John Block opened Block Construction on May 1 of the current year. The following amounts summarize the transactions and financial position of Block Construction as of May 31.
During May the following transactions occurred:
01-May Block purchased $20,000 of stock in the company.
02-May The company purchased $4,000 of equipment for the company with cash.
07-May The company purchased supplies for $1,000 on account.
15-May The company replaced some windows for a client and received $10,000 cash as payment in full at the time of service.
17-May The company sent an invoice to a customer for work performed, $3,800.
20-May The company paid $700 of his accounts payable balance as of May 20th.
24-May The company collected a partial payment of $1,000 from the customer for the work done and billed (invoice) on May 17.
25-May The company sold $5,000 of company stock to an investor.
28-May The company paid wages of $2,500.
30-May The company paid office rent of $1,500.
30-May The company paid dividends of $1,800 to investors.
Requirements:
- Use the date line to enter the transactions for May into the accounting equation. The spreadsheet will automatically calculate the new balances after each entry.
- Prepare the Income Statement for the month of May for Block Construction by completing the gray cells, using information from the spreadsheet above or calculating values as appropriate.
- Prepare the Statement of Retained Earnings for Block Construction for the Month of May by completing the gray cells, using information from the spreadsheet above or calculating values as appropriate.
- Prepare the Balance Sheet for Block Construction as of May 31, by completing the gray cells, using information from the spreadsheet above or calculating values as appropriate.
- Address the following four questions for Block Construction. Use full sentences and write in good form.
Question 1: How much is net income? What is the formula to arrive at net income?
Question 2: How much is beginning retained earnings? How much is ending retained earnings? What items contribute to ending retained earnings?
Question 3: Define Assets. How much are Total Assets for Block Construction?
Question 4: Today's accountant does not sit a back office and crunch numbers all day long. They are part of the business team. Accounting is called the language of business because it communicates information to help people make better decisions. Give two examples of how accountants work with other business teams to contribute to the growth and success of a business.
Sample Solution