Inferring Operating Transactions and Preparing an Income Statement and Balance Sheet

Kate's Kite Company (a corporation) sells and repairs kites from manufacturers around the world. Its stores are located in rented space in malls and shopping centers. During its first month of operations ended April 30, 2011, Kate's Kite Company completed eight transactions with the dollar effects indicated in the following schedule:

Required:
1. Write a brief explanation of transactions (a) through (h). Include any assumptions that you made.
2. Compute the ending balance in each account and prepare an income statement and a classified balance sheet for Kate's Kite Company on April 30,2011.

Transcribed Image Text:

DOLLAR EFFECT OF EACH OF THE EIGHT TRANSACTIONS Ending Balance Accounts (b) (e) (d) (r) (g) (h) (a) (e) Cash $63.300 S(13,700) $(6,200) $8,680 $(1.240) $(2,480) $3,720 Accounts Receivable 3.720 Inventory 24,800 (6,510) Prepaid Expenses Store Fixtures 1,860 13,700 Accounts Payable Uneamed Revenue 18,600 $1,480 2,480 Contributed Capital 63,300 Sales Revenue 12,400 1,240 Cost of Sales 6,510 Wages Expense 1,240 Rent Expense 620 Utilities Expense 1,480