Bev’s Dry Cleaners is owned and operated by Beverly Zahn. A building and equipme
ID: 2541850 • Letter: B
Question
Bev’s Dry Cleaners is owned and operated by Beverly Zahn. A building and equipment are currently being rented, pending expansion to new facilities. The actual work of dry cleaning is done by another company for a fee. The assets and the liabilities of the business on November 1, 2019, are as follows: Cash, $16,800; Accounts Receivable, $34,400; Supplies, $3,200; Land, $40,000; Accounts payable, $14,400. Business transactions during November are summarized as follows:
Beverly Zahn invested additional cash in the business with a deposit of $30,000 in the business bank account.
Purchased land adjacent to land currently owned by Bev’s Dry Cleaners to use in the future as a parking lot, paying cash of $15,100.
Paid rent for the month, $18,400.
Charged customers for dry cleaning revenue on account, $5,520.
Paid creditors on account, $2,580.
Purchased supplies on account, $13,620.
Received cash from cash customers for dry cleaning revenue, $29,440.
Received cash from customers on account, $36,800.
Received monthly invoice for dry cleaning expense for November (to be paid on December 10), $14,720.
Paid the following: wages expense, $8,100; truck expense, $2,940; utilities expense, $3,130; miscellaneous expense, $1,400.
Determined that the cost of supplies on hand was $2,020; therefore, the cost of supplies used during the month was $3,760.
Withdrew $8,500 cash for personal use.
Required:
1. Determine the amount of Beverly Zahn’s capital as of November 1.
2. Use the attached spreadsheet to complete part 2. Click on the Spreadsheet icon above to open and save the Excel file to your computer. Your input into the spreadsheet will not be included in your grade in CengageNOW on this problem.
Enter the assets, liabilities, and owner's equity as of November 1 in equation form similar to that shown in this chapter. In tabular form below the equation, indicate increases and decreases resulting from each transaction and the new balances after each transaction.
3. Using the balances from the spreadsheet, prepare an income statement for November, a statement of owner's equity for November, and a balance sheet as of November 30. Use a minus sign to indicate a net loss if applicable.
Balance sheet as of November 30:
When entering assets, enter them in order of liquidity.
4. Prepare a statement of cash flows for November:
Use the minus sign to indicate cash outflows, decreases in cash, and cash payments.
Explanation / Answer
1 Amount of capital as on Nov.1 Capital=Total assets-Total liabilities Total assets=Cash+Accounts receivable+Supplies+Land=16800+34400+3200+40000=94400 Total liabilities=Accounts payable=14400 Capital=94400-14400=80000 2 Assets Laibilities Owner's equity Expenses Revenue Cash Accounts Receivable Supplies Land Accounts Payable Capital Net income Drawings Rent Supplies Expense Cleaning Expense Wage Expense Truck Expense Utilities Expense Misc. Expense Beginning balance 16800 34400 3200 40000 14400 80000 Additional cash 30000 30000 Land purchased -15100 15100 Rent paid -18400 18400 Charged to customers on account 5520 5520 Paid creditors -2580 -2580 Purchased supplies 13620 13620 Received cash from customers 29440 29440 Received cash from customers on account 36800 -36800 Cleaning expense to be paid 14720 14720 Paid expenses -15570 8100 2940 3130 1400 Supplies used (Note:1) 14800 14800 Withdrew for personal use -8500 -8500 Total 52890 3120 2020 55100 40160 110000 -28530 -8500 18400 14800 14720 8100 2940 3130 1400 34960 Note:1 Supplies used Beginning balance 3200 Purchased supplies 13620 16820 Less: Ending balance 2020 Supplies used 14800 3 Income statement Revenue 34960 Less: Cleaning expenses 14720 Gross profit 20240 Less:Expenses Rent 18400 Supplies Expense 14800 Wage Expense 8100 Truck Expense 2940 Utilities Expense 3130 Misc. Expense 1400 48770 Net loss -28530 Statement of owner's equity: Beginning balance 80000 Add: Additional investment 30000 110000 Less:Net loss 28530 Drawings 8500 37030 Ending balance 72970 Balance sheet Assets Cash 52890 Accounts receivable 3120 Supplies 2020 Land 55100 113130 Liabilities and Equity Accounts payable 40160 Capital 72970 113130 4 Statement of cashflows: Cashflows from operating activities: Net loss -28530 Add:Adjustment Decrease in accounts receivable (34400-3120) 31280 Decrease in supplies (3200-2020) 1180 Increase in accounts payable (40160-14400) 25760 58220 Cash genrated from operations (A) 29690 Cashflows from investing activities: Purchase of Land (B) -15100 Cashflows from financing activities: Additional capital invested 30000 Drawings -8500 Cashflows from financing activities © 21500 Net increase in cash (A)+(B)+© 36090 Beginning balance 16800 Ending balance balance 52890
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