Problem:
The two entrepreneurs plan to rent bicycles and in-line skates to week-End visitors to the lakefront. The following transactions occurred during the first month of operations:
May 1 received contribution of 9,000 from each of the two principal owners of the new business in exchange for shares of stock.
May 1 Purchased ten bicycles for $300 each on an open account. The company has 30 days to pay for the bicycles.
May 9 Purchased 20 pair of in-line skates at $125 per pair, 20 helmets at 50 each. And 20 set of protective gear (knee and elbow pads and wrist guards) at $45 per Set for cash.
May 10 Purchased $100 in miscellaneous supplies on account. The company has 30 days to pay for the supplies.
May 15 Paid $125 bill from local radio station for advertising for the last two Week of may.
May 17 Customers rented in-line skates and bicycles for cash of $ 1,800.
May 24 Billed the local park district 1,200 for in line skating lessons provided to Neighborhood children.The park district is to pay one-half of the bill within five Working days and the rest within 30 days.
May 29 Received 50% of the amount billed to the park district.
May 30 customers rented in-line skates and bicycles for cash of $3,000.
May 30 paid wages of 4160 to a friend who helped over the weekend.
May 31 paid the balance due on the bicycles.
Required:
Problem 1. Prepare a table to summarize the preceding transactions as they affect the accounting equation.
Exhibit:
Trans accounts accounts notes capital retained
No. cash receivable equipment building land payable payable stock earnings
1 10,000 10,000
2. Prepare an income statement month ended May 31, 2010
3. prepare a classified balance sheet at may 31,2010.