Answer to Question #224427 in Economics for Khwisti

Question

Boikago Dance Studio accounting records reflect the following account balances at January 1, 2020.

Cash R100,000 Supplies R 4,000

Ordinary shares 50,000 Retained Earnings 54,000

During 2020, the following transactions occurred:

1) On February 1, rented a small studio for a one-year period. Paid R6,000 cash.

2) On November 1, received R1,200 cash for dance lessons to be provided evenly

over November, December, and January.

3) By December 31, used R3,000 of the supplies

4) At December 31, accrued R3,000 in wages and salaries.

5) During the year, paid cash for R20,000 in wages and salaries

6) During the year, earned R40,000 cash in dance lesson revenue.

1) Prepare an income statement for 2020. Ignore income tax effects. (6 marks)

2) Prepare a classified balance sheet for Boikago Dance Studio at December 31, 2020. (9 marks)

Answer 1

1) Prepare an income statement for 2020. Ignore income tax effects.

$$-6,000+1,200-3,000-3,000-20,000+40,000=9,200$$

2) Prepare a classified balance sheet for Boikago Dance Studio at December 31, 2020

Cash R109,200 Supplies R 4,000

Ordinary shares 50,000 Retained Earnings 54,000