Prepare an income statement and a statement of retained earnings for the month of June. Also, prepare a balance sheet at June 30

Question

The transactions of Magna Designer Corporation for the first month of their operations are as follows:
• On June 1, 2017, Magna Designer Corporation received $25,000 cash from its stockholders and gave common stock to the stockholders.
• The company rendered services to three clients on account with total revenues earned of $9,000.
• It then incurred an advertising expense on four different websites and promised to pay a total of $1,200 at a later date.
• On June 13, Magna Designers purchased $1,000 worth of office supplies for cash. (The supplies are not used by June 30 )
• On June 22, it received $2,000 on account from a client and deposited it into the business account.
• On June 23, it incurred $1,300 for a legal expense and paid cash.
• On June 30, Magna Designers made a payment of $500 to one of the websites that it owed for advertising provided earlier in the month.
• No dividends were paid during the month.

What will be an ideal response

Answer 1

Magna Designer Corporation
Income Statement
Month Ended June 30, 2017

Revenues:
Service Revenue $9,000
Expenses:
Advertising Expense $1,200
Legal Expense 1,300
Total Expenses 2,500
Net Income $ 6,500

Magna Designer Corporation
Statement of Retained Earnings
Month Ended June 30, 2017

Retained Earnings, June 1, 2017 $0
Net income for the month 6,500
6,500
Dividends 0
Retained Earnings, June 30, 2017 $6,500

Magna Designer Corporation
Balance Sheet
June 30, 2017

Assets Liabilities
Cash $24,200 Accounts Payable $ 700
Account Receivable 7,000
Office Supplies 1,000
Stockholders' Equity
Common Stock 25,000
Retained Earnings 6,500
______ Total Stockholders' Equity 31,500
Total Assets $32,200 Total Liabilities and Stockholders' Equity $32,200

Note:
Calculation of cash balance, June 30, 2017

Common stock issued $25,000
Service fees received 2,000
Receipts 27,000
Less payments:
Legal expense (1,300 )
Office supplies (1,000 )
Advertising expenses (500 )
Cash balance, June 30, 2017 $24,200