Concept explainers
The following account balances are for William Giese, Certified Public Accountant, as of April 30, 2019.
INSTRUCTIONS
Using the
Analyze: What net change in owner’s equity occurred during the month of April?
Calculate the amount of WG, Capital at April 1, 2019 by using accounting equation.
Explanation of Solution
Accounting equation: Accounting equation is an accounting tool expressed in the form of equation, by creating a relation between resources or assets of a company and claims of resources to creditors and owners. Accounting equation is expressed as shown below:
Calculate the amount of WG, Capital at April 1, 2019 by using accounting equation.
Working notes: Calculate the amount of total expenses.
Hence, the amount of WG, Capital at April 1, 2019 is $102,580.
Prepare an income statement and a statement of owner’s equity for WG, Certified Public Accountant for the month of April and a balance sheet at April 30, 2019 from the information given.
Explanation of Solution
Income statement: Income statement is a financial statement that shows the net income or net loss by deducting the expenses from the revenues and vice versa.
Prepare an income statement for WG, Certified Public Accountant for the month of April.
WG, Certified Public Accountant | ||
Income Statement | ||
For the Month ended April 30, 2019 | ||
Fees earned | $53,600 | |
Expenses | ||
Advertising expense | $7,780 | |
Maintenance expense | $9,200 | |
Salaries expense | $26,000 | |
Total expenses | $42,980 | |
Net income | $10,620 |
Table (1)
Statement of owner's’ equity: This statement reports the beginning owner’s equity and all the changes which led to ending owner's’ equity. Additional capital, net income from income statement is added to and net loss from income statement and drawings are deducted from beginning owner’s equity to arrive at the end result, ending owner’s equity.
Prepare a statement of owner’s equity for WG, Certified Public Accountant for the month of April.
WG, Certified Public Accountant | ||
Statement of Owner's Equity | ||
For the Month ended April 30, 2019 | ||
WG Capital, April 1, 2019 | $102,580 | |
Net income for the month of April | $10,620 | |
Withdrawals | $(13,600) | |
Decrease in Capital | $(2,980) | |
WG Capital, April 30, 2019 | $99,600 |
Table (2)
Balance Sheet: Balance Sheet summarizes the assets, the liabilities, and the Shareholder’s equity of a company at a given date. It is also known as the statement of financial status of the business.
Prepare a balance sheet for WG, Certified Public Accountant at April 30, 2019.
WG, Certified Public Accountant | |
Balance Sheet | |
At April 30, 2019 | |
Assets | |
Cash | $60,000 |
Accounts Receivable | 24,000 |
Machinery | 42,000 |
Total assets | $126,000 |
Liabilities | |
Accounts Payable | $26,400 |
Owners’ Equity | |
WG, capital, April 30, 2019 | 99,600 |
Total liabilities and owners’ equity | $126,000 |
Table (3)
Analyze: The owner’s equity is decreased by $2,980
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