a. C. After several months of planning, Barbara Schmidt started a haircutting business called The Cutlery. The following events occurred during its first month: On August I, Schmidt put $3,000 cash into a checking account in the name of The Cut- lery. She also invested $15,000 of equipment that she already owned. b. On August 2, she paid $600 cash for furniture for the shop. On August 3, she paid $500 cash to rent space in a strip mall for August. d. On August 4, she furnished the shop by installing the old equipment and some new equipment that she bought on credit for $1,200. This amount is to be repaid in three equal payments at the end of August, September, and October. On August 5, The Cutlery opened for business. Receipts from cash sales in the first week and a half of business (ended August 15) were $825. f. On August 17, Schmidt paid $125 to an assistant for working during the grand opening, e. 8 Cash receipts from sales during the second half of August were $930. h. On August 31, Schmidt paid an installment on the account payable. i. On August 31, she withdrew $900 cash for her personal use. Required 1. Arrange the following asset, liability, and owner's cquity titles in a table similar to the one in Illustration 1-7: Cash, Furniture, Store Equipment, Accounts Payable, and Bar- bara Schmidt, Capital. Show the effects of each transaction on the equation. Explain each of the changes in owner's equity. 2. Prepare an income statement for August. 3. Prepare a statement of changes in owner's equity for August, 4. Prepare a balance sheet as of August 31. 5. Prepare a statement of cash flows for August. Determine the return on equity ratio for August. 7. Determine the modified return on equity ratio for August, assuming that Schmidt's 6. a. C. After several months of planning, Barbara Schmidt started a haircutting business called The Cutlery. The following events occurred during its first month: On August I, Schmidt put $3,000 cash into a checking account in the name of The Cut- lery. She also invested $15,000 of equipment that she already owned. b. On August 2, she paid $600 cash for furniture for the shop. On August 3, she paid $500 cash to rent space in a strip mall for August. d. On August 4, she furnished the shop by installing the old equipment and some new equipment that she bought on credit for $1,200. This amount is to be repaid in three equal payments at the end of August, September, and October. On August 5, The Cutlery opened for business. Receipts from cash sales in the first week and a half of business (ended August 15) were $825. f. On August 17, Schmidt paid $125 to an assistant for working during the grand opening, e. 8 Cash receipts from sales during the second half of August were $930. h. On August 31, Schmidt paid an installment on the account payable. i. On August 31, she withdrew $900 cash for her personal use. Required 1. Arrange the following asset, liability, and owner's cquity titles in a table similar to the one in Illustration 1-7: Cash, Furniture, Store Equipment, Accounts Payable, and Bar- bara Schmidt, Capital. Show the effects of each transaction on the equation. Explain each of the changes in owner's equity. 2. Prepare an income statement for August. 3. Prepare a statement of changes in owner's equity for August, 4. Prepare a balance sheet as of August 31. 5. Prepare a statement of cash flows for August. Determine the return on equity ratio for August. 7. Determine the modified return on equity ratio for August, assuming that Schmidt's 6
