Assignment 3

Herley City was started on December 1, 2015, by Jason Elliot with an investment of $30,000 cash. It has been

operating for one year. Elliott has made additional investments of $20,000 but he has not withdrawn any funds.

The company rents out snowboards and related gear from a small store. The balance sheet accounts at

November 30, 2016, are as follows:

Cash.............................................. $ 2,000

Accounts Receivable................... 18,000

Rental Gear.................................. 36,000

Rental Snowboards..................... 68,000

Store Equipment......................... 26,000

Accounts Payable........................ 24,000

Equity............................................ jQuery20008644562453754108_1524342714786???

The following transactions took place during the month of December 2016:

Dec. 1 Elliott borrowed $30,000 from his family and invested $24,000 in the business. The other $6,000

was intended for Elliott's living expenses.

1 The business paid $6,000 for the month's rent on the store space.

4 The business signed a one-year lease for the rental of additional store space at a cost of $4,000 per

month. The lease is effective January 1. The business will pay the first month's rent in January.

6 Rental fees for the week were: Gear, $12,000; Boards, $28,000. Half the fees were received in cash

and half on account.

10 The business paid the accounts payable from November 30, 2016.

12 The business purchased gear for $18,000 and boards for $32,000, all on account.

13 Rental fees for the week were: Gear, $6,000,. Boards, $12,000. All the fees were received in cash.

15 The company received payment for the accounts receivable owing at November 30, 2016.

18 The company purchased store equipment for $8,000 by paying $2,000 cash with the balance due in

60 days.

20 Rental fees for the week were: Gear, $8,000; Boards, $20,000. Half the fees were received in cash

and half on account.

24 The company paid the balance owing for the purchases made on December 12.

27 Rental fees for the week were: Gear, $4,000; Boards, $16,000. All the fees were received in cash.

27 The company received payment for rental fees on account from December 6.

Required:

1. What is the total net income earned by the business over the period of December 1, 2015 to November

30, 2016?

2. Record and Post the above transactions and prepare the Trial Balance for December 31, 2016

3. Prepare the income statement for Herley City for the month ended December 31, 2016.

4. Prepare the balance sheet for Herley City at December 31, 2016.

5. Elliott has expressed concern that although the business seems to be profitable and growing, he

constantly seems to be investing additional money into it and has been unable to make any withdrawals

for the work he has put into it. Prepare a reply to his concerns.