1.

Prepare the Income Statement, Statement of Retained Earnings and Balance Sheet
for the month ended October 31.
Comprehensive Problems Example:
Larson’s Accounting Company has the following account balances: Cash, $5,000; Accounts
Receivable, $2,000; Prepaid Rent $1,500; Supplies, $850; Equipment, $6,000; Trucks, $15,000;
Accounts Payable, $2,500; Common Stock, $20,000; Retained Earnings $7,850. Business
transactions during December are presented as follows:
1. Company received cash from clients for services, $4,500
2. Larson paid to creditors $500,
3. Paid office rent for the month of December, $750,
4. Company billed client for accounting services on account, $5,200
5. Supplies were purchased on account, $650,
6. Company received cash from clients billed previously, $6,000
7. Larson received an invoice for office equipment repair services from Office Extra for December (the invoice will be paid next month),
$850,
8. Larson paid monthly salaries, $2,700,
9. Utilities expense were paid, $280,
10. Miscellaneous expense were paid, $350,
11. Dividends were paid, $550.

Assets = Liabilities + Stockholders’ Equity + Net Income

+
Accounts Prepaid Accounts Common – – Expense
Cash Supplies Equipment Trucks Retained Revenue
Receivable Rent Payable Stock Dividends Expenses Type
Earnings

Previous
$5,000 $2,000 $1,500 $850 $6,000 $15,000 $2,500 $20,000 $7,850
Balances

1 4,500 4,500

2 -500 -500

Rent
3 -750 750
expense

4 5,200 5,200

5 650 650

6 6,000 -6,000

Repair
7 850 850
expense

Salary
8 -2,700 2,700
expense

Utilities
9 -280 280
expense

Misc.
10 -350 350
expense

11 -550 550

Ending
$11,120 $1,200 $750 $1,500 $6,000 $15,000 $3,500 $20,000 $7,850 $550 $9,700 $4,930
Balance:

Larson CompanyIncome StatementMonth Ended December 31, 2014

Expenses:

Rent Expense $750

Repair Expense 850

Wages Expense 2700

Utilities Expense 280

Miscellaneous expense 350

Total Expenses $4,930

Net Income ($9,700 – $4,930)= $4,770

Larson CompanyStatement of Retained EarningsMonth Ended December 31

Net income for the month $4,770

Less Dividends – 550

Increase in Stockholders’ Equity + 4,220

Larson Inc., Retained Earnings, December 31 $12,070

Larson Company

Balance Sheet

Month Ended December 31

Assets Liabilities

Cash $11,120 Accounts Payable $3,500

Accounts Receivable 1,200

Prepaid Rent 750 Stockholders’ Equity

Supplies 1,500 Common Stock 20,000

Equipment 6,000 Retained Earnings 12,070

Trucks 15,000

Total Assets $35,570 Total Liabilities and Stockholders’ Equity $35,570

Cast 77 Service Company has the following account balances: Cash, $6,000;
Comprehensive Problem 1.
Accounts Receivable, $7,000; Prepaid Rent, 1,900; Prepaid Insurance, $1,200 Supplies, $950;
Equipment, $7,000; Trucks, $10,000; Accounts Payable, $2,700; Common Stock $25,000;
Retained Earnings $6,350. Business transactions during December are presented as follows:
1. Company received cash from clients for services, $7,500
2. Cast 77 paid to creditors $600,
3. Paid office rent for the month of December, $950,
4. Company billed client for accounting services on account, $8,200
5. Supplies were purchased on account, $450,
6. Company received cash from clients billed previously, $4,200
7. Cast 77 received an invoice for services from Copy Plus for December (the invoice will be paid next month), $550,
8. Cast 77 paid monthly salaries, $4,700,
9. Utilities expense were paid, $380,
 10. Miscellaneous expense were paid, $250,
11. Paid for monthly insurance, $200
12. Dividends were paid, $750.
Required:
 Apply the basic accounting equation (create a spreadsheet, please see comprehensive example) to complete a transaction analysis
for each transaction (hint: enter the balances provided first).

 Prepare income statement at the end of December 31.

 Prepare statement of retained earnings equity at the end of December 31.

 Prepare balance sheet at the end of December 31.