Hometown Décor Company PDF

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hometown décor company Hometown Décor Company...

Description

HOMETOWN DÉCOR COMPANY Owner’s Equity Statement Year Ended December 31, 2018 Owner’s capital Add: Investment:

$56,000

Net Income:

$115,700

Less: Drawings:

$171,700 $171,700 $36,000

Owner’s Capital:

$135,700 HOMETOWN DÉCOR COMPANY Balance Sheet Year Ended December 31, 2018

Cash Receivable

$56,000 $800

Equiment

$17,000

Office supplies

$8,000 $77,800

Liabilities

1. Meg McKinney opened a public relations firm called Solid Gold on August 1, 2018. The following amounts summarize her business on August 31, 2018:

During September 2018, the business completed the following transactions: a. Meg McKinney contributed $17,000 cash in exchange for capital. b. Performed service for a client and received cash of $800. c. Paid off the beginning balance of accounts payable. d. Purchased office supplies from OfficeMax on account, $1,200. e. Collected cash from a customer on account, $2,000. f. McKinney withdrew $1,600. g. Consulted for a new band and billed the client for services rendered, $4,500. h. Recorded the following business expenses for the month: Paid office rent: $1,000. Paid advertising: $500.

ASSETS

=

Accounts Office + Land = Cash + Receivabl + Supplies e

LIABILITIE + S Accounts Payable

EQUITY

McKinney, Service McKinney Rent Advertisin + , Capital – Withdrawal + – – Revenue Expense g Expense s

+17,000

2. Cash $21,500 Conner Thomas started a new business, Thomas Gymnastics, and completed the following transactions during December: Dec. 1 2 5 9 10 15 20 25 28 28

Thomas contributed $19,000 cash in exchange for capital. Received $3,800 cash from customers for services performed. Paid $200 cash for office supplies. Performed services for a customer and billed the customer for services rendered, $4,500. Received $200 invoice for utilities due in two weeks. Paid for advertising in the local paper, $250. Paid utility invoice received on December 10. Collected cash in full from customer billed on December 9. Paid rent for the month, $1,600. Paid $1,450 to assistant for wages.

30 31

Received $1,400 cash from customers for services performed. Thomas withdrew $3,500.

3. Net Income $115,700 Presented here are the accounts of 18 for the year ended December 31, 2018. Land Notes Payable Property Tax Expense Hunt, Withdrawals Rent Expense Salaries Expense Salaries Payable Service Revenue Office Supplies Hunt, Capital, Dec. 31, 2017

$13,000 33,000 2,800 36,000 14,000 67,000 1,300 225,000 8,000 56,000

Owner contribution, 2018 Accounts Payable Accounts Receivable Advertising Expense Building Cash Equipment Insurance Expense Interest Expense

$ 28,000 14,000 800 17,000 170,400 2,800 17,000 1,700 6,800

Requirements 1. Prepare Hometown Décor Company’s income statement. Example: A: Income Statement Year Ended December 31, 2018

Revenue: Service Revenue Expenses: Salaries Expense Advertising Expense Rent Expense Interest Expense Property Tax Expense Insurance Expense Total Expenses Net Income

2. Prepare the statement of owner’s equity. 3. Prepare the balance sheet.

$ 225,000 $ 67,000 17,000 14,000 6,800 2,800 1,700 109,300 $ 115,700

4. Let’s examine a case using Greg’s Tunes and Sal’s Silly Songs. It is now the end of the first year of operations, and both owners want to know how well each business came out at the end of the year. Neither business kept complete accounting records, and neither owner made any withdrawals. The businesses throw together the data shown on the next page at year-end:

To gain information for evaluating the businesses, the owners ask you several questions. For each answer, you must show your work to convince the owners that you know what you are talking about. Requirements 1. Which business has more assets? 2. Which business owes more to creditors? 3. Which business has more owner’s equity at the end of the year? 4. Which business brought in more revenue? 5. Which business is more profitable? 6. Which of the foregoing questions do you think is most important for evaluating these two businesses? Why? 7. Which business looks better from a financial standpoint?

HOMETOWN DÉCOR COMPANY Income Statement Year Ended December 31, 2018 Revenue: Service Revenue Expenses: Salaries Expense Advertising Expense Rent Expense Interest Expense Property Tax Expense Insurance Expense Total Expenses Net Income

$ 225,000 $ 67,000 17,000 14,000 6,800 2,800 1,700 109,300 $ 115,700...