Problem: Hannah Banks started her own consulting firm, Banks Consulting, Inc., on May 1, 2002.
The following transactions occurred during the month of May.
May 1 Stockholders invested $15,000 cash in the business.
2 Paid $800 for office rent for the month.
3 Purchased $700 of supplies on account.
5 Paid $200 to advertise in the Daily News.
9 Received $1,000 cash for services provided.
12 Paid $300 cash dividend.
15 Performed $5,000 of services on account.
17 Paid $2,500 for employee salaries.
20 Paid for the supplies purchased on account on May 3.
23 Received a cash payment of $2,000 for services provided on account on May 15.
26 Borrowed $5,000 from the bank on a note payable.
29 Purchased office equipment for $3,500 on account.
30 Paid $250 for utilities.
Question 1: Show the effects of the previous transactions on the accounting equation using the following format:
Assets = Liabilities + Stockholders' Equity
Cash + Receivables + Supplies + office Equipment = Notes Payable + Accounts Payable + Common Stock + Retained Earnings
Include explanations for any changes in the Retained Earnings Account in your analysis.
Question 2: Prepare an Income Statement for the month of May
Question 3: Prepare a balance sheet at May 31, 2002