Preparation and Interpretation of Financial Statements

P4 The accounts of Frequent Ad, an agency that develops marketing materials for print, radio, and television, follow.

The agency's first year of operations just ended on January 31, 2014.

Accounts Payable $19,400

Accounts Receivable 24,600

Advertising Service Revenue 159,200

A. Francis, Capital 5,000*

Cash 1,800

Equipment Rental Expense 37,200

Marketing Expense 4,500

Office Rent Expense 10,800

Salaries Expense 86,000

Salaries Payable 1,300

Supplies 900

Supplies Expense 19,100

Withdrawals 0

*Represents the initial investment by the owner.

REQUIRED

Prepare Frequent Ad's income statement, statement of owner's equity, and balance sheet.

2. Business Application Review the financial statements and comment on the financial challenges Frequent Ad faces.