Assets

Cash $7,000

Accounts Receivable 6,000

Supplies 2,000

Equipment 10,000

Total Assets $25,000

Liabilities & Equity

Accounts Payable $3,000

Common Stock 20,000

Retained Earnings 2,000

Total Liabilities & Equity $25,000

Instructions:

Open the balances in the general ledger (T-accounts).

Post the journal entries from the general journal to the general ledger (T-accounts).

Prepare the four financial statements: Income Statement, Statement of Retained Earnings, Balance Sheet, Statement of Cash Flows (Direct Method or Indirect Method.)

Transaction 1: Investment by Stockholders

Description: Invest $25,000 cash in the business in exchange for $25,000 of common stock.

Journal Entry: Dr. Cr.

Cash 25,000

Common Stock 25,000

Transaction 2: Purchase of Equipment for Cash

Description: Purchases computer equipment for $9,000 cash.

Journal Entry: Dr. Cr.

Equipment 9,000

Cash 9,000

Transaction 3: Purchase of Supplies on Credit

Description: Purchases for $1,800 from Acme Supply Company computer paper and other supplies expected to last several months. Acme agrees to allow Softbyte to pay this bill at a later date.

Journal Entry: Dr. Cr.

Supplies 1,800

Accounts Payable 1,800

Transaction 4: Services Provided for Cash

Description: Receives $1,600 cash from customers for programming services it has provided.

Journal Entry: Dr. Cr.

Cash 1,600

Service Revenue 1,600

Transaction 5: Purchase of Advertising on Credit

Description: Received a bill for $350 from the Daily News for advertising but postpones payment until a later date.

Journal Entry: Dr. Cr.

Advertising Expense 350

Accounts Payable 350

Transaction 6: Services Rendered for Cash and Credit

Description: Provides $3,700 of programming services for customers. The company receives cash of $1,700 from customers, and it bills the balance of $2,000 on account.

Journal Entry: Dr. Cr.

Cash 1,700

Accounts Receivable 2,000

Service Revenue 3,700

Transaction 7: Payment of Expenses

Description: Pays the following expenses in cash: store rent $650, salaries and wages of employees $920, and utilities $230.

Journal Entry: Dr. Cr.

Rent Expense 650

Salary Expense 920

Utilities Expense 230

Cash 1,800

Transaction 8: Payment of Accounts Payable

Description: Pays $500 cash on accounts payable.

Journal Entry: Dr. Cr.

Accounts Payable 500

Cash 500

Transaction 9: Receipt of Cash on Account

Description: Receives $900 in cash from customers who had been billed for services.

Journal Entry: Dr. Cr.

Cash 900

Accounts Receivable 900

Transaction 10: Dividends

Description: The corporation pays a dividend of $1,350 in cash to the stockholders of Softbyte Inc.

Journal Entry: Dr. Cr.

Dividends 1,350

Cash 1,350

What is the ending cash balance?

A. $ 23,150

B. $ 23,250

C. $ 23,350

D. $ 23,550

What is the ending accounts receivable balance?

$ 7,100

B. $ 7,200

C. $ 7,300

D. $ 7,500

What is the ending supplies balance?

A. $ 3,200

B. $ 3,500

C. $ 3,800

D. $ 4,100

What is the ending equipment balance?

A. $ 15,000

B. $ 18,000

C. $ 19,000

D. $ 20,000

What is the ending accounts payable balance?

A. $ 4,650

B. $ 4,750

C. $ 4,950

D. $ 5,250

What is the ending retained earnings balance?

A. $ 3,800

B. $ 4,100

C. $ 3,500

D. $ 3,900

What is the net income?

A. $ 2,750

B. $ 3,150

C. $ 3,350

D. $ 2,950

What is the amount of total expenses?

A. $ 1,650

B. $ 2,350

C. $ 1,850

D. $ 2,150

What is the net increase in cash for the period?

A. $ 16,550

B. $ 14,350

C. $ 17,650

D. $ 15,150

What is the net cash provided by operating activities?

A. $ 1,500

B. $ 1,800

C. $ 1,900

D. $ 2,100

What is the net cash used by investing activities?

A. $ (19,000)

B. $ (10,000)

C. $ (8,000)

D. $ (9,000)

What is the net cash provided by financing activities?

A. $ 21,150

B. $ 25,950

C. $ 22,350

D. $ 23,650

An asset is:

only acquired with cash

something the company owns

only contributed by stockholders

a companys obligation to pay

Net income:

decreases equity

represents the amount of assets owners put into a business

equals assets minus liabilities

is revenues minus expenses

If assets are $300,000 and liabilities are $195,000, then equity equals:

$ 95,000

$ 105,000

$ 195,000

$ 300,000