The following cash transactions took place during March, the first
month of business for Cats and Dogs Company:

1. D.C. Dawg started a business, Cats and Dogs Company, by contributing $6,000.
2. The Cats and Dogs Company borrowed $2,000 from the bank on March 1.
The note is a 1-year, 12% note, with both principal and interest to be
repaid on February 28 of next year.
3. The company earned $900 in revenue.
4. Expenses amounted to $650
5. Distributions to owners amounted to $25.

You are to complete the following tasks:

1. Show how each affects the accounting equation.
2. Give one additional piece of information related to the transaction
that could be recorded in an information system for a purpose other
than the financial statements.
3. Prepare the four basic financial statements for the month of March.

I need this by answered by Friday July 22, 2005.  Thanks

Hi canales!!

 

      Assets =         Liabilities       +       Owners? Equity 
---------------------------------------------------------------
1-   +$6,000 cash                                +$6,000 capital 
2-   +$2,000 cash   +$2,000 notes/payable     
3-   +  $900 cash                                +  $900 revenue 
4-   -  $650 cash                                -  $650 expenses 
5-   -   $25 cash                                -   $25 distribution 
----------------------------------------------------------------
Adjustment:      
6-                  +   $20 interest/payable     -   $20 interest expense 
----------------------------------------------------------------     
Totals $8,225 =      $2,020             +         $6,205 


 ---------------------------------------------------

 
 
Income Statement For the Month Ended March 31 
---------------------------------------------
Revenue            $900 
Expenses           $670 
                -----------
Net Income         $230 
 



Statement of Changes in Owners? Equity For the Month Ended March 31 
--------------------------------------------------------
Beginning Capital                     $0  
Contributions during the year     $6,000 
Net Income for the year             $230 
Withdrawals                         ($25) 
                                 -----------
Ending Capital                    $6,205 
 



Balance Sheet At March 31 
-------------------------- 
Assets                       Liabilities + Owners? Equity 
       
Cash             $8,225      Note Payable         $2,000 
                             Interest Payable        $20 
                             Capital, D.C. Dawg   $6,205 
-----------------------------------------------------------           
                  Total Liabilities
                              +          
Total Assets  $8,225          Owners? Equity      $8,225 
----------------------------------------------------------- 





Statement of Cash Flows For the month ending March 31
----------------------------------------------------- 
Cash from Operating Activities    
          Sales                        $900    
          Operating expense           ($650)  
Total Cash from Operations                        $250
 
Cash from Investing Activities                      $0 

Cash from Financing Activities    
    Owner?s contributions            $6,000  
    Distributions to owners            ($25)   
    Loan                             $2,000  
Total Cash from Financing                       $7,975 
                                              ----------
Net Increase in Cash                            $8,225 


------------------------------------------------------

As a bonus I add a good source, that is very related to this kind of
problems. From the page of the book "Financial Accounting: A Business
Process Approach" by Jane L. Reimers at Pearson - Prentice Hall site,
the chapter 2 powerpoint file will be very helpful in understanding
this topic:
http://myphliputil.pearsoncmg.com/student/bp_reimers_finacct_1/ch02s.ppt

The chapter 2 page is:
http://myphlip.pearsoncmg.com/cw/mpchapter.cfm?vbcid=4165

The book main page is:
http://myphlip.pearsoncmg.com/cw/mpbookhome.cfm?vbookid=319

-------------------------------------------------------

I hope that this helps you. Feel free to use the clarification feature
if you need it.

Regards,
livioflores-ga

---

Request for Answer Clarification by canales-ga on 15 Jul 2005 15:19 PDT

Thank you for your help. Were you able to answer question 1 & 2? It
looks like you just did #3.

---

Clarification of Answer by livioflores-ga on 15 Jul 2005 15:44 PDT

Hi!!

The questions 1 and 2 was answered in the first chart, the one
inmediatly above the "Income Statement For the Month Ended March 31",
in that chart or table items 1 to 5 show how each transaction affects
the accounting equation. Item 6 is the one additional piece of
information required.

Thank you for your good comments rating and the generous tip. I hope
to see you in the future in this forum, it was a pleasure to work in
your question.

Regards,
livioflores-ga

The answer you gave helped a lot. Thank you so much!