a. Prepare T-accounts for each of the accounts provided. Enter beginning balances. Recordeach of the August transactions in the T-accounts and calculate ending balance for eachaccount. Create new accounts as necessary.

b. Calculate cash flows from operations for the month ending August 31, 2015.

c. Prepare a classified income statement for the month of August in good form. For thesake of completeness, assume income tax expense is $146,600.

ACCT: 2100 Spring 2016 Chapter 3 Take Home Quiz The following account balances are provided for Stylish Services, Inc. at July 31, 2015: Balance Cash $ 250,000 Accounts receivable 170,000 Investment 38,000 Spare parts and supplies 40,000 Prepaid insurance 36,000 Land and Equipment (net) 487,000 84,000 Accounts payable Interest payable 300 Salaries payable 36,000 Unearned revenue 40,000 Bank loan due October 1, 2017 426,000 Common stock (no par) 350,000 Retained earnings 84,700 All August 2015 transactions follow: 1. Provided services on account for a total of $400,000. 2. Customers redeemed gift cards for $20,000 in services. 3. Used $18,000 in parts and supplies. 4. Sold an investment costing $25,000 for $30,000 cash. 5. Paid accounts payable of $55,000. 6. Collected $180,000 on customer accounts. 7. Issued common stock for $75,000. 8. Purchased equipment for $35,000, $15,000 of which was paid in cash. The remainder was on account. 9. Paid $30,000 for August, September and October rent. 10. Paid $76,000 for employee services. $36,000 was for July services and $7,000 was for services to be performed in September. 11. Received a $2,000 bill for August utilities. The bill will not be paid until September. 12. Paid $2,500 for August radio advertisements. 13. Received a $3,000 dividend payment. 14. The prepaid insurance contract expires on January 31, 2016. Required: a. Prepare T-accounts for each of the accounts provided. Enter beginning balances. Record each of the August transactions in the T-accounts and calculate ending balance for each account. Create new accounts as necessary. b. Calculate cash flows from operations for the month ending August 31, 2015. c. Prepare a classified income statement for the month of August in good form. For the sake of completeness, assume income tax expense is $146,600. Solution 1 Cash 250000 30000 180000 75000 3000 55000 15000 30000 76000 2500 1 Accounts receivable 170000 180000 400000 1 390000 Investment 38000 25000 1Spareparts and supplies 40000 18000 13000 22000 359500 1 Prepaid insurance 36000 6000 1 Land and equipment 487000 35000 30000 1 1 36000 Unearned revenue 20000 40000 20000 Retained earnings 84700 Service revenue 400000 20000 84700 1 1 10000 Prepaid rent 20000 10000 1 1 1 Advertising expense 2500 2000 2000 2500 Cash flow from operations Cash collections: From customers 180000 Cash disbursements Payment of accouunts payable Rent Employee service Advertising expense Total disbursement 55000 30000 76000 2500 163500 Cash flow from operations 3 16500 Income statement Service revenue Dividend revenue Gain on sale of investment Total revenue Expenses 420000 3000 5000 423000 Interest payable 300 Bank loan 426000 300 1 Common stock 350000 75000 426000 1 Supplies expenses 18000 425000 Gain on sale of investmen 1 5000 18000 20000 Utilities expenses 2 1 420000 Rent expense 1 51000 0 1 Accounts payable 55000 84000 20000 2000 522000 Salaries payable 36000 1 1 5000 Prepaid wages 7000 1 7000 1 Wages expense 33000 33000 Dividend revenue 3000 3000 1 Insurance expense 6000 6000 Supplies expenses Rent expense Wages expense Utilities expense Advertising expense Insurance expense Total expenses Income from operations Income taxes Net income 18000 10000 33000 2000 2500 6000 71500 351500 146600 204900 Solution 1 Cash 250000 30000 180000 75000 3000 55000 15000 30000 76000 2500 1 Accounts receivable 170000 180000 400000 1 390000 Investment 38000 25000 1Spareparts and supplies 40000 18000 13000 22000 359500 1 Prepaid insurance 36000 6000 1 Land and equipment 487000 35000 30000 1 1 36000 Unearned revenue 20000 40000 20000 Retained earnings 84700 Service revenue 400000 20000 84700 1 1 10000 Prepaid rent 20000 10000 1 1 1 Advertising expense 2500 2000 2000 2500 Cash flow from operations Cash collections: From customers 180000 Cash disbursements Payment of accouunts payable Rent Employee service Advertising expense Total disbursement 55000 30000 76000 2500 163500 Cash flow from operations 3 16500 Income statement Service revenue Dividend revenue Gain on sale of investment Total revenue Expenses 420000 3000 5000 423000 Interest payable 300 Bank loan 426000 300 1 Common stock 350000 75000 426000 1 Supplies expenses 18000 425000 Gain on sale of investmen 1 5000 18000 20000 Utilities expenses 2 1 420000 Rent expense 1 51000 0 1 Accounts payable 55000 84000 20000 2000 522000 Salaries payable 36000 1 1 5000 Prepaid wages 7000 1 7000 1 Wages expense 33000 33000 Dividend revenue 3000 3000 1 Insurance expense 6000 6000 Supplies expenses Rent expense Wages expense Utilities expense Advertising expense Insurance expense Total expenses Income from operations Income taxes Net income 18000 10000 33000 2000 2500 6000 71500 351500 146600 204900