Journal Entries, Trial Balance, and Financial Statements

Neveranerror Inc. was organized on June 2 by a group of accountants to provide accounting and tax services to small businesses. The following transactions occurred during the first month of business:

Required:

1. Prepare journal entries on the books of Neveranerror Inc. to record the transactions entered into during the month. Ignore depreciation expense and interest expense.

Indicate the effect on financial statement items by selecting "" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.

June 2: Received contributions of $10,000 from each of the three owners of the business in exchange for shares of stock.

June 5: Purchased a computer system for $12,000. The agreement with the vendor requires a down payment of $2,500 with the balance due in 60 days.

June 8: Signed a two-year promissory note at the bank and received cash of $20,000.

June 15: Billed $12,350 to clients for the first half of June. Clients are billed twice a month for services performed during the month, and the bills are payable within ten days.

June 17: Paid a $900 bill from the local newspaper for advertising for the month of June.

June 23: Received the amounts billed to clients for services performed during the first half of the month.

June 28: Received and paid gas, electric, and water bills. The total amount is $2,700.

June 29: Received the landlords bill for $2,200 for rent on the office space that Neveranerror leases. The bill is payable by the 10th of the following month.

June 30: Paid salaries and wages for June. The total amount is $5,670.

June 30: Billed $18,400 to clients for the second half of June.

June 30: Declared and paid dividends in the amount of $6,000.

4. Which of the following would indicate a good financial health of the company?

Journal Balance Sheet Stockholders' Date Description Debit Credit Assets = Liabilities Equity + June 2 Income Statement Net Revenues Expenses Income 2. Prepare a trial balance at June 30. If an amount box does not require an entry, leave it blank. Neveranerror Inc. Trial Balance June 30 Debits Credits Accounts receivable Advertising expense Cash Computer Notes payable Totals 3a. Prepare the income statement for the month of June. Neveranerror Inc. Income Statement For the Month of June Expenses: 3b. Prepare the statement of retained earnings for the month of June. If an amount is zero, enter "O". Neveranerror Inc. Statement of Retained Earnings For the Month of June 30. Prepare the classified balance sheet at June 30. Neveranerror Inc. Balance Sheet June 30 Assets Current assets: Total current assets Property, plant, and equipment: Total assets Liabilities and Stockholders' Equity Current liabilities: Long-term debt: Total liabilities Total stockholders' equity Total liabilities and stockholders' equity Net profit ratio of 5% and industry average is 10%. Current ratio is 1.6 and the industry average is 1.4. The solvency ratio is 1.2 and the industry average is 1.7. The interest coverage ratio is