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Transactions of Sky Company for the month of December 2017 are presented below: 1. The owner...

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Accounting

Transactions of Sky Company for the month of December 2017 arepresented below: 1. The owner invested $400,000 to start hisbusiness. 2. Purchased equipment for $48,000, paying $12,000 cashand the remaining amount will be paid after 10 days. 3. Purchasedoffice supplies on credit for $3,200. 4. Invested additional$160,000 cash in the business. 5. Services billed to customersamounted to $20,000. 6. Received a bill for $1,200 for advertisingof the current month. 7. Paid $10,000 as salaries of the month. 8.The owner withdrew $1,400 cash from the business for his personaluse. Required: a. Using the following table, show the effect of theabove transactions on the accounting equation b. Prepare the incomestatement, statement of owner’s equity, and balance sheet of SkyCompany on 31 December 2017

Answer & Explanation Solved by verified expert
3.8 Ratings (623 Votes)

a)

Assets = Liabilities + Shareholders Equity
1 $ 400,000.00 = $                 -   + $                 400,000.00
2 $    36,000.00 = $ 36,000.00 + $                                   -  
3 $      3,200.00 = $    3,200.00 + $                                   -  
4 $ 160,000.00 = $                 -   + $                 160,000.00
5 $    20,000.00 = $                 -   + $                   20,000.00
6 $                   -   = $    1,200.00 + $                   (1,200.00)
7 $ (10,000.00) = $                 -   + $                 (10,000.00)
8 $ (14,000.00) = $                 -   + $                 (14,000.00)

b)

Income Statement
Service Revenue $ 20,000.00
Expenses:
Advertising Expense $    1,200.00
Salaries Expense $ 10,000.00
Total Expenses $ 11,200.00
Net Profit $    8,800.00
  statement of owner’s equity
Net Income $      8,800.00
Investment During the Month $ 560,000.00
Drawings $    (1,400.00)
Net Balance $ 567,400.00
Balance Sheet
Assets:
Equipment $    48,000.00
Current Assets
Cash $ 536,600.00
Accounts Receivable $    20,000.00
Office Supplies $      3,200.00
Total Current Assets $ 559,800.00
Total Assets $ 607,800.00
Liabilites
Accounts Payable $    39,200.00
Deferred Expenses $      1,200.00
Owners Equity $ 567,400.00
Total Liabilites and Equity $ 607,800.00

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