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Homework answers / question archive / Financial statements LOB CHECK FIGURE: All Omar, Capital, March 31, 2020 - $20
Financial statements LOB CHECK FIGURE: All Omar, Capital, March 31, 2020 - $20.200 Using your answer from Exercise 1-22, prepare an income statement, statement of changes in equity, and bal- ance sheet for March 2020. Analysis Component: Review Omar's income statement. Does the profit of $900 represent $900 of cash? Explain
MISU ueny te du us) for each Exercise 1-22 Effects of transactions on the accounting equation 106,7 eXcel CHECK FIGURE: Accounts payable, March 31, 2020 = $2,350 a. Ali Omar invested $4,300 cash and $15,000 of equipment to start his business, Omar's Yard Care. b. Purchased various supplies on account: $1,600. c. Bought supplies on credit; $950. d. Omar signed a $4,000 contract to do yard work beginning in May. e. Did work for a client on account: $550. f. Performed services for a customer on credit; $600. g. Paid $200 for the supplies purchased in (c). h. Paid $250 for advertising online. i. Collected the amount owed from the customer in (f).
Income statement | ||||
Service Revenue | $ 1,150.00 | |||
Less: | Expenses: | |||
Advertising Expenses | $ 250.00 | |||
Net Income | $ 900.00 |
Statement of changes in equity | ||||
Common Stock: | ||||
Beginning Balance | $ - | |||
Add: | Issued during the period | $ 19,300.00 | ||
Ending Balance | $ 19,300.00 | |||
Retained Earnings: | ||||
Beginning Balance | $ - | |||
Add: | Net Income | $ 900.00 | ||
Ending Balance | $ 900.00 | |||
Total Equity | $ 20,200.00 |
Balance Sheet | |||
Assets | |||
Cash | $ 4,450.00 | ||
Supplies | $ 2,550.00 | ||
Accounts Receivable | $ 550.00 | ||
Equipment | $ 15,000.00 | ||
Total Assets | $ 22,550.00 | ||
Liabilities and Equity | |||
Accounts Payable | $ 2,350.00 | ||
Total Liabilities | $ 2,350.00 | ||
Equity: | |||
Common Stock | $ 19,300.00 | ||
Retained Earnings | $ 900.00 | ||
Total Equity | $ 20,200.00 | ||
Total Liabilities and Equity | $ 22,550.00 |
No, profit of $ 900 does not represent cash. Income statement is prepared on | |||||
the basis of accrual accounting principle. As per this concept, revenue earned and | |||||
expenses incurred during the year is taken into account to compute net income rather | |||||
than cash received or cash expended. Therefore, net income of $ 900 is a result of | |||||
revenue earned and expenses incurred. |