Question

Sanyu Sony started a new business and completed these transactions during December.

Dec. 1 Sanyu Sony transferred \(65000 cash from a personal savings account to a checking account in the name of Sony Electric in exchange for its common stock.

2 The company rented office space and paid \)1000 cash for the December rent.

3 The company purchased \(13000 of electrical equipment by paying \)4800 cash and agreeing to pay the \(8200 balance in 30 days.

5 The company purchased office supplies by paying \)800 cash.

6 The company completed electrical work and immediately collected \(1200 cash for these services.

8 The company purchased \)2530 of office equipment on credit.

15 The company completed electrical work on credit in the amount of \(5000.

18 The company purchased \)350 of office supplies on credit.

20 The company paid \(2530 cash for the office equipment purchased on December 8.

24 The company billed a client \)900 for electrical work completed; the balance is due in 30 days.

28 The company received \(5000 cash for the work completed on December 15.

29 The company paid the assistant’s salary of \)1400 cash for this month.

30 The company paid \(540 cash for this month’s utility bill.

31 The company paid \)950 cash in dividends to the owner (sole shareholder).

Required 2. Prepare the income statement and the statement of retained earnings for the current month, and the balance sheet as of the end of the month.

Short answer

The net income of the business is $4,160, closing retained earnings is $3,210 and the total of the balance sheet is $76,760.

Step-by-step solution

Preparation of Income Statement

Income Statement
For the month ended December 31
Particulars	Amount ($)	Amount ($)
Revenues		7,100
Expenses
Rent Expense	1,000
Salary Expense	1,400
Utility Expense	540
Total expenses		2,940
Net Income		4,160

Preparation of statement of retained earnings

Statement of retained earnings
For the month ending December, 31
	Amount ($)
Opening retained Earnings	0
Add: Net Income	4,160
	4,160
Less: Dividends	-950
Closing retained earnings	3,210

Preparation of Balance Sheet

Balance Sheet
As on December 31
Assets	Amount ($)	Liabilities	Amount ($)
Cash	59,180	Accounts payable	8,550
Accounts receivables	900
Office Supplies	1,150	Equity
Office Equipment	2,530	Common stock	65,000
Electrical Equipment	13,000	Retained Earnings	3,210
Total assets	76,760	Total liabilities and equity	76,760