Question

On December 1, Jasmin Ernst organized Ernst Consulting. On December 3, the owner contributed $83,110 in assets to launch the business. On December 31, the company’s records show the following items and amounts.


Cash $ 14,550 Cash withdrawals by owner $ 1,120
Accounts receivable 12,940 Consulting revenue 12,940
Office supplies 2,400 Rent expense 2,640
Land 45,860 Salaries expense 5,920
Office equipment 17,020 Telephone expense 800
Accounts payable 7,820 Miscellaneous expenses 620
Owner investments 83,110

Answer 1

The preparation of the stockholder equity is presented below:

Statement of stockholder equity

J.Ernst, Capital, December 1  $ 0

Add: Investment by owner  $83,100

Add: Net Income  $2,960

Less: Withdrawals by owner  ($1,120)

J.Ernst, Capital, December 31  $84,940

Working note:

• The preparation of the income statement is presented below:

Income Statement

Consulting revenue  $12,940

Less:

Rent expense  $2,640

Salaries expense  $5,920

Telephone expense  $800

Miscellaneous expenses  $620

Total expenses  ($9,980)

Net Income  $2,960

Therefore we can conclude that the ending balance of the stockholder equity is $84,940

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