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Financial Statements

Seth Feye established Reliance Financial Services on July 1, 2018. Reliance Financial Services offers financial planning advice to its clients. The effect of each transaction and the balances after each transaction for July are shown below.

	Assets					=	Liabilities +	Stockholders' Equity
	Cash	+	Accounts Receivable	+	Supplies	=	Accounts Payable	+	Common Stock	-	Dividends	+	Fees Earned	-	Salaries Expense	-	Rent Expense	-	Auto Expense	-	Supplies Expense	-	Misc. Expense
a.	+38,470								+38,470
b.					+3,350		+3,350
Bal.	38,470				3,350		3,350		38,470
c.	+37,700												+37,700
Bal.	76,170				3,350		3,350		38,470				37,700
d.	-10,400																-10,400
Bal.	65,770				3,350		3,350		38,470				37,700				-10,400
e.	-1,620						-1,620
Bal.	64,150				3,350		1,730		38,470				37,700				-10,400
f.			+26,500										+26,500
Bal.	64,150		26,500		3,350		1,730		38,470				64,200				-10,400
g.	-7,310																		-5,000				-2,310
Bal.	56,840		26,500		3,350		1,730		38,470				64,200				-10,400		-5,000				-2,310
h.	-15,400														-15,400
Bal.	41,440		26,500		3,350		1,730		38,470				64,200		-15,400		-10,400		-5,000				-2,310
i.					-1,900																-1,900
Bal.	41,440		26,500		1,450		1,730		38,470				64,200		-15,400		-10,400		-5,000		-1,900		-2,310
j.	-9,600										-9,600
Bal.	31,840		26,500		1,450		1,730		38,470		-9,600		64,200		-15,400		-10,400		-5,000		-1,900		-2,310

Required:

1. Prepare an income statement for the month ended July 31, 2018.

Reliance Financial Services
Income Statement
For the Month Ended July 31, 2018
Fees earned		$
Expenses:
Salaries expense	$
Rent expense
Auto expense
Supplies expense
Miscellaneous expense
Total expenses
Net income		$

Feedback

1. An income statement reports the revenues and expenses. When revenues are larger than the expenses, the difference is net income.

Learning Objective 5.

2. Prepare a retained earnings statement for the month ended July 31, 2018. If an answer is zero, enter "0". If a net loss is incurred or dividends were paid, enter that amount as a negative number using a minus sign.

Reliance Financial Services
Retained Earnings Statement
For the Month Ended July 31, 2018
Retained earnings, July 1, 2018		$
Net income	$
Dividends
Change in retained earnings		$
Retained earnings, July 31, 2018		$

Feedback

2. Follow Example Exercise 1-5. Recall that the statement of retained earnings considers beginning retained earnings, net income for the year and dividends to calculate the ending retained earnings. The net income from the income statement is needed to complete the statement of retained earnings.

Learning Objective 5.

3. Prepare a balance sheet as of July 31, 2018. When entering assets, enter them in order of liquidity.

Reliance Financial Services
Balance Sheet
July 31, 2018
Assets
Cash		$
Accounts receivable
Supplies
Total assets		$
Liabilities
Accounts payable		$
Stockholders' Equity
Common stock	$
Retained earnings
Total stockholders' equity
Total liabilities and stockholders' Equity		$

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