Question

 P1.1A (LO 3, 4) On April 1, Julie Spengel established Spengel's Travel Agency. The following transactions were completed during the month.

 1. Invested $15,000 cash to start the agency.

 2. Paid $600 cash for April office rent.

 3. Purchased equipment for $3,000 cash.

 4. Incurred $700 of advertising costs in the Chicago Tribune, on account.

 5. Paid $900 cash for office supplies.

 6. Performed services worth $10,000: $3,000 cash is received from customers, and the balance of $7,000 is billed to customers on account.

 7. Withdrew $600 cash for personal use.

 8. Paid Chicago Tribune $500 of the amount due in transaction (4).

 9. Paid employees' salaries $2,500.

 10. Received $4,000 in cash from customers who have previously been billed in transaction (6).

 Instructions

 a. Prepare a tabular analysis of the transactions using the following column headings: Cash, Accounts Receivable, Supplies, Equipment, Accounts Payable, Owner's Capital, Owner's Drawings, Reve- nues, and Expenses.

 b. From an analysis of the owner's equity columns, compute the net income or net loss for April.

Answer 1

a)

Prepare a tabular analysis as follows:

	Assets				=	Liabilities	+	Shareholders' Equity
Trans.	Cash	Accounts receivable	Supplies	Equipment	=	Accounts payable	+	Owner's capital	Service revenue	Owner's Drawings	Rent Expn.	Advertising Expn.	Salaries Expn.
1	$15,000							$15,000
2	($600)										($600)
3	($3,000)			$3,000
4						$700						($700)
5	($900)		$900
6	$3,000	$7,000							$10,000
7	($600)									($600)
8	($500)					($500)
9	($2,500)												($2,500)
10	$4,000	($4,000)
Total	$13,900	$3,000	$900	$3,000		$200		$15,000	$10,000	($600)	($600)	($700)	($2,500)

Prepare the statement of owner's equity and Income statement as follows:

Income Statement
Sales revenue		$10,000
Less: operating expense
Salaries expense	($2,500)
Rent expense	($600)
Advertising expense	($700)	($3,800)
Net Income		$6,200

Statement of Owner's equity
Beginning balance	-
Add: Contribution	$15,000
Add: Net income	$6,200
Less: Drawings	($600)
Ending balance	$20,600