Transactions; Financial Statements Bev’s Dry Cleaners is owned and operated by B

Question

Transactions; Financial Statements

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 assetsand the liabilities of the business on November 1, 2019, are as follows: Cash, $17,850; Accounts Receivable, $36,550; Supplies, $3,400; Land, $42,500; Accounts payable, $15,300. Business transactions during November are summarized as follows:

Beverly Zahn invested additional cash in the business with a deposit of $33,000 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 $16,700.

Paid rent for the month, $20,400.

Charged customers for dry cleaning revenue on account, $6,120.

Paid creditors on account, $2,860.

Purchased supplies on account, $15,100.

Received cash from cash customers for dry cleaning revenue, $32,640.

Received cash from customers on account, $40,800.

Received monthly invoice for dry cleaning expense for November (to be paid on December 10), $16,320.

Paid the following: wages expense, $8,980; truck expense, $3,260; utilities expense, $3,470; miscellaneous expense, $1,550.

Determined that the cost of supplies on hand was $2,240; therefore, the cost of supplies used during the month was $4,020.

Withdrew $9,400 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.

Income Statement Bev's Dry Cleaners Income Statement November 30, 2019 1 Cash 2 Assets 4 6 7 8 10

Explanation / Answer

1.

Beverley Zahn's capital as on November 1 = 85,000

Working:

Cash + Accounts Receivable + Supplies + Land = Accounts Payable + Capital

17,850+36,550+3,400+42,500 = 15,300 + Capital

Capital = 100,300 - 15,300 = =85,000

2.

3.

Purchase of supplies on account for $15,100 seems to be incorrect, because the supplies balance is stated to be $2,240 as at Nov.30, and the supplies used is stated to be $4,020., which makes it a total of supplies of $6,260, which does not fit with the purchase of supplies of $15,100 on account.

Income summary Ref Cash + A/R + Supplies + Land = A/P + Capital + Beg.Balances 17850 + 36550 + 3400 + 42500 = 15300 + 85000 + 1 Investment 33000 + + + = + 33000 + Balance 50850 + 36550 + 3400 + 42500 = 15300 + 118000 + 0 2 Purchase of land -16700 + + + 16700 = + + Balance 34150 + 36550 + 3400 + 59200 = 15300 + 118000 + 0 3 Paid rent -20400 + + + = + + -20400 Balance 13750 + 36550 + 3400 + 59200 = 15300 + 118000 + -20400 4 Charged customers + 6120 + + = + + 6120 Balance 13750 + 42670 + 3400 + 59200 = 15300 + 118000 + -14280 5 Paid creditors -2860 + + + = -2860 + + Balance 10890 + 42670 + 3400 + 59200 = 12440 + 118000 + -14280 6 Purchase of supplies on account + + 15100 + = 15100 + + Balance 10890 + 42670 + 18500 + 59200 = 27540 + 118000 + -14280 7 Cash received for service 32640 + + + = + + 32640 Balance 43530 + 42670 + 18500 + 59200 = 27540 + 118000 + 18360 8 Cash received from customers on account 40800 + -40800 + + = + + Balance 84330 + 1870 + 18500 + 59200 = 27540 + 118000 + 18360 9 Cost of services + + + = 16320 + + -16320 Balance 84330 + 1870 + 18500 + 59200 = 43860 + 118000 + 2040 10 Paid expenses -17260 + + + = + + -17260 Balance 67070 + 1870 + 18500 + 59200 = 43860 + 118000 + -15220 11 Cost of supplies used + + -4020 + = + + -4020 Balance 67070 + 1870 + 14480 + 59200 = 43860 + 118000 + -19240 12 Withdrawal -9400 + + + = + -9400 + Balance 57670 + 1870 + 14480 + 59200 = 43860 + 108600 + -19240

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