Question

Required information Problem 1-7A Analyzing transactions and preparing financial statements LO C4, P1, P2 [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. 1 G. Gram invested $42,500 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 $1,930 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 $5,600 cash. 12 The company provided $2,800 of consulting services for a client on credit. 15 The company paid $740 cash for an assistant's salary for the first half of this month. 20 The company received $2,800 cash payment for the services provided on May 12. 22 The company provided $3,600 of consulting services on credit. 25 The company received $3,600 cash payment for the services provided on May 22. 26 The company paid $1,930 cash for the office equipment purchased on May 3. 27 The company purchased $80 of office equipment on credit. 28 The company paid $740 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 $300 cash for this month's utilities. 31 The company paid $1,500 cash in dividends to the owner (sole shareholder). May

Answer 1

Working as follows:

Income Statement
Revenue:
Consulting service ($5600+$2800+$3600)		$12,000
Less: operating expense:
Rent expense	$2,200
Cleaning expense	$780
Salary ($740+$740)	$1,480
Telephone bill	$300
Utilities	$300	$5,060
Net Income		$6,940

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Statement of owner's equity
Beginning bal.	-
Add: Net Income	$6,940
Less: Dividends	($1,500)
Ending balance	$5,440

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Prepare Balance Sheet as follows:

Balance Sheet
Assets:
Current Assets:
Cash	$46,010
Total Current assets	$46,010
Office equipment ($1930+$80)	$2,010
Total Assets	$48,020
Liabilities:
Current liabilities:
Accounts payable	$80
Stockholders' Equity
Common stock	$42,500
Retained earnings	$5,440
Total Liabilities & Owners' Equity	$48,020

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The Gram Co.
Statement of cash flows:
For the Month Ended May 31
Operating Activities:
Cash received from clients	$12,000
Cash paid for cleaning service	($780)
Cash paid for rent	($2,200)
Cash paid for salaries	($1,480)
Cash paid for telephone bill	($300)
Cash paid for Utilities	($300)
Cash flow from operating activities (A)		$6,940
Cash flow from Investing activities: (B)
Purchase of Equipment		($1,930)
Cash flow from Financing activities:
cash received from the issuance of common stock	$42,500
Cash paid for dividends	($1,500)
Cash flow from Financing activities (C)		$41,000
Increase/(Decrease) in cash (A+B+C)		$46,010
Cash at beginning		-
Cash at the End		$46,010