bev s dry cleaners is owned and operated by beverly zahn a building and equipment ar 539353

Transactions; financial statements

Bev’s Dry Cleaners is owned and operated by Beverly Zahn. A building and equipment are currently being rented, pending expansion to new facilities. The actual work of dry cleaning is done by another company at wholesale rates. The assets, liabilities, and capital stock of the business on November 1, 2014, are as follows: Cash, $39,000; Accounts Receivable, $80,000; Supplies, $11,000; Land, $50,000; Accounts Payable, $31,500; Capital Stock, $50,000. Business transactions during November are summarized as follows:

a. Beverly Zahn invested additional cash in exchange for capital stock with a deposit of $21,000 in the business bank account.

b. Purchased land adjacent to land currently owned by Bev’s Dry Cleaners to use in the future as a parking lot, paying cash of $35,000.

c. Paid rent for the month, $4,000.

d. Charged customers for dry cleaning revenue on account, $72,000.

e. Paid creditors on account, $20,000.

f. Purchased supplies on account, $8,000.

g. Received cash from cash customers for dry cleaning revenue, $38,000.

h. Received cash from customers on account, $77,000.

i. Received monthly invoice for dry cleaning expense for November (to be paid on December 10), $29,450.

j. Paid the following: wages expense, $24,000; truck expense, $2,100; utilities expense, $1,800; miscellaneous expense, $1,300.

k. Determined that the cost of supplies on hand was $11,800; therefore, the cost of supplies used during the month was $7,200.

l. Paid dividends, $5,000.

Instructions

1. Determine the amount of retained earnings as of November 1.

2. State the assets, liabilities, and stockholders’ equity as of November 1 in equation form similar to that shown in this chapter. In tabular form below the equation, indicate increases and decreases resulting from each transaction and the new balances after each transaction.

3. Prepare an income statement for November, a retained earnings statement for November, and a balance sheet as of November 30.

4. (Optional). Prepare a statement of cash flows for November.