Problem 1-1A Fredonia Repair Inc. was started on May 1. A summary of May transac

Question

Problem 1-1A

Fredonia Repair Inc. was started on May 1. A summary of May transactions is presented below.

1. Stockholders invested $15,500 cash in the business in exchange for common stock.

2. Purchased equipment for $5,500 cash.

3. Paid $200 cash for May office rent.

4. Paid $600 cash for supplies.

5. Incurred $300 of advertising costs in the Beacon News on account.

6. Received $5,000 in cash from customers for repair service.

7. Declared and paid a $1,000 cash dividend.

8. Paid part-time employee salaries $1,000.

9. Paid utility bills $140.

10. Performed repair services worth $990 on account.

11. Collected cash of $140 for services billed in transaction (10).

Part 1.

Prepare a tabular analysis of the transactions. Revenue is called Service Revenue.

Part 2.

From an analysis of the Retained Earnings columns, compute the net income or net loss for May.

Explanation / Answer

Answer to Part 2:

Answer to part 1 Cash + Accounts Receivable + Supplies + Equipment = Accounts Payable + Common Stock + Retained Earnings 1 15500 15500 15500 + + + = + 15500 + 2 -5500 5500 10000 + + + 5500 = + 15500 + 3 -200 -200 9800 + + + 5500 = + 15500 + -200 4 -600 600 9200 + + 600 + 5500 = + 15500 + -200 5 300 -300 9200 + + 600 + 5500 = 300 + 15500 + -500 6 5000 5000 14200 + + 600 + 5500 = 300 + 15500 + 4500 7 -1000 -1000 13200 + + 600 + 5500 = 300 + 15500 + 3500 8 -1000 -1000 12200 + + 600 + 5500 = 300 + 15500 + 2500 9 -140 -140 12060 + + 600 + 5500 = 300 + 15500 + 2360 10 990 990 12060 + 990 + 600 + 5500 = 300 + 15500 + 3350 11 140 -140 12200 + 850 + 600 + 5500 = 300 + 15500 + 3350

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