X Company is a merchandiser and prepares monthly financial statements. The follo

Question

X Company is a merchandiser and prepares monthly financial statements. The following is its balance sheet at the beginning of January:

The following summary transactions occurred during January:

Sold stock to investors for $50,000.

Borrowed $30,000 from a bank.

Bought merchandise from suppliers, paying $3,715 and promising to pay $4,302 next month.

Bought equipment from a manufacturer, paying $31,200 and promising to pay $4,200 in three months.

Paid $2,843 to merchandise suppliers that it had promised to pay.

Sold merchandise, receiving $17,837 cash and promises to pay of $4,513; the merchandise that was sold previously cost $11,175.

Paid a total of $512 for rent and insurance in advance.

Received $2,712 from customers who had promised to pay.

Paid $5,260 for wages, utilties, and other miscellaneous expenses.

Note: Ignore adjusting entries.

4. What was the cash balance on January 31?

5. What were total equities on January 31?

6. What was net income in January?

                                                     Balance Sheet                                                         January 1

Explanation / Answer

4. Cash balance on Jan 31

5.

6. Net income in January

Beginning balanace $52276 Add: Sale of stock 50000 Borrowing from bank 30000 Sale of merchandise 17837 Collection from customers 2712 152825 Less: Payment for merchandise (3715+2843) 6558 Payment for equipment 31200 Payment for rent 512 Payment for wages, utilties, and other miscellaneous expenses 5260 Cash balance on Jan 31 $109295

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