Analyzing transactions and preparing financial statements

Nihal Naser launched a new business, NasersMaintenance Co., that began operations on June 1. The following transactions were completed by the company during that first month.

June 1		Nihal Naser invested $130,000 cash in the company.
2		The company rented a furnished office and paid $6,000 cash for Junes rent.
4		The company purchased $2,400 of equipment on credit.
6		The company paid $1,150 cash for this months advertising of the opening of the business.
8		The company completed maintenance services for a customer and immediately collected $850 cash.
14		The company completed $7,500 of maintenance services for Sun City Mall on credit.
16		The company paid $800 cash for an assistants salary for the first half of the month.
20		The company received $7,500 cash payment for services completed for Sun City Mall on June 14.page 44
21		The company completed $7,900 of maintenance services for Wojooh Beauty Shop on credit.
24		The company completed $675 of maintenance services for Build-It Coop on credit.
25		The company received $7,900 cash payment from Wojooh Beauty Shop for the work completed on June 21.
26		The company made payment of $2,400 cash for equipment purchased on June 4.
28		The company paid $800 cash for an assistants salary for the second half of this month.
29		Nihal Naser withdrew $4,000 cash from The company for personal use.
30		The company paid $150 cash for this months telephone bill.
30		The company paid $890 cash for this months utilities.

Required

1. Arrange the following asset, liability, and equity titles in a table like Exhibit 1.9: Cash; Accounts Receivable; Equipment; Accounts Payable; N. Naser, Capital; N. Naser, Withdrawals; Revenues; and Expenses.

2. Show the effects of the transactions on the accounts of the accounting equation by recording increases and decreases in the appropriate columns. Do not determine new account balances after each transaction. Determine the final total for each account and verify that the equation is in balance.

3. Prepare a June income statement, a June statement of owners equity, a June 30 balance sheet, and a June statement of cash flows.

Check (2) Ending balances: Cash, $130,060; Expenses, $9,790 (3) Net income, $7,135; Total assets, $133,135

Problem 1-8B

Analyzing the effects of transactions

Farah Hammam started a new business, HammamComputing, and completed the following transactions during its first year of operations.

a. Farah Hammam invests $90,000 cash and office equipment valued at $10,000 in the company.

b. The company purchased a $150,000 building to use as an office. It paid $40,000 in cash and signed a note payable promising to pay the $110,000 balance over the next 10 years.

c. The company purchased office equipment for $25,000 cash.

d. The company purchased $1,200 of office supplies and $1,700 of office equipment on credit.

e. The company paid a local newspaper $750 cash for printing an announcement of the offices opening.

f. The company completed a financial plan for a client and billed that client $2,800 for the service.

g. The company designed a financial plan for another client and immediately collected a $4,000 cash fee.

h. Farah Hammam withdrew $11,500 cash from the company for personal use.

i. The company received $1,800 cash from the client described in transaction f.

j. The company made a payment of $700 cash on the equipment purchased in transaction d.

k. The company paid $2,500 cash for the office secretarys wages.

Required

1. Create a table like the one in Exhibit 1.9, using the following headings for the columns: Cash; Accounts Receivable; Office Supplies; Office Equipment; Building; Accounts Payable; Notes Payable; F. Hammam, Capital; F. Hammam, Withdrawals; Revenues; and Expenses.

2. Use additions and subtractions within the table created in part 1 to show the dollar effects of each transaction on individual items of the accounting equation. Show new balances after each transaction.

3. Once you have completed the table, determine the companys net income.

Check (2) Ending balances: Cash, $15,350; Expenses, $3,250; Notes Payable, $110,000 (3) Net income, $3,550