Reference no: EM132543479

Mary William and Shuhong Wu established MS Hair Salon at the beginning of 2019. MS Hair Salon provides hairy cuts for men, women, and children, and permanents and hair coloring for men and women. Additionally, both Mary and Shuhong decided to generate some extra revenue by selling hair styling products. They opened a business account on the same day and deposited a total of $ 40,000 as capital. Both Mary and Shuhong contributed an equal amount of money. Additionally, MS Hair Salon borrowed $20,000 as a small business loan from CashLend finance. This $20,000 loan has 2.5% interest per year: interest is payable at the end of each month and the loan will be repayable after two years. They leased the store for two years for $ 3,000 a month and pay the last month's rent in advance.

They bought the furniture for $20,000, cash register for $2,000. Both furniture and cash register have an estimated useful life of 5 years. Both assets will have no value at the end of useful life. Each month they paid $ 1,000 to a part-time hairstylist, $ 1,800 for supplies and $300 for online advertising. Monthly hair cutting and styling revenue for the first three months were $ 5,000, $6,500, and $7,000. During these three months, MS Hair Salon generated revenue of 12,000 from hair product sales. The total cost of those products is $7,000. Interest in the borrowed money was paid in cash by the end of each month.

Question a. Prepare an income statement for three months ending March 31, 2019. (Show your working where necessary)

Question b. Prepare a statement of changes in retained earnings for three months ending March 31, 2019.Show your working where necessary)