Response:
Red Flash Photography
Balance Sheet as at January 1, 2018,
Assets
Cash,............... $26,000
Supplies,........... $9,400
Land,...............$74,000
Total..................109,400
Capital and Liabilities
Deferred Revenue... $6,400
Common Stock.......$64,000
Retained Earnings...$39,000.
Total............................109,400
Red Flash Photography
Balance Sheet as at December 31, 2018
Updated Balance Sheet on December 31, 2018
Assets
Cash..........................................42,600
Accounts Receivable............ 44,000
Supplies....................................15,800
Land..........................................74,000
Prepaid Rent............................19,500
Total........................................... 195,900
Capital & Liabilities
Common Stock......................98,000
Retained Earnings.................56,500
Accrued Wages........................5,400
Accounts Payable...................36,000
Total........................................... 195,900
Clarification:
1. On February 15, issue additional common stock amounting to $34,000.
INCREASE EQUITY BY 34,000, AND ADD TO CASH
2. On May 20, provide cash services to customers for $49,000, and on account for $44,000.
DEDUCT 49,000 FROM CASH AND INCREASE RETAINED EARNINGS AS INCOME, ADD 44,000 TO ACCOUNTS RECEIVABLE AND INCREMENT TO RETAINED EARNINGS AS INCOME
3. On August 31, disburse salaries to employees for $37,000.
DEDUCT 37,000 FROM CASH AND RETAINED EARNINGS
4. On October 1, acquire rental space for a year, costing $26,000.
DEDUCT FROM CASH AND FROM RETAINED EARNINGS
5. On November 17, obtain supplies on credit, totaling $36,000.
ADD TO STOCK, INCREASE ACCOUNTS PAYABLE
6. On December 30, distribute dividends totaling $3,400.
DEDUCT FROM CASH AND FROM RETAINED EARNINGS
The following details are available as of December 31, 2018:
1. Employees are owed another $5,400 in salaries.
INCREASE ACCRUED SALARIES, DECREASE RETAINED EARNINGS AS EXPENSES INCURRED DURING THIS PERIOD
2. Three months of rental has been utilized.
ESTABLISH PREPAID RENT FOR 3/4 OF RENT (19,500) AND DECREASE 6500 FROM RETAINED EARNINGS AS EXPENSES FOR THE PERIOD
3. Supplies valued at $6,400 are still available.
DEDUCT 19600 (26,000-6400) FROM SUPPLIES AND RETAINED EARNINGS AS PERIOD EXPENSE
4. All customer services related to the initial deferred revenue have been completed.
REMOVE DEFERRED REVENUE OF 6,400 AND ADD THAT AMOUNT TO RETAINED EARNINGS AS INCOME RECEIVED
