Question 1 [30 marks]

Boikago Dance Studio accounting records reflect the following account balances at January 1, 2020.

Cash R100,000 Supplies R 4,000

Ordinary shares 50,000 Retained Earnings 54,000

During 2020, the following transactions occurred:

1) On February 1, rented a small studio for a one-year period. Paid R6,000 cash.

2) On November 1, received R1,200 cash for dance lessons to be provided evenly

over November, December, and January.

3) By December 31, used R3,000 of the supplies

4) At December 31, accrued R3,000 in wages and salaries.

5) During the year, paid cash for R20,000 in wages and salaries

6) During the year, earned R40,000 cash in dance lesson revenue.

Required:

1.

Determine the effect on the accounting equation of the preceding transactions. Create a table like the one below to reflect the increases and decreases in accounts. (15 marks)

where possible add more columns for different accounts according to need e.g. cash would have a column under Assets.

Balance Sheet Income Statement Stockholders

Assets = Liabilities + Equity Revenues Expenses = Net Income

Prepare an income statement for 2020. Ignore income tax effects. (6 marks) Prepare a classified balance sheet for Boikago Dance Studio at December 31, 2020. (9 marks)