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 16. Gram invested $43,500 cash in the company in exchange for its common stock. 1 The company rented a furnished office and paid $2,500 cash for May's rent. 3 The company purchased $1,860 of office equipment on credit. 5 The company paid $780 cash for this month's cleaning services. 8 The company provided consulting services for a client and immediately collected $6,000 cash. 12 The company provided $2,500 of consulting services for a client on crediit. 15 The company paid $730 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 $3,900 of consulting services on credit. 25 The company received $3,900 cash payment for the services provided on May 22. 26 The company paid $1,860 cash for the office equipment purchased on May 3. 27 The company purchased $80 of office equipment on credit. 28 The company paid $730 cash for an assistant's salary for the second halt of this month. 30 The company paid $300 cash for this month's telephone bill. 30 The company paid $300 cash for this month's utilities. 31 The company paid $1,500 cash in dividends to the owner (solo 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,

Answer 1

Requirement 2a:

THE GRAM CO.
Income Statement
For Month Ended May 31
Revenues:
Service revenue [6,000+2,500+3,900]		$12,400
Total Revenues		$12,400
Expenses:
Rent Expense	$2,500
Cleaning services expense	$780
Salaries expense [730+730]	$1,460
Telephone expense	$300
Utilities expense	$100
Total Expenses		$5,140
Net income		$7,260

Requirement 2b:

THE GRAM CO.
Statement of Retained Earnings
For Month Ended May 31
Retained earnings, May 1	$0
Net income	$7,260
	$7,260
(Less): Dividends	($1,500)
Retained earnings, May 31	$5,760

Requirement 2c:

THE GRAM CO.
Balance Sheet
May 31
Assets		Liabilities
Cash	$47,400	Accounts payable	$80
Accounts receivable	$0	Total Liabilities	$80
Office equipment	$1,940	Equity
		Common stock	$43,500
		Retained earnings	$5,760
		Total Equity	$49,260
Total Assets	$49,340	Total liabilities and equity	$49,340

Requirement 3:

THE GRAM CO.
Statement of Cash Flows
For Month Ended May 31
Cash flows from operating activities:
Cash collections from customers [6,000+2,500+3,900]	$12,400
Cash paid for accounts payable	($1,860)
Cash paid for rent	($2,500)
Cash paid for Cleaning supplies	($780)
Cash paid for salaries expense [730+730]	($1,460)
Cash paid for telephone expense	($300)
Cash paid for utilities	($100)
Net cash provided by operating activities (i)		$5,400
Cash flows from investing activities:
Net cash provided by operating activities (ii)		$0
Cash flows from financing activities:
Issuance of common stock	$43,500
Payment of dividends	($1,500)
Net cash provided by financing activities (iii)		$42,000
Net increase(decrease) in cash (i+ii+iii)		$47,400
Cash balance, May 1		$0
Cash balance, May 31		$47,400

Calculations:

		Assets					=	Liabilities	+	Equity
Date		Cash	+	Accounts Receivable	+	Office Equipment	=	Accounts Payable	+	Common Stock	-	Dividends	+	Revenues	-	Expenses	Account Titles for Expenses
May	1	$43,500	+		+		=		+	$43,500	-		+		-
	1	($2,500)	+		+		=		+		-		+		-	$2,500	Rent expense
	3		+		+	$1,860	=	$1,860	+		-		+		-
	5	($780)	+		+		=		+		-		+		-	$780	Cleaning services expense
	8	$6,000	+		+		=		+		-		+	$6,000	-		Service revenue
	12		+	$2,500	+		=		+		-		+	$2,500	-		Service revenue
	15	($730)	+		+		=		+		-		+		-	$730	Salaries expense
	20	$2,500	+	($2,500)	+		=		+		-		+		-
	22		+	$3,900	+		=		+		-		+	$3,900	-		Service revenue
	25	$3,900	+	($3,900)	+		=		+		-		+		-
	26	($1,860)	+		+		=	($1,860)	+		-		+		-
	27		+		+	$80	=	$80	+		-		+		-
	28	($730)	+		+		=		+		-		+		-	$730	Salaries expense
	30	($300)	+		+		=		+		-		+		-	$300	Telephone expense
	30	($100)	+		+		=		+		-		+		-	$100	Utilties expense
	31	($1,500)	+		+		=		+		-	$1,500	+		-		Dividends
		$47,400	+	$0	+	$1,940	=	$80	+	$43,500	-	$1,500	+	$12,400	-	$5,140