Arrange the following asset, liability and owner’s equity titles in a table just like illustrated in this unit: Cash, Accounts Receivable, Office Supplies, Office Equipment, Electrical Equipment, Accounts Payable and Mimi Capital.
Use additions and subtractions to show the effect of each transaction on the items in the equation. Show new totals after each transaction. Next to each change in owners equity state whether the change was caused by an investment, revenue, expense or withdrawal.
Prepare an income statement, a statement of owner’s equity, and a balance sheet
Excersie 3: Presented below is selected information related to Inovation Group plc at December 31, 2017. Flanagan reports financial information monthly.
Equipment £10,000 Utilities Expense £ 4,000
Cash 8,000 Accounts Receivable 9,000
Service Revenue 36,000 Salaries and Wages Expense 7,000
Rent Expense 11,000 Notes Payable 16,500
Accounts Payable 2,000 Dividends 5,000
(a) Determine the total assets of Flanagan at December 31, 2017.
(b) Determine the net income that Flanagan reported for December 2017.
(c) Determine the equity of Flanagan at December 31, 2017.
To arrange the asset, liability, and owner's equity titles in a table:
| Assets | Liabilities | Owner's Equity |
|---------------------------------|-------------------------------|---------------------------|
| Cash | Accounts Payable | Mimi Capital |
| Accounts Receivable | Notes Payable | |
| Office Supplies | | |
| Office Equipment | | |
| Electrical Equipment | | |
Using additions and subtractions to show the effect of each transaction and the new totals after each transaction:
1. Cash will increase by £8,000. Owner's Equity will increase by £8,000 as it is caused by an investment.
New total: Cash £8,000, Owner's Equity £8,000
2. Accounts Receivable will increase by £9,000. Owner's Equity will increase by £9,000 as it is caused by revenue.
New total: Accounts Receivable £9,000, Owner's Equity £17,000
3. Service Revenue will increase by £36,000. Owner's Equity will increase by £36,000 as it is caused by revenue.
New total: Service Revenue £36,000, Owner's Equity £53,000
4. Rent Expense will decrease by £11,000. Owner's Equity will decrease by £11,000 as it is caused by an expense.
New total: Rent Expense £0, Owner's Equity £42,000
5. Accounts Payable will increase by £2,000. Owner's Equity will decrease by £2,000 as it is caused by an expense.
New total: Accounts Payable £2,000, Owner's Equity £40,000
6. Dividends will decrease by £5,000. Owner's Equity will decrease by £5,000 as it is caused by a withdrawal.
New total: Dividends £0, Owner's Equity £35,000
(a) Total assets of Flanagan at December 31, 2017: £17,000 (Accounts Receivable) + £10,000 (Equipment) + £8,000 (Cash) = £35,000
(b) Net income reported by Flanagan for December 2017: Service Revenue (£36,000) - Salaries and Wages Expense (£7,000) - Utilities Expense (£4,000) = £25,000
(c) Equity of Flanagan at December 31, 2017: Owner's Equity £35,000