PR 1-3B Financial statements

Jose Loder established Bronco Consulting on August 1, 2016. The effect of each transaction and the balances after each transaction for August follow:

Assets 5Liabilities 1 Stockholders’ Equity Receivable + Supplies = Accounts Payable + Common Stock − Dividends + Fees Earned − Salaries Expense − Rent Expense − Auto Expense − Supplies Expense − Misc. Expense
a. +75,000 +75,000 b. +9,000 +9,000 Bal.  75,000 9,000 9,000    75,000 c. +92,000 +92,000 Bal.   167,000 9,000 9,000    75,000   92,000
d.  –27,000                                –27,000 Bal. 140,000 9,000 9,000    75,000   92,000 –27,000 e. –6,000                 –6,000 Bal.   134,000 9,000       3,000    75,000   92,000 –27,000 f.                   +33,000                 +33,000 Bal. 134,000 33,000 9,000       3,000    75,000  125,000 –27,000 g.  –23,000                                –15,500 –7,500 Bal. 111,000 33,000 9,000       3,000    75,000  125,000 –27,000 –15,500 –7,500 h.    –58,000                                 –58,000 Bal. 53,000 33,000 9,000       3,000    75,000  125,000 –58,000 –27,000 –15,500 –7,500 i.                   –6,100–6,100
Bal.   53,000 33,000 2,900       3,000    75,000  125,000 –58,000 –27,000 –15,500 –6,100 –7,500 j. –5,000–5,000 Bal.    48,000    33,000      2,900      3,000    75,000 –5,000  125,000 –58,000 –27,000 –15,500 –6,100 –7,500

Instructions

1. Prepare an income statement for the month ended August 31, 2016.

2. Prepare a retained earnings statement for the month ended August 31, 2016.

3. Prepare a balance sheet as of August 31, 2016.

4. (Optional) Prepare a statement of cash flows for the month ending August 31, 2016.

Answer:

BRONCO CONSULTING Income Statement For the Month Ended August 31, 2016 Fees earned $125,000 Expenses: Salaries expense $58,000 Rent expense 27,000 

Auto expense 15,500 Supplies expense 6,100 Miscellaneous expense 7,500 Total expenses 114,100 Net income $ 10,900 BRONCO CONSULTING Retained Earnings Statement For the Month Ended August 31, 2016 Retained earnings, August 1, 2016 $ 0 Net income for August $10,900 Less dividends 5,000 Increase in retained earnings 5,900 Retained earnings, August 31, 2016 $5,900 BRONCO CONSULTING Balance Sheet August 31, 2016 Assets Liabilities Cash $48,000 Accounts payable $ 3,000 Accounts receivable 33,000 Supplies 2,900 Stockholders’ Equity Common stock $75,000 Retained earnings 5,900 Total stockholders’ equity 80,900 Total liabilities and Total assets $83,900 stockholders’ equity $83,900 4. (Optional) Cash flows from operating activities: Cash received from customers $ 92,000 Deduct cash payments for expenses and payments to creditors* (114,000) Net cash flows used for operating activities $(22,000) Cash flows from investing activities 0 Cash flows from financing activities: Cash received from issuing common stock $ 75,000 Deduct cash dividends (5,000) Net cash flows from financing activities 70,000 Net increase in cash and August 31, 2014, cash balance $ 48,000 * $27,000 + $6,000 + $23,000 + $58,000; These amounts are taken from the cash column shown in the problem.