Puzzle Zoo Toy Company

After working for many years for a toy manufacturing company, James Stevens has recently started his own toy shop in the beginning of May 2021. The company is called Puzzle Zoo.

The following events occurred during May 2021:

a. Stevens started the firm, investing his personal savings of $15,000 in cash.

b. Puzzle Zoo bought $7,000 of inventories on credit

c. Puzzle Zoo took a loan of $65,000

d. On the last day of the month, Puzzle Zoo bought a toy manufacturing machine for $50,000 in cash

The following events occurred during June 2021:

e. Puzzle Zoo paid 4 months of rent in advance for July to October for a shop of $4,000

f. Puzzle Zoo opened for business. Customers bought toys worth $2500, of which

$1500 was in cash, and $1000 on account

g. Inventories sold in f. had a book value of $500

h. Puzzle Zoo received $800 in cash for an order they must deliver next month

i. The firm received a $1000 cash for the toys sold previously rendered on account from part f

j. Puzzle zoo replenished some of its inventories and bought toys from its supplier for $400 on account.

k. Puzzle zoo received a $300 bill for electricity and expects to pay next month

l. Puzzle zoo noted that the machine that was bought in May has a useful life of 5 years, is depreciated on a straight line and is expected to have a $2,000 salvage value.

m. Puzzle Zoo noted that its loan has an annual interest rate of 6%. Puzzle Zoo expects to pay interest in cash every quarter, with its first quarter ending in July

n. The firm recorded income tax expense at a 35% income tax rate. Taxes will be paid in cash at the end of the year.

o. Puzzle Zoo paid James a $100 dividend.

Question 1: For the month of June, please prepare the following:

a) Prepare a set of journal entries; show two methods: cr/dr convention and algebraic method

b) Prepare a balance sheet as of the end of June

c) Prepare an income statement

d) Prepare a shareholders equity statement

e) Prepare a direct cash flow statement

f) Prepare an indirect cash flow statement

Hint: Use your shareholders' equity statement and balance sheet at the end of May as your beginning balances for June.