Reference no: EM13546296

Kean Dry Cleaners is owned and operated by Wally Lowman. A building and equipment are currently being rented, pending expansion to new facilities. The actual work of dry cleaning is done by another company at wholesale rates. The assets and the liabilities of the business on March 1, 2012, are as follows: Cash, $15,000; Accounts Receivable, $31,000; Supplies, $3,000; Land, $36,000; Accounts Payable, $13,000.

Business transactions during March are summarized as follows:

a. Wally Lowman invested additional cash in the business with a deposit of $28,000 in the business bank account.

b. Paid $14,000 for the purchase of land as a future building site.

c. Received cash from cash customers for dry cleaning revenue, $17,000.

d. Paid rent for the month, $5,000.

e. Purchased supplies on account, $2,500.

f. Paid creditors on account, $12,800.

g. Charged customers for dry cleaning revenue on account, $34,000.

h. Received monthly invoice for dry cleaning expense for March (to be paid on April 10), $13,500.

i. Paid the following: wages expense, $7,500; truck expense, $2,500; utilities expense, $1,300; miscellaneous expense, $2,700.

j. Received cash from customers on account, $28,000.

k. Determined that the cost of supplies on hand was $1,900; therefore, the cost of supplies used during the month was $3,600.

l. Withdrew $8,000 cash for personal use.

Instructions

1. Determine the amount of Wally Lowman's capital as of March 1 of the current year.

2. State the assets, liabilities, and owner's equity as of March 1 in equation form similar to that shown in this chapter. In tabular form below the equation, indicate increases and decreases resulting from each transaction and the new balances after each transaction.

3. Prepare an income statement for March, a statement of owner's equity for March, and a balance sheet as of March 31.

4. (Optional). Prepare a statement of cash flows for March.