Use this problem in conjunction with problem P2-40B.

{Requirements}

1. Journalize the transactions of DH Designers, Inc. Explanations are not required.

2. Set up the following T-accounts: Cash, Accounts Receivable, Supplies, Land, Accounts Payable, Share Capital, Retained Earnings, Dividends, Service Revenue, Rent Expense, and Advertising Expense. Insert in each account its balance as given (example: Cash \(\$ 1,700\) ). Post to the accounts.

3. Compute the balance in each account. For each asset account, each liability account, and for Share Capital, compare its balance to the ending balance you obtained in problem 2-40 Are the amounts the same or different?

problem P2-40

Doug Hanna operates and is the major shareholder of an interior design studio called DH Designers, Inc. The following amounts summarize the financial position of the business on April 30, 2020:

During May 2020, the business completed these transactions:

a. Hanna received \(\$ 30,000\) as a gift and deposited the cash in the business bank account. The business issued common shares to Hanna.

b. Paid \(\$ 1,000\) on accounts payable.

c. Performed services for a client and received cash of \(\$ 5,100\)

d. Collected cash from a customer on account, \(\$ 700\).

e. Purchased supplies on account, \(\$ 800\).

f. Consulted on the interior design of a major office building and billed the client for services rendered, \(\$ 15,000\)
g. Received cash of \(\$ 1,700\) and issued common shares to a shareholder.
h. Recorded the following expenses for the month: paid office rent, \(\$ 2,100\); paid advertising, \(\$ 1,600\).
i. Declared and paid a cash dividend of \(\$ 2,000\).
{Requirements}
In order to guide Doug Hanna:
1. Prepare the income statement of DH Designers, Inc. for the month ended May 31, 2020 , List expenses in decreasing order by amount.
2. Prepare the statement of retained earnings of DH Designers, Inc. for the month ended May 31,2020 3. Prepare the balance sheet of DH Designers, Inc. at May 31, 2020.

Transcribed Image Text:

ASSETS LIABILITIES + SHAREHOLDERS' EQUITY Cash + Accounts Receivable + Supplies + Land => Accounts Payable Common Retained + Shares Earnings Bal. 1,700 2,200 24,100 5,400 10,000 12,600