Question

Fredonia Repair Inc. was started on May 1. A summary of May transactions is presented below.

1.		Stockholders invested $15,500 cash in the business in exchange for common stock.
2.		Purchased equipment for $5,500 cash.
3.		Paid $200 cash for May office rent.
4.		Paid $600 cash for supplies.
5.		Incurred $300 of advertising costs in the Beacon News on account.
6.		Received $5,000 in cash from customers for repair service.
7.		Declared and paid a $1,000 cash dividend.
8.		Paid part-time employee salaries $1,000.
9.		Paid utility bills $140.
10.		Performed repair services worth $990 on account.
		11. Collected cash of $140 for services billed in transaction (10). Prepare a tabular analysis of the transactions. Revenue is called Service Revenue. From an analysis of the Retained Earnings columns, compute the net income or net loss for May.

Answer 1

1

Trasaction	Cash	Accounts Receivable	Supplies	Office Equipment	Notes Payable	Accounts Payable	Common Stock	Retained Earnings
1	15500						15500
2	-5500			5500
3	-200							-200
4	-600		600
5						300		-300
6	5000							5000
7	-1000							-1000
8	-1000							-1000
9	-140							-140
10		990						990
11	140	-140
	12200	850	600	5500	0	300	15500	3350

2

Income Statement
Income
Service Revenue		5990
Expenses
Rent	200
advertising costs	300
employee salarie	1000
utility	140	1640
Net Income		4350