Types of accounts and income statement preparation (Learning Objectives 5 & 6 ) 15–20 min.

Selected accounts of Cole Consulting, Inc., a financial services business, have the following balances at December 31, 2014, the end of its first year of operations. During the year, James Cole, the only stockholder, bought $20,000 of stock in the business.

$ 26,500 6,300 4,100 10,000 116,600 7,000 2,700 Office Furniture ......................

Utilities Expense.....................

Accounts Payable...................

Note Payable ..........................

Service Revenue ....................

Accounts Receivable ..............

Supplies Expense...................

$28,000 4,200 500 36,700 1,500 1,600 48,000 Rent Expense ...........................

Cash.........................................

Office Supplies.........................

Salaries Expense ......................

Salaries Payable.......................

Property Tax Expense ..............

Equipment................................

Requirements 1. Identify each as an asset, liability, revenue, or expense.

2. Prepare the income statement of Cole Consulting, Inc., for the year ended December 31, 2014. What is the result of operations for 2014?

3. Assuming the balance in Retained Earnings on December 31, 2014, was $9,300, what was the amount of the dividends during the year? Answer by preparing a statement of retained earnings to solve for the dividends. Recall that the business has just completed its first year and has no beginning balance for retained earnings.

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