Problem:
A Mark Mader created a corporation providing legal services, Mark Mader Inc., on July 1, 2007.
On July 31 the balance sheet showed: Cash $4,000; Accounts Receivable
$2,500; Supplies $500; Office Equipment $5,000; Accounts Payable $4,200; Common Stock
$6,200; and Retained Earnings $1,600. During August the following transactions occurred.
1. Collected $1,500 of accounts receivable due from customers.
2. Paid $2,700 cash for accounts payable due.
3. Earned revenue of $6,400, of which $3,000 is collected in cash and the balance is due in September.
4. Purchased additional office equipment for $2,000, paying $400 in cash and the balance on account.
5. Paid salaries $1,400, rent for August $900, and advertising expenses $350.
6. Declared and paid a cash dividend of $700.
7. Received $2,000 from Standard Federal Bank; the money was borrowed on a 4-month note payable.
8. Incurred utility expenses for the month on account $450.
Instructions
(a) Prepare a tabular analysis of the August transactions beginning with July 31 balances.
The column heading should be: Cash Accounts Receivable Supplies Office
Equipment Notes Payable Accounts Payable Common Stock Retained Earnings.
Include margin explanations for any changes in Retained Earnings.
(b) Prepare an income statement for August, a retained earnings statement for August, and a classified balance sheet at August 31.