Question

a. Marie and Paula opened up The Friendly Fisherman by contributing $23,100 on July 1, 2009, in exchange for common stock. b. The firm borrowed $12,000 from the bank on July 1. The note is a 3-year, 8% note, with both principal and interest to be repaid on June 30, 2010. C. The firm prepaid a year of rent for $1,100 that started August 1, 2009. d. The firm paid $950 cash for operating expenses for the first month. e. The firm earned $9,500 in revenue the first month. Of that amount, $7,000 was collected in cash. f. The firm hired an administrative assistant and paid $510 cash in salary expense for the first month. g. The firm declared and paid distributions to owners in the amount of $2,000 for the first month. h. At the end of the month, $27 of interest payable is due but not yet paid on the note from item (b).

Answer 1

The Friendly Fisherman Liabilties Account Stockholders Equity Contributed Capital + $ Account + $ 23,100 Common Stock + Assets Account Cash Retained Earnings Account $ $ Events a $ $23,100 + + b $ 12,000 Cash $ 12,000 Notes Payable + + + + + + $ (1,100) Cash $ 1,100 Prepaid Rent $ (950) Cash + + + + $ (950) Operating expenses + e + + $ 9,500 Revenue $ 7,000 Cash $ 2,500 Accounts Receivable $ (510) Cash + + + $ (510) Salaries expenses + g $ (2,000) Cash + + $(2,000) Dividends + = $ 27 Interest Payable + + $ (27) Interest expenses + End Bal $41,140 $ - = $12,027 $ - + $ 23,100 + $ 6,013

9,500 The Friendly Fisherman Income Statement For the Month Ended July 31, 2009 Revenue Expenses Operating expenses Salaries expenses Interest expenses Total Expenses Net Income 950 510 27 1,487 8,013 23,100 23,100 Statement of Stockholders Equity For the Month Ended July 31, 2009 Beginning Common Stock Issue of Common Stock Ending Common Stock Beginning Retained Earnings Net Income Less Dividends Ending Retained Earnings Total Stockholders Equity 8,013 (2,000) 6,013 29,113

Calculation The Friendly Fisherman Balance Sheet As of July 31, 2009 Assets Current Assets Cash Accounts Receivable Prepaid Rent Liabilities & Stockholders Equity Liabilities 37,540 Notes Payable 2,500 Interest Payable 1,100 Total Liabilties 12,000 =41,140-2,500-1,100 27 12,027 Stockholders Equity Common Stock Retained earnings Total Stockholders Equity 23,100 6,013 29,113 Total Assets 41,140 Total Liabilities & Stockholders Equity 41,140

The Friendly Fisherman Cashflow Statement - Direct method For the Month Ended July 31, 2009 Cash flows from Operating Activities Cash received from customers Cash paid for rent Cash paid for operating expenses Cash paid for Salaries Net cash from operations 7,000 (1,100) (950) (510) 4,440 Cash flows from Investing Activities Net cash from Investing Cash flows from Financing Activities Proceeds from issue of common stock Proceeds from issue of notes Dividends paid Net cash from Financing Net Increase in Cash 23,100 12,000 (2,000) 33,100 37,540