Reference no: EM132503159

Harvey Benedict set up a company, Eggs Restaurant Ltd. He invested $2,000 cash from his savings in the shares of the company. The company borrowed $30,000 in cash from a bank. The interest rate is 8.0% per annum and interest has to be paid half yearly (in September and March each year) on the outstanding loan balance, starting from 01 April 2010. Harvey purchased equipment for the restaurant for $22,000 paying $15,000 in cash with the remainder on credit to be settled in June 2010. This equipment is expected to have a useful life of eight years. All these transactions took place on 31 March 2010. The first loan principal repayment of $1,200 will be made on 15 May 2010.

The business started operations on 01 April 2010. During April 2010, the following events occurred for Eggs Restaurant:

1. The restaurant purchased food supplies for $9,000. Of this amount, $5,000 was paid in cash and the rest will be paid in May 2010.

2. The total payroll was $3,500 and, of this amount, $600 was owed to employees at the end of the month.

3. The restaurant sold $16,000 in meals for cash and $400 on 30 days' credit to a corporate customer. The food supplies used for these meals cost $6,000.

4. The rent for the restaurant premises is $1,200 per month. According to the terms of the lease, the restaurant paid (by cheque) three months' rent in advance during the month.

5. Miscellaneous expenses, other than depreciation, but including electricity for the month were $2,700. Except for the electricity bill this amount was paid in cash. The electricity bill for $700 was received in May.

6. Harvey made an additional contribution of $5,000 as an investment in the shares of the company.

The income tax rate for companies is 30% (ignore the effects of GST in this case).

REQUIRED:

Question a. Calculate the bank account balance at the end of April 2010. (show workings)

Question b.  Prepare the Income Statement for the month of April 2010.

Question c.  Prepare the Balance Sheet as the 30 April 2010.