Question

Problem 3-5 Sage Hill Inc. was started on May 1. A summary of May transactions is presented below. 1. Stockholders invested $24,500 cash in the business in exchange for common stock. 2. Purchased equipment for $5,000 cash. 3. Paid $300 cash for May office rent. Paid $500 cash for supplies. Incurred $300 of advertising costs in the Beacon News on account. Received $4,400 in cash from customers for performing repair service. Paid a $1,600 cash dividend. 8. Paid part-time employee salaries $1,100. 9. Paid utility bills $160. 10. Performed repair services worth $990 on account. 11. Collected cash of $100 for services billed in transaction (10). Prepare a tabular analysis of the transactions. Revenue is called Service Revenue. (If a transaction causes a decrease in Assets, Liabilities or Stockholders' Equity, place a negative sign (or parentheses the amount entered for the particular Asset, Liability or Equity item that was reduced.) Assets SAGE HILL INC. Liabilities Accounts Stockholders' Equity Retained Earnings Common Accounts + Receivable Cash + Supplies + Equipment = Payable + Stock Stock + + Revenues Expenses Dividends

Answer 1

Assets SAGE HILL INC. Liabilities Accounts Payable $0 Cash + Supplies Accounts Receivable + + Equipment + + Dividends Shareholders' Equity Retained Earnings Revenues - Expenses - $0 - $0 $0 $0 $0 - $300 + + + + $0 $0 + + $5,000 + + + Common Stock $24,500 $0 $0 $0 $0 $24,500 $5,000 $300 $500 3) + + + + $500 + + + + + + + $0 + + $0 5) $0 $300 + $300 + + + + $4,400 + + + $0 + $0 + + $1,600 + + $4,400 $1,600 $1,100 $160 + $0 + + + - $0 $0 $0 + + + + 10) $1,100 $160 $0 $0 + + + + + $0 $0 $990 $0 $5.390 + + + + $990 $100 $890 11) SO + $0 $0 $1,600 + $100 $20,340 + + $0 Bal. $500 + $5,000 + + = $300 - $24,500 + + $1,860 -

$5,390 SAGE HILL INC. Income Statement For Month Ended May 31 Repair Service Revenue Expenses: Rent Expense $300 Advertising Expense $300 Salaries Expense $1,100 Utility Expense $160 Total Expenses Net Income $1,860 $3,530 [$5390 - $1860]