Question

Cullen Beatty plans to start a consulting business—Cullen Consulting Services. In preparation to do this, on April 1, 2019, he invested $54,000 in cash and $23,000 in equipment, and opened an account at Office Plus by purchasing $1,900 in office supplies which is due by the end of the month. He then signed a one-year lease agreement on an office building for $6,800, paying the full amount in advance.


Prepare a Balance Sheet for Cullen Consulting Services as of April 1, 2019, before he conducts any services.

Answer 1

Answer:
Balance Sheet for Cullen Consulting Services as of April 1, 2019,

Liabilities	Amount	Assets	Amount
Accounts payable	$1,900	Cash	$47,200
		supplies	$1,900
Owners equity		prepaid rent	$6,800
Cullen beatty capital	$77,000	Equipment	$23,000
	$78,900	Total	$78,900

Note:

• Cash balance = $54,000 initial investment - $6,800 paid towards lease = $47,200
• Since supplies are purchased on account: account payable to the tune of $1900 will be created.
• Since lease of one year is paid in advance, it results is creation of prepaid rent.
• Capital of cullen beatty = cash + equipment = $54,000 + 23,000 =$77,000