All answers should be well explained and correct.

Question 1: Required financial statements for external users and understand how to use these statements in decision making)

The income statement of Saeed CAR Repair is as follows:

SAEED CAR REPAIR

Income Statement

For the Month Ended April 30, 2018

Revenue

CAR Repair Revenue.....................................................................$7,500

Expenses

Salaries Expense...........................................................................$3,400

Depreciation Expense...................................................................450

Utilities Expense...........................................................................400

Rent Expense.................................................................................600

Supplies Expense..........................................................................1,050

Total Expenses.......................................................................5,900

Net Income.............................................................................................$1,600

On April 1, the owner, Lee Gentry, had a capital balance of $12,900. During April, Gentry withdrew $3,000 cash for personal use.

Instructions

(a)Prepare closing entries at April 30.(4 Marks)

(b)Prepare an owner's equity statement for the month of April.(2 Marks)

Question 2: (Requierd financial statements for external users and understand how to use these statements in decision making)

Abu Dhabi Insurance Agency prepares monthly financial statements. Presented below is an income statement for the month of June that is correct on the basis of information considered.

ABU DHABI INSURANCE AGENCY

Income Statement

For the Month Ended June 30

Revenues

Premium Commission Revenue...................................................$53,000

Expenses

Salary expense...............................................................................$6,000

Advertising expense.....................................................................800

Rent expense.................................................................................4,200

Depreciation expense...................................................................2,800

Total expenses...............................................................................13,800

Net income..............................................................................................$39,200

Additional Data: When the income statement was prepared, the company accountant neglected to take into consideration the following information:

1.A utility bill for $2,000 was received on the last day of the month for electric and gas service for the month of June.

2.A company insurance salesman sold a life insurance policy to a client for a premium of $35,000. The agency billed the client for the policy and is entitled to a commission of 20%.

3.Supplies on hand at the beginning of the month were $3,000. The agency purchased additional supplies during the month for $3,500 in cash and $2,200 of supplies were on hand at June 30.

4.The agency purchased a new car at the beginning of the month for $19,200 cash. The car will depreciate $4,800 per year.

5.Salaries owed to employees at the end of the month total $5,300. The salaries will be paid on July 5.

Instructions

Preparea correct income statement.

Question 3)You are the CFO for Tom & Jerry's, Inc. Together with Tom Fheelein and Jerry Rhodeint, the company's two shareholders, you are examining the following statement of cash flows which they prepared for Tom & Jerry's, Inc. for the year ended January 31, 2015.

TOM & JERRYS'S, INC.

Statement of Cash Flows

For the Year Ended January 31, 2015

Sources of cash

From sales of merchandise $380,000

From sale of capital stock 410,000

From sale of investment (purchased below) 80,000

From depreciation 55,000

From issuance of note for truck 20,000

From interest on investments 6,000

Total sources of cash 951,000

Uses of cash

For purchase of fixtures and equipment 320,000

For merchandise purchased for resale 258,000

For operating expenses (including depreciation) 160,000

For purchase of investment 75,000

For purchase of truck by issuance of note 20,000

For purchase of treasury stock 10,000

For interest on note payable 3,000

Total uses of cash 846,000

Net increase in cash $105,000

Tom claims that this statement of cash flows is an excellent portrayal of a superb first year with cash increasing $105,000. Jerry replies that it was not a superb first year. Rather, he says, the year was an operating failure as the statement is presented incorrectly and $105,000 is not the actual increase in cash. The cash balance at the beginning of the year was $140,000.

Instructions:

Using the data provided, develop a statement of cash flows using the indirect method. The only noncash item in the income statement is depreciation. The purchase/sale of the investment and any resulting gain/loss are investing (not operating) activities. Hint: You may need to figure out net income for the year.

Who is correct, Tom or Jerry? please explain why.