Kikis Famous Desserts Corporation was formed on July 1, 2007. On July 31, the balance sheet showed

Question:

Kiki’s Famous Desserts Corporation was formed on July 1, 2007. On July 31, the balance sheet showed Cash $7,000,Accounts Receivable $2,000, Supplies $500, Office Equipment $5,000, Accounts Payable $5,500, Common Stock $7,500, and Retained Earnings $1,500. During August, the following transactions occurred.

1. Collected $1,000 of accounts receivable.

2. Paid $1,200 cash on accounts payable.

3. Earned revenues of $10,000, of which $3,000 is collected in cash and the balance is due in September.

4. Purchased additional office equipment for $2,000, paying $250 in cash and the balance on account.

5. Paid salaries $2,000, rent for August $1,500, and advertising expenses $450.

6. Paid dividends of $550.

7. Received $1,000 from Allied Bank—money borrowed on a note payable.

8. Incurred utility expenses for month on account $500.

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 + Office Equipment = Notes Payable - Accounts Payable - Common Stock - Retained Earnings.

(b) Prepare an income statement for August, a retained earnings statement for August, and a balance sheet at August 31.

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