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.

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Definitions:

Monetary Control Act

A United States federal law enacted in 1980 aimed at improving the Federal Reserve's control over the monetary supply and interest rates.

Thrift Institutions

Financial organizations focused on savings and mortgage lending, including savings and loan associations, credit unions, and savings banks.

Commercial Banks

Financial institutions that offer a wide range of services including deposit accounts, loans, and other financial products to businesses and consumers.

Contractionary Monetary Policy

To fight inflation, the Federal Reserve decreases the money supply.