The following are the transactions relating to the formation of Gray Mowing Services Inc. and its first

Question:

The following are the transactions relating to the formation of Gray Mowing Services Inc. and its first month of operations. Prepare an answer sheet with the columns shown. Record each transaction in the appropriate columns of your answer sheet. Show the amounts involved and indicate how each account is affected (+ or ?). After all transactions have been recorded, calculate the total assets, liabilities, and stockholders? equity at the end of the month and calculate the amount of net income for the month.

a. The firm was organized and the initial stockholders invested cash of $12,000.

b. The company borrowed $18,000 from a relative of one of the initial stockholders; a short-term note was signed.

c. Two zero-turn lawn mowers costing $7,600 each and a professional trimmer costing $2,600 were purchased for cash. The original list price of each mower was $10,200, but a discount was received because the seller was having a sale.

d. Gasoline, oil, and several packages of trash bags were purchased for cash of $1,800.

e. Advertising flyers announcing the formation of the business and a newspaper ad were purchased. The cost of these items, $3,400, will be paid in 30 days.

f. During the first two weeks of operations, 94 lawns were mowed. The total revenue for this work was $14,100; $9,300 was collected in cash, and the balance will be received within 30 days.

g. Employees were paid $8,400 for their work during the first two weeks.

h. Additional gasoline, oil, and trash bags costing $2,200 were purchased for cash.

i. In the last two weeks of the first month, revenues totaled $18,400, of which $7,500 was collected.

j. Employee wages for the last two weeks totaled $10,200; these will be paid during the first week of the next month.

k. It was determined that at the end of the month the cost of the gasoline, oil, and trash bags still on hand was $600.

l. Customers paid a total of $3,000 due from mowing services provided during the first two weeks. The revenue for these services was recognized in transaction f.

image

After you have completed parts a through l in Exercise 4.6, prepare an income statement for Gray Mowing Services Inc. for the month presented and a balance sheet at the end of the month using the captions shown on the answer sheet.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Accounting What the Numbers Mean

ISBN: 978-1260565492

12th edition

Authors: David Marshall, Wayne McManus, Daniel Viele

Question Posted: