarbanes-Oxley Act to ensure that investors invest only
in companies that will be profitable.
4. The primary accounting standard-setting body in the United States is the
Securities and Exchange Commission (SEC).
5. The historical cost principle dictates that companies record assets at their
cost and continue to report them at their cost over the time the asset is held.
FALSE
DO IT! 1-2 Classify the following items as investment by owner (I), owner’s
drawings (D), revenues (R), or expenses (E). Then indicate whether each item
increases or decreases owner’s equity.
(I) Drawings. Decreases owner’s equity
(D) Rent revenue. Increases owner’s equity
(E) Advertising expense Decrease in owner’s equity
(I) Owner puts personal assets into the business. Increases owner’s equity

DO IT! 1-3 Transactions made by J. Depp and Co., a law fi rm, for the month of
March are shown below. Prepare a tabular analysis which shows the effects
of these transactions on the expanded accounting equation, similar to that
shown in Illustration 1-8.
1. The company performed $20,000 of services for customers, on credit.
2. The company received $20,000 in cash from customers who had been billed
for services (in transaction 1).
3. The company received a bill for $2,300 of advertising, but will not pay it
until a later date.
4. J. Depp withdrew $3,600 cash from the business for personal use.

DO IT! 1-4 Presented below is selected information related to Howard

Company at December 31, 2014. Howard reports financial information
monthly. Accounts Payable $ 3,000 Salaries and Wages Expense $16,500
Cash 4,500, Notes Payable 25,000, Advertising Expense 6,000, Rent Expense
10,500, Service Revenue 51,500, Accounts Receivable 13,500, Equipment

29,000, Owner’s Drawings 7,500

(a) Determine the total assets of Howard Company at December 31, 2014.

(b) Determine the net income that Howard Company reported for December
2014.

(c) Determine the owner’s equity of Howard Company at December 31, 2014
E1-1 Zimmerman Company performs the following accounting tasks during
the year.
________Analyzing and interpreting information.
________Classifying economic events.
________Explaining uses, meaning, and limitations of data.
________Keeping a systematic chronological diary of events.
________Measuring events in dollars and cents.
_______Preparing accounting reports.
________Reporting information in a standard format.
________Selecting economic activities relevant to the company.
________Summarizing economic events.

Accounting is “an information system that identifies, records, and

communicates the economic events of an organization to interested users.”
Instructions: Categorize the accounting tasks performed by Zimmerman as
relating to either the identification (I), recording (R), or communication (C)
aspects of accounting.

E1-2 (a) The following are users of financial statements.

________Customers ________Securities and Exchange Commission
________Internal Revenue Service ________Store manager
________Labor unions ________Suppliers
________Marketing manager ________Vice president of finance
________Production supervisor
Instructions
Identify the users as being either external users or internal users.
(b) The following questions could be asked by an internal user or an
external user.
Internal Users Can we afford to give our employees a pay raise?
External Users Did the company earn a satisfactory income?
________Do we need to borrow in the near future?
________How does the company’s profitability compare to other companies?
________What does it cost us to manufacture each unit produced?
________Which product should we emphasize?
________Will the company be able to pay its short-term debts?

Instructions
Identify each of the questions as being more likely asked by an internal user
or an external user.
E1-3 Jill Motta, president of Motta Company, has instructed Linda Berger, the
head of the
accounting department for Motta Company, to report the company’s land in
the company’s
accounting reports at its fair value of $170,000 instead of its cost of $100,000.
Motta says,
“Showing the land at $170,000 will make our company look like a better
investment when
we try to attract new investors next month.”
Instructions
Explain the ethical situation involved for Linda Berger, identifying the
stakeholders and
the alternatives.
E1-4 The following situations involve accounting principles and assumptions.
1. Piang Company owns buildings that are worth substantially more than they
originally
cost. In an effort to provide more relevant information, Piang reports the
buildings at
fair value in its accounting reports.
2. Delta Company includes in its accounting records only transaction data that
can be
expressed in terms of money.
3. Luke Witte, owner of Luke’s Photography, records his personal living costs
as expenses
of the business.
Instructions
For each of the three situations, say if the accounting method used is correct
or incorrect.
If correct, identify which principle or assumption supports the method used. If
incorrect,
identify which principle or assumption has been violated.

E1-5 Tomlin Cleaners has the following balance sheet items.

Accounts payable = Liability
Accounts receivable = Asset
Cash Notes payable = Liability
Equipment Salaries and wages payable = Liability
Supplies = Asset
Owner’s capital = Owner’s Equity
Instructions
Classify each item as an asset, liability, or owner’s equity

E1-6 Selected transactions for Tara Lawn Care Company are listed below.
1. Made cash investment to start business. = Increase in Asset & Increase in OE
2. Paid monthly rent. = Decrease Cash & Increase Expense
3. Purchased equipment on account. = Increase Asset & Increase Liability
4. Billed customers for services performed. = Increase in Asset & Increase in
Revenue
5. Withdrew cash for owner’s personal use. = Decrease Cash & Decrease OE
6. Received cash from customers billed in (4) = Increase Cash Asset &
Decrease A/R Asset
7. Incurred advertising expense on account. = Increase Expense & Increase
Liability.
8. Purchased additional equipment for cash. = Increase Asset (Equipment) &
Decrease in Asset (Cash)
9. Received cash from customers when service was performed. = Increase
Asset (Cash) & Increase Revenue
Instructions
List the numbers of the above transactions and describe the effect of each
transaction on assets, liabilities, and owner’s equity. For example, the first
answer is: (1) Increase in assets and increase in owner’s equity.

E1-7 Kam Computer Timeshare Company entered into the following

transactions during May 2014.
(c) 1. Purchased computer terminals for $20,000 from Digital Equipment on
account.
(e) 2. Paid $4,000 cash for May rent on storage space.
(a) 3. Received $17,000 cash from customers for contracts billed in April.
(b) 4. Performed computer services to Viking Construction Company for
$3,000 cash.
(e) 5. Paid Tri-State Power Co. $11,000 cash for energy usage in May.
(b) 6. Kam invested an additional $29,000 in the business.
(e) 7. Paid Digital Equipment for the terminals purchased in (1) above.
(f) 8. Incurred advertising expense for May of $1,200 on account

Instructions
Indicate with the appropriate letter whether each of the transactions above
results in:
(a) An increase in assets and a decrease in assets.
(b) An increase in assets and an increase in owner’s equity.
(c) An increase in assets and an increase in liabilities.
(d) A decrease in assets and a decrease in owner’s equity.
(e) A decrease in assets and a decrease in liabilities.
(f) An increase in liabilities and a decrease in owner’s equity.
(g) An increase in owner’s equity and a decrease in liabilities

E1-8 An analysis of the transactions made by Liam Agler & Co., a certified
public accounting firm, for the month of August is shown below. The expenses
were $650 for rent, $4,800 for salaries and wages, and $500 for utilities.
Analyze the effect of transactions on assets, liabilities, and owner’s equity.
Analyze transactions and compute net income.
Instructions
(a) Describe each transaction that occurred for the month.
(b) Determine how much owner’s equity increased for the month.
(c) Compute the amount of net income for the month.
E1-9 An analysis of transactions for Liam Agler & Co. was presented in E1–8.

Instructions
Prepare an income statement and an owner’s equity statement for August and
a balance
sheet at August 31, 2014. Assume that August is the company’s first month of
business.

E1-10 Iverson Company had the following assets and liabilities on the dates
indicated.
Iverson began business on January 1, 2013, with an investment of $100,000.

Instructions
From an analysis of the change in owner’s equity during the year, compute the
net income (or loss) for:
Note: To analyze changes in owner’s equity use T-Accounts)
(a) 2013, assuming Iverson’s drawings were $15,000 for the year.
(b) 2014, assuming Iverson made an additional investment of $45,000 and
had no drawings in 2014.
(c) 2015, assuming Iverson made an additional investment of $15,000 and
had drawings of $25,000 in 2015.

E1-11 Two items are omitted from each of the following summaries of
balance sheet and income statement data for two proprietorships for the
year 2014, Garba’s Goods and Zahra Enterprises.

Instructions
Determine the missing amounts.
E1-12 The following information relates to David Pande Co. for the year
2014.

Instructions
After analyzing the data, prepare an income statement and an owner’s equity
statement for the year ending December 31, 2014.
E1-13 Reza Lang is the bookkeeper for Taylor Company. Reza has been trying
to get the balance sheet of Taylor Company to balance. Taylor’s balance sheet
is shown below.

Instructions
Prepare a correct balance sheet.

E1-14 Andrew Tym is the sole owner of Deer Park, a public camping ground
near the Lake
Mead National Recreation Area. Andrew has compiled the following financial
information as of December 31, 2014
E1-15 Presented below is financial information related to the 2014
operations of Gilligan Cruise Company.
E1-16 Presented below is information related to the sole proprietorship of
Huan Feng attorney.

Instructions
Prepare the 2014 owner’s equity statement for Huan Feng’s legal practice
Problems: Set A
P1-1A On April 1, Renato Uhrig established Renato’s Travel Agency. The
following transactions were completed during the month.

1. Invested $15,000 cash to start the agency.

2. Paid $600 cash for April office rent.
3. Purchased equipment for $3,000 cash.
4. Incurred $700 of advertising costs in the Chicago Tribune, on account.
5. Paid $800 cash for office supplies.
6. Performed services worth $10,000: $3,000 cash is received from
customers, and the balance of $7,000 is billed to customers on account.
7. Withdrew $500 cash for personal use.
8. Paid Chicago Tribune $500 of the amount due in transaction (4).
9. Paid employees’ salaries $2,500.
10. Received $4,000 in cash from customers who have previously been billed
in transaction (6).
Instructions
(a) Prepare a tabular analysis of the transactions using the following column
headings: Cash, Accounts Receivable, Supplies, Equipment, Accounts Payable,
Owner’s Capital, Owner’s Drawings, Revenues, and Expenses.
(b) From an analysis of the owner’s equity columns, compute the net income
or net loss for April.

P1-2A Sue Kojima opened a law office on July 1, 2014. On July 31, the balance
sheet showed Cash $5,000, Accounts Receivable $1,500, Supplies $500,
Equipment $6,000, Accounts Payable $4,200, and Owner’s Capital $8,800.
During August, the following transactions occurred.
1. Collected $1,200 of accounts receivable.
2. Paid $2,800 cash on accounts payable.
3. Recognized revenue of $7,500 of which $3,000 is collected in cash and the
balance is
due in September.
4. Purchased additional equipment for $2,000, paying $400 in cash and the
balance on account.
5. Paid salaries $2,500, rent for August $900, and advertising expenses $400.
6. Withdrew $700 in cash for personal use.
7. Received $2,000 from Standard Federal Bank—money borrowed on a note
payable.
8. Incurred utility expenses for month on account $270
Instructions
(a) Prepare a tabular analysis of the August transactions beginning with July
31 balances. The column headings should be as follows: Cash 1 Accounts
Receivable +Supplies + Equipment = Notes Payable + Accounts Payable +
Owner’s Capital - Owner’s Drawings + Revenues - Expenses.
(b) Prepare an income statement for August, an owner’s equity statement for
August, and a balance sheet at August 31.

P1-3A On June 1, Tamara Eder started Crazy Creations Co., a company that
provides craft opportunities, by investing $12,000 cash in the business.
Following are the assets and liabilities of the company at June 30 and the
revenues and expenses for the month of June.

a.
b.
P1-4A Debra Menge started her own consulting fi rm, Menge Consulting, on
May 1, 2014.
The following transactions occurred during the month of May.
May 1 Debra invested $7,000 cash in the business.
2 Paid $900 for office rent for the month.
3 Purchased $600 of supplies on account.
5 Paid $125 to advertise in the County News.
9 Received $4,000 cash for services performed.
12 Withdrew $1,000 cash for personal use.
15 Performed $5,400 of services on account
17 Paid $2,500 for employee salaries.
20 Paid for the supplies purchased on account on May 3.
23 Received a cash payment of $4,000 for services performed on account on
May 15.
26 Borrowed $5,000 from the bank on a note payable.
29 Purchased equipment for $4,200 on account.
30 Paid $275 for utilities
Instructions
(a) Show the effects of the previous transactions on the accounting equation
using the following format.

(b) Prepare an income statement for the month of May.

(c) Prepare a balance sheet