Glenrose Servicing began operations on June 1, 2014. The transactions for the first two months follow:
2014
June 1 The owner, Diane Towbell, invested $20,000 cash and office equipment with a value of $6,000.
5 Glenrose Servicing performed $3,000 of services for a client on account.
7 Paid rent for June in the amount of $1,500.
9 Collected $1,000 from the customer of June 5.
15 Paid $5,000 of mid-month wages to part-time employees.
17 Provided $2,000 of services to a client and collected the cash immediately.
29 Received the $300 June utilities bill. It will be paid in July.
30 Paid $1,500 in wages to part-time employees.
July 5 Did work for a customer on account; $3,500.
8 Collected $2,000 from credit customers.
9 Paid $1,500 rent for July.
12 Purchased $1,800 of additional office equipment on account.
14 Paid $1,000 of the amount owing regarding July 12.
15 Paid mid-month wages to part-time staff; $2,500.
17 Performed services for a customer and immediately collected $4,800.
25 Paid $300 in utilities for the month of July plus the balance owing from June.
31 Paid $1,700 in wages to part-time employees.
31 The owner withdrew cash of $2,000 for personal use.
Required
1. Create two tables like the one in Exhibit 1.15 for each of June and July using the following headings for the columns: Cash; Accounts Receivable; Office Equipment; Accounts Payable; Diane Towbell, Capital; and Explanation of Equity Transaction.
2. Use additions and subtractions to show the effects of the above transactions on the elements of the equation for each of June and July.
3. Prepare an income statement and statement of changes in equity for each of the months ended June 30, and July 31, 2014. Also prepare a balance sheet at June 30, 2014, and July 31, 2014.
Analysis Component: Answer each of the following questions:
1. Assets increased by $800 from June 30, 2014, to July 31, 2014. How was this increase financed?
2. Which financial statement reports on a company's?
a. Performance?
b. Financial position?
Explain what is meant by each of these terms.
3. Explain how Glenrose Servicing's July income statement, statement of changes in equity, and balance sheet are linked.