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

question 195

Essay

Prepare an income statement and a statement of owner's equity for the month of June.Also,prepare a balance sheet at June 30.The transactions of Magna Designer Company for the first month of their operations are as follows:
• On June 1,2017,the owner Carlos Magna Designer contributed $25,000 cash to establish the business.
• The company rendered services to three clients on account with total revenues earned of $9,000.
• It then incurred an advertising expense on four different websites and promised to pay a total of $1,200 at a later date.
• On June 13,Magna Designer purchased $1,000 worth of office supplies for cash.(The supplies are not used by June 30. )
• On June 22,it received $2,000 on account from a client and deposited it into the business account.
• On June 23,it incurred $1,300 for a legal expense and paid cash.
• On June 30,Magna Designers made a payment of $500 to one of the websites that it owed for advertising provided earlier in the month.
• No owner withdrawals were paid during the month.

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Definitions:

Holding Currency

The practice of keeping money in the form of cash or liquid assets as opposed to investing or depositing it.

MPC

Marginal Propensity to Consume refers to the proportion of an increase in income that gets spent on consumption of goods and services, as opposed to being saved.

Aggregate Demand

The total quantity of goods and services demanded across all sectors of an economy under certain economic conditions and price levels.

Aggregate-Demand Curve

A graphical representation showing the total quantity of goods and services demanded across all levels of prices in the economy.