Seth Feye established Reliance Financial Services on July 1, 2019. Reliance Financial Services offers financial planning

Seth Feye established Reliance Financial Services on July 1, 2019. Reliance Financial Services offers financial planning advice to its clients. The effect of each transaction and the balances after each transaction for July follow:

Assets 5Liabilities1 Owner’s Equity

Cash + Accounts Receivable + Supplies = Accounts Payable + Seth Feye,  Capital Seth Feye, − Drawing + Fees  Earned − Salaries Expense − Rent  Expense − Auto Expense − Supplies  Expense − Misc. Expense a. +50,000 +50,000 b. +7,000 +7,000 Bal.     50,000    7,000  7,000    50,000 c. –3,600 −3,600 Bal.     46,400    7,000  3,400    50,000 d. +110,000+110,000

Bal. 156,400    7,000  3,400    50,000    110,000 e. –33,000–33,000 Bal. 123,400    7,000  3,400    50,000    110,000 –33,000 f. −20,800–16,000 –4,800

Bal.    102,600    7,000  3,400    50,000   110,000 –33,000 –16,000 –4,800 g. −55,000–55,000 Bal. 47,600    7,000  3,400    50,000    110,000 –55,000 –33,000 –16,000 –4,800 h. –4,500–4,500 Bal.    47,600    2,500  3,400    50,000    110,000 –55,000 –33,000 –16,000 –4,500 –4,800 i. +34,500+ 34,500 Bal.    47,600    34,500    2,500  3,400    50,000 144,500 –55,000 –33,000 –16,000 –4,500 –4,800 j. –15,000–15,000 Bal.    32,600    34,500    2,500  3,400    50,000 –15,000 144,500 –55,000 –33,000 –16,000 –4,500 –4,800

Instructions

1. Prepare an income statement for the month ended July 31, 2019.

2. Prepare a statement of owner’s equity for the month ended July 31, 2019.

3. Prepare a balance sheet as of July 31, 2019.

4. (Optional) Prepare a statement of cash flows for the month ending July 31, 2019.

Answer:

1.

Fees earned$144,500

Expenses:

Salaries expense$55,000

Rent expense33,000

Auto expense16,000

Supplies expense4,500

Miscellaneous expense4,800

Total expenses113,300

Net income$ 31,200

2.

Seth Feye, capital, July 1, 2019$ 0

Investment on July 1, 2019$ 50,000

Net income for July31,200

Withdrawals(15,000)

Increase in owner’s equity66,200

Seth Feye, capital, July 31, 2019$66,200

3.

Cash$32,600

Accounts receivable34,500

Supplies2,500

Total assets$69,600

Accounts payable$ 3,400

Seth Feye, capital66,200

Total liabilities and owner’s equity$69,600

4. (Optional)

Cash flows from operating activities: 

Cash receipts from customers$ 110,000

Cash payments for expenses and payments to

creditors*(112,400)    

Net cash flow used for operating activities$ (2,400)

Cash flows from investing activities0

Cash flows from financing activities:

Cash receipt of owner’s investment $ 50,000

Cash withdrawal by owner(15,000)      

Net cash flow from financing activities35,000       

Net increase in cash and July 31, 2019, cash balance $32,600

* $3,600 + $33,000 + $20,800 + $55,000; these amounts are taken from the cash column 

shown in the problem.