February 28, 2014 March 31, 2014 Accounts payable $310,000 $400,000 Accounts receivable 800,000 960,000 Cash 320,000 380,000 Justin Berk, capital ? ? Supplies 30,000 35,000
a. Prepare balance sheets for Ebony Interiors as of February 28 and March 31, 2014.
b. Determine the amount of net income for March, assuming that the owner made no additional investments or withdrawals during the month.
c. Determine the amount of net income for March, assuming that the owner made no additional investments but withdrew $50,000 during the month.
Answer:
a. EBONY INTERIORS Balance Sheet February 28, 2014 Assets Liabilities Cash $ 320,000 Accounts payable $ 310,000 Accounts receivable 800,000 Supplies 30,000 Owner’s Equity Justin Berk, capital 840,000 Total liabilities and Total assets $1,150,000 owner’s equity $1,150,000 EBONY INTERIORS Balance Sheet March 31, 2014 Assets Liabilities Cash $ 380,000 Accounts payable $ 400,000 Accounts receivable 960,000 Supplies 35,000 Owner’s Equity Justin Berk, capital 975,000 Total liabilities and Total assets $1,375,000 owner’s equity $1,375,000
b.
Owner’s equity, March 31 $975,000
Owner’s equity, February 28 840,000
Net income $135,000
c.
Owner’s equity, March 31 $975,000
Owner’s equity, February 28 840,000
Increase in owner’s equity $135,000
Add withdrawal 50,000
Net income $185,000