Pays for services received on credit 7 buys store

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Entrepreneurial Finance
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Chapter 11 / Exercise 3
Entrepreneurial Finance
Leach/Melicher
Expert Verified
Pays for services received on credit7Buys store equipment for cash8Owner withdraws cash9Performs services on credit10Collects cash on receivable from (9)Cash balance, December 1 . . . . . . . . . . . . .$ Cash withdrawal by owner. . . . . . . . . . . . .2,000Cash received from customers. . . . . . . . . .12,400Cash payment of long-term liabilities . . . . . .1,500Cash paid for store supplies . . . . . . . . . . . .3,200Cash purchase of equipment . . . . . . . . . . . .39,000Cash paid for rent . . . . . . . . . . . . . . . . . . . .1,750Cash paid to employee . . . . . . . . . . . . . . . .2,000Cash investment by owner. . . . . . . . . . . . .57,000CheckCo. Y, Dec. 31, 2002 Assets, $135,100A new business, AllNet, has the following cash balance and cash flows for the month of December:RequiredPrepare a statement of cash flows for AllNet for the month of December.CheckCash Bal., Dec. 31,$19,9500
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Chapter 11 / Exercise 3
Entrepreneurial Finance
Leach/Melicher
Expert Verified
Fiona Dare started a new business called Midwest Consulting and it completed the following trans-actions during its first year of operations:a.Dare invests $70,000 cash and office equipment valued at $10,000 in the business.b.Paid $150,000 for a building to use as an office. Dare paid $20,000 in cash and signed a notepayable promising to pay the balance over the next ten years.c.Purchased office equipment for $15,000 cash.d.Purchased $1,200 of office supplies and $1,700 of office equipment on credit.e.Paid a local newspaper $500 cash for an announcement of the office’s opening.f.Completed a financial plan on credit and billed the client $2,800 for the service.g.Designed a financial plan for another client and collected a $4,000 cash fee.h.Dare withdrew $3,275 cash from the company bank account to pay personal expenses.i.Received $1,800 cash from the client described in transaction fj.Made a $700 cash payment on the equipment purchased in transaction dk.Paid $1,800 cash for the office secretary’s wages...RequiredPreparation Component1.Create a table like the one in Exhibit 2.13, using the following headings for the columns: Cash;Accounts Receivable; Office Supplies; Office Equipment; Building; Accounts Payable; NotePayable; and Fiona Dare, Capital. Leave space for an Explanation column to the right of the Capitalcolumn. Identify revenues and expenses by name in the Explanation column.2.Use additions and subtractions to show the effects of these transactions on individual items of theaccounting equation. Show new balances after each transaction. Indicate next to each change inequity whether it was caused by an investment, a revenue, an expense, or a withdrawal.3.Once you have completed the table, determine the company’s net income.Analysis Component4.Determine the return on equity for Midwest Consulting (use the $80,000 initial investment as thebeginning balance of equity). Assuming that Dare could have earned $3,000 for the period fromanother job, determine the modified return on equity for the period. State whether you think thebusiness is a good use of Dare’s money if an alternative investment would have returned 10% forthe same period.Ken Stone launched a new business called Ken’s Maintenance Co. that began operations on June 1.The following transactions were completed during the month:June 1Stone invested $130,000 cash in the business.1Rented a furnished office of a maintenance company that was going out of business and

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