Gabi Gram started The Gram Co., a new business that began operations on May 1. The Gram Co. completed the following transactions during its first month of operations. May 1 G. Gram invested $40,000 cash in the company in exchange for its common stock.
1 The company rented a furnished office and paid $2,200 cash for May’s rent.
3 The company purchased $1,890 of equipment on credit.
5 The company paid $750 cash for this month’s cleaning services.
8 The company provided consulting services for a client and immediately collected $5,400 cash.
12 The company provided $2,500 of consulting services for a client on credit.
15 The company paid $750 cash for an assistant’s salary for the first half of this month.
20 The company received $2,500 cash payment for the services provided on May 12.
22 The company provided $3,200 of consulting services on credit.
25 The company received $3,200 cash payment for the services provided on May 22.
26 The company paid $1,890 cash for the equipment purchased on May 3.
27 The company purchased $80 of equipment on credit.
28 The company paid $750 cash for an assistant’s salary for the second half of this month.
30 The company paid $300 cash for this month’s telephone bill.
30 The company paid $280 cash for this month’s utilities.
31 The company paid $1,400 cash in dividends to the owner (sole shareholder).

Required:
a. Determine the final total for each account and verify that the equation is in balance.
b. Prepare an Income Statement for May,
c. Prepare a statement of Owner's equity for May,
d. Prepare 31 Balance Sheet.
e. Prepare Cash flows for May.

a) May 1 G. Gram invested $40,000 cash in the company in exchange for its common stock.

Dr Cash 40,000

    Cr Common stock 40,000

May 1 The company rented a furnished office and paid $2,200 cash for May’s rent.

Dr Rent expense 2,200

    Cr Cash 2,200

May 3 The company purchased $1,890 of equipment on credit.

Dr Equipment 1,890

    Cr Accounts payable 1,890

May 5 The company paid $750 cash for this month’s cleaning services.

Dr Cleaning expenses 750

    Cr Cash 750

May 8 The company provided consulting services for a client and immediately collected $5,400 cash.

Dr Cash 5,400

    Cr Service revenue 5,400

May 12 The company provided $2,500 of consulting services for a client on credit.

Dr Accounts receivable 2,500

    Cr Service revenue 2,500

May 15 The company paid $750 cash for an assistant’s salary for the first half of this month.

Dr Wages expense 750

    Cr Cash 750

May 20 The company received $2,500 cash payment for the services provided on May 12.

Dr Cash 2,500

    Cr Accounts receivable 2,500

May 22 The company provided $3,200 of consulting services on credit.

Dr Accounts receivable 3,200

    Cr Service revenue 3,200

May 25 The company received $3,200 cash payment for the services provided on May 22.

Dr Cash 3,200

    Cr Accounts receivable 3,200

May 26 The company paid $1,890 cash for the equipment purchased on May 3.

Dr Accounts payable 1,890

    Cr Cash 1,890

May 27 The company purchased $80 of equipment on credit.

Dr Equipment 80

    Cr Accounts payable 80

May 28 The company paid $750 cash for an assistant’s salary for the second half of this month.

Dr Wages expense 750

    Cr Cash 750

May 30 The company paid $300 cash for this month’s telephone bill.

Dr Telephone expense 300

    Cr Cash 300

May 30 The company paid $280 cash for this month’s utilities.

Dr Utilities expense 280

    Cr Cash 280

May 31 The company paid $1,400 cash in dividends to the owner (sole shareholder).

Dr Dividends 1,400

    Cr Cash 1,400

                                                 debit               credit

Cash                                        $42,780

Equipment                              $1,970

Accounts payable                                           $80

Common stock                                               $40,000

Service revenue                                             $11,100

Rent expense                         $2,200

Cleaning expenses                $750

Wages expense                     $1,500

Telephone expense               $300

Utilities expense                     $280

Dividends                                $1,400                          

totals                                        $51,180            $51,180

Service revenue                                             $11,100

Expenses:

Net income                                                    $6,070

Beginning balance                                               $0

Common stocks issued                             $40,000

Net income                                                   $6,070

Sub-total                                                     $46,070

Dividends                                                   ($1,400)

Ending balance                                          $44,670

Assets:

Cash $42,780

Equipment $1,970

Total assets                             $44,750

Liabilities and equity:

Accounts payable $80

Common stock $40,000

Retained earnings $4,670

Total liabilities and equity      $44,750

Cash flows from operating activities:

Net income                                      $6,070

Increase in accounts payable             $80

net cash from operating activities  $6,150

Cash flows from financing activities:

Purchase of equipment                  ($1,970)

Cash flow from financing activities:

Common stocks issued               $40,000

Dividends paid                              ($1,400)

net cash fro financing activities  $38,600

net cash increase                        $42,780

beginning cash balance                 $0    

ending cash balance                  $42,780

disadvantages of leasing a vehicle: no vehicle equity and mileage limitations

disadvantages of purchasing a vehicle: large down payment and vehicle depreciation

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the answer is true

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