Suppose you start a lawn mowing business. Some venture capitalists give you $40,000 in exchange for stock in your company. You buy equipment for your business at a total cost of $10,000. You pay 30% down and finance the remainder with a note payable. A truck is necessary to haul the equipment to the various jobs. You acquire this at a cost of $15,000; $2,000 down and a note for the remaining $13,000. You find a garage to lease to store your equipment and truck. You have to pay 3 months in advance. The total check for the rental is $6,000. A final expenditure is made to acquire office supplies so you’ll be able to bill your customers once you provide them a service. You spend $1,000 on office supplies.

After your first few hectic days in your new venture, someone asks to see a balance sheet for your company.

Requirement 1:

Prepare a balance sheet that indicates your financial position based on the above transactions. (Use the attached template, or create your own Excel workbook.)

Additional Information:

During the month: (Normal Transactions)

1. Mowed lawns and collected at the time of service $3,000
2. Purchased gas for the lawn mowers of $100
3. Paid Wages of $1,000
4. Paid Insurance of $200
5. A customer was going out of town next month and sent $80 in advance payment.
6. Mowed lawns and billed the customers on account for $220.
7. Paid dividends to the shareholders of $500.

At end of month: (Adjusting Entries)

1. One month of rent had expired
2. $200 of office supplies had been used
3. $1,000 of equipment had depreciated
4. $200 of interest had accrued which will be payable the next period
5. All the gas for the lawn mowers was used; and all the cost of the insurance had expired