Prepare an Income Statement and a Statement of Owner's Equity

question 156

Essay

Prepare an income statement and a statement of owner's equity for the month of May.Also,prepare a balance sheet as of May 31,2017,for McGuire Company.The financial transactions of McGuire Company for the month of May,their first month of operations,are as follows:
• On May 1,2017,the owner,Thomas McGuire contributed $20,000 cash to establish the business.
• On May 3,the company borrowed $5,000 from a creditor and executed a note payable with the principal and interest to be due in one year.
• On May 7,the company purchased $15,000 of equipment for cash.
• On May 8,McGuire Company rendered service to a client and earned $3,000 in cash.
• On May 12,the company incurred a repair expense of $1,800 and promised to pay the repair contractor the following month.
• On May 18,the company rendered service to a new client in the amount of $8,000 on account,as the client promised to pay the following month.
• At the end of May,McGuire withdrew $1,500 from the business.

Understand the roles and legal classifications of individuals within an organization in terms of principals, agents, employees, and independent contractors.

Recognize the conditions under which a principal is liable for contracts formed by an agent.

Grasp the significance of the equal dignity rule and how it affects the interactions between principal and agent.

Discuss the concept of constructive trust and its relevance in agency relationships.

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Definitions:

Birthday Gift

An item or service given to someone on the occasion of their birthday without expectation of payment.

Inherits

To receive property, titles, or rights from a deceased person's estate according to a will or as determined by law.

Lost Property

Items that are unintentionally left by their owner at a place where they are not likely to be found.

Mislaid Property

Property that is intentionally placed somewhere but then forgotten by the owner.