Question

Required information (The following information applies to the questions displayed below) 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 10. 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 office 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 office equipment purchased on May 3. 27 The company purchased $80 of office 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). 2-a. Prepare income statement for May. 2-b. Prepare statement of retained earnings for May. 2.c. Prepare balance sheet for May 31, 3. Prepare statement of cash flows for May. Complete this question by entering your answers in the tabs below. < Prev 12 of 12 Next

Answer 1

2-A)

THE GRAM CO.
Income Statement
For Month Ended May 31
Revenues:
Consulting fees revenue ($5400+2500+3200)		$11100
Expenses:
Rent expense	2200
Cleaning expense	750
Salary expense (750+750)	1500
Telephone expense	300
Utilities expense	280
Total expenses		-5030
Net income		$6070

2-B)

THE GRAM CO.
Statement of Retained earnings
For Month Ended May 31
Retained earnings, May 1	$0
Add: Net income	6070
	6070
Less: Dividends	-1400
Retained earnings, May 31	$4670

2-C)

THE GRAM CO.
Balance Sheet
May 31
Assets		Liabilities
Cash	$42780	Accounts payable	$80
Accounts receivable	0	Equity
Office equipment	1970	Common stock	40000
		Retained earnings	4670
Total assets	$44750	Total liabilities and equity	$44750

Cash= $40000-2200-750+5400-750+2500+3200-1890-750-300-280-1400= $42780

Accounts receivable= $2500-2500+3200-3200= $0

Office equipment= $1890+80= $1970

Accounts payable= $1890-1890+80= $80

Common stock= $40000

2-D)

THE GRAM CO.
Statement of Cash Flows
For Month Ended May 31
Cash flow from Operating activities:
Cash received from customers	$11100
Cash paid for rent	-2200
Cash paid for cleaning services	-750
Cash paid to employees (750+750)	-1500
Cash paid for telephone	-300
Cash paid for utilities	-280
Net cash provided by operating activities		$6070
Cash flow from Investing activities:
Purchase of office equipment	-1890
Net cash used in investing activities		-1890
Cash flow from financing activities:
Investment by shareholder	40000
Dividend paid	-1400
Net cash provided by financing activities		38600
Net increase (decrease) in cash (6070-1890+38600)		$42780
Add: Beginning cash balance		0
Ending cash balance		$42780