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Excel Applications for Accounting Principles 4th Edition by Gaylord Smith
Edition 4ISBN: 978-1111581565Excel Applications for Accounting Principles 4th Edition by Gaylord Smith
Edition 4ISBN: 978-1111581565 Exercise 1
PROBLEM DATA
On June 1 of the current year, Wilson Wood opened Woody's Web Services. This sole proprietorship had the following transactions during June.
a. Opened a business checking account and made a deposit, $9,000.
b. Paid rent for June for office space and computer equipment, $3,000.
c. Purchased office supplies (stamps, pens, etc.) on account, $1,980.
d. Received cash for services rendered, $4,500.
e. Paid creditor for office supplies purchased on account, $1,400.
f. Purchased office supplies for cash, $420.
g. Billed clients for consultations performed on account, $4,600.
h. Paid monthly internet service bill of $360.
i. Paid the secretary's salary of $2,400.
j. Returned $300 of office supplies purchased in transaction f. Received a full refund.
k. Received cash from clients previously billed, $3,000.
l. Cash was withdrawn for owner's personal use, $2,000.
REQUIREMENT
Use the space below to prepare an income statement, a statement of owner's equity (capital statement), and a balance sheet in good form for Woody's Web Services for the month of June.
On June 1 of the current year, Wilson Wood opened Woody's Web Services. This sole proprietorship had the following transactions during June.
a. Opened a business checking account and made a deposit, $9,000.
b. Paid rent for June for office space and computer equipment, $3,000.
c. Purchased office supplies (stamps, pens, etc.) on account, $1,980.
d. Received cash for services rendered, $4,500.
e. Paid creditor for office supplies purchased on account, $1,400.
f. Purchased office supplies for cash, $420.
g. Billed clients for consultations performed on account, $4,600.
h. Paid monthly internet service bill of $360.
i. Paid the secretary's salary of $2,400.
j. Returned $300 of office supplies purchased in transaction f. Received a full refund.
k. Received cash from clients previously billed, $3,000.
l. Cash was withdrawn for owner's personal use, $2,000.
REQUIREMENT
Use the space below to prepare an income statement, a statement of owner's equity (capital statement), and a balance sheet in good form for Woody's Web Services for the month of June.
Explanation
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Income statement:
Income statement is a financial statement that defines the profits earned and loses incurred by the company. It includes all the revenue generating items and the expenses and the net off comes the profit or loss. Each company strives to earn maximum profits. This statement determines the profitability of the company. It determines the net income of the company at a particular point of time.
Statement of Owner's equity:
Statement of owner's equity is a financial statement that defines the owner's equity or net worth of the company. It records the amount that is been invested by the shareholders of the company. It also includes the portion of net income that is retained by the company for investment purposes, which is termed as retained earnings.
It also includes other comprehensive income. It refers to the incomes which are not included in the net income derived from income statement. These are reported after the income statement.
Balance Sheet:
Balance sheet is defined as a financial statement that defines the financial position of the company at a particular point of time.
The balance sheet equation is written as:
Assets are the items that are owned by the company. It includes the investments made by the company. For example- building, long term investments, land, cash, bank, etc.
Liabilities are the items that the company owes to others. These items are the obligation of the company. It includes loans, mortgages, accounts payable, etc.
Capital is the amount invested in the business. It is also termed as owner's equity. It includes shareholder's equity, retained earnings, etc.
Prepare the income statement as follows:
Thus, net income is $ 3,340.
Prepare the statement of equity as follows:
Thus, closing capital is $ 10,340.
Prepare the balance sheet as follows:
Thus, total of balance sheet is $ 10,920.
Working note:
Determine the effect of transaction on accounting equation with their ending balances as follows:
Income statement is a financial statement that defines the profits earned and loses incurred by the company. It includes all the revenue generating items and the expenses and the net off comes the profit or loss. Each company strives to earn maximum profits. This statement determines the profitability of the company. It determines the net income of the company at a particular point of time.
Statement of Owner's equity:
Statement of owner's equity is a financial statement that defines the owner's equity or net worth of the company. It records the amount that is been invested by the shareholders of the company. It also includes the portion of net income that is retained by the company for investment purposes, which is termed as retained earnings.
It also includes other comprehensive income. It refers to the incomes which are not included in the net income derived from income statement. These are reported after the income statement.
Balance Sheet:
Balance sheet is defined as a financial statement that defines the financial position of the company at a particular point of time.
The balance sheet equation is written as:
Assets are the items that are owned by the company. It includes the investments made by the company. For example- building, long term investments, land, cash, bank, etc. Liabilities are the items that the company owes to others. These items are the obligation of the company. It includes loans, mortgages, accounts payable, etc.
Capital is the amount invested in the business. It is also termed as owner's equity. It includes shareholder's equity, retained earnings, etc.
Prepare the income statement as follows:
Thus, net income is $ 3,340. Prepare the statement of equity as follows:
Thus, closing capital is $ 10,340. Prepare the balance sheet as follows:
Thus, total of balance sheet is $ 10,920. Working note:
Determine the effect of transaction on accounting equation with their ending balances as follows:
Excel Applications for Accounting Principles 4th Edition by Gaylord Smith
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