(Solved Homework): The following account balances are provided for Modern Communications, Inc. at July 31,2017: Balance Cash Accounts receivable Inte…

The following account balances are provided for Modern Communications, Inc. at July 31,2017: Balance Cash Accounts receivable Interest receivable Investments Spare parts and supplies Prepaid insurance Equipment (net) Accounts payable Interest payable Salaries payable Unearned revenue Bank loan due October 1, 2018 Common stock (no par) Retained earnings $ 250,000 170,000 150 38,000 40,000 36,000 486,850 84,000 300 36,000 40,000 426,000 350,000 84,700

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The following account balances are provided for Modern Communications, Inc. at July 31,2017: Balance Cash Accounts receivable Interest receivable Investments Spare parts and supplies Prepaid insurance Equipment (net) Accounts payable Interest payable Salaries payable Unearned revenue Bank loan due October 1, 2018 Common stock (no par) Retained earnings $ 250,000 170,000 150 38,000 40,000 36,000 486,850 84,000 300 36,000 40,000 426,000 350,000 84,700

Expert Answer

 

Answer 1-4.
Cash Accounts Receivable Interest Receivable
Beg. Bal.           250,000              67,000 5 Beg. Bal.          170,000        206,000 6 Beg. Bal.                    150                  150 12
4-a                5,000              86,000 9 1          395,000
6           206,000                2,350 11
12                    450                9,000 13
End. Bal.           297,100 End. Bal.          359,000 End. Bal.                       –
Investments Spare Parts & Supplies Prepaid Insurance
Beg. Bal.              38,000                5,000 4-a Beg. Bal.            40,000          16,000 3 Beg. Bal.              36,000
               3,000 4-b
End. Bal.              30,000 End. Bal.            24,000 End. Bal.              36,000
Equipment (Net) Accounts Payable Interest Payable
Beg. Bal.           486,850 Beg. Bal.          84,000 Beg. Bal.                  300
8              35,000 5            67,000
End. Bal.           521,850 End. Bal.          17,000 End. Bal.                  300
Salaries Payable Unearned Revenue Bank Loan due October, 2018
Beg. Bal.              36,000 Beg. Bal.          40,000 Beg. Bal.          426,000
9              36,000 2            18,000
End. Bal.                       – End. Bal.          22,000 End. Bal.          426,000
Common Stock Retained Earnings Service Revenue
Beg. Bal.           350,000 Beg. Bal.          84,700 Beg. Bal.                     –
         395,000 1
           18,000 2
End. Bal.           350,000 End. Bal.          84,700 End. Bal.          413,000
Spare Parts & Supplies Expenses Loss on sale of Investment Notes Payable
Beg. Bal.                       – Beg. Bal.                     – Beg. Bal.                     –
3              16,000 4-b              3,000            35,000 8
End. Bal.              16,000 End. Bal.              3,000 End. Bal.            35,000
Salaries Expenses Advance Salaries Utilities Expenses
Beg. Bal.                       – Beg. Bal.                     – Beg. Bal.                       –
9              41,000 9              9,000 10                1,200
End. Bal.              41,000 End. Bal.              9,000 End. Bal.                1,200
Utility Payable Advetisement Expenses Interest Revenue
Beg. Bal.                       – Beg. Bal.                     – Beg. Bal.                     –
               1,200 10 11              2,350                  300 12
End. Bal.                1,200 End. Bal.              2,350 End. Bal.                  300
Rent Expenses
Beg. Bal.                       –
13                9,000
End. Bal.                9,000
Answer.
Trial Balance
as of Aug 31, 2017
Particulars Dr. Amt. Cr. Amt.
Cash       297,100
Accounts Receivable       359,000
Interest Receivable                   –
Investments          30,000
Spare Parts & Supplies          24,000
Prepaid Insurance          36,000
Equipment (Net)       521,850
Accounts Payable          17,000
Interest Payable                300
Salaries Payable                   –
Unearned Revenue          22,000
Bank Loan due October, 2018       426,000
Common Stock       350,000
Retained Earnings          84,700
Service Revenue       413,000
Spare Parts & Supplies Expenses          16,000
Loss on sale of Investment            3,000
Notes Payable          35,000
Salaries Expenses          41,000
Advance Salaries            9,000
Utilities Expenses            1,200
Utility Payable            1,200
Advetisement Expenses            2,350
Interest Revenue                300
Rent Expenses            9,000
Total    1,349,500    1,349,500
                  –
Answer c.
Income Statement
for Aug 31, 2017
Revenues
Service Revenue       413,000
Less: Expenses
Spare Parts & Supplies Expenses       (16,000)
Salaries Expenses       (41,000)
Utilities Expenses          (1,200)
Advetisement Expenses          (2,350)
Rent Expenses          (9,000)       (69,550)
Net Operating Income (Loss)       343,450
Other Income or Expenses
Loss on sale of Investment          (3,000)
Interest Revenue                300          (2,700)
Net Income       340,750
Answer b.
Modern Communications
Statement of Cash Flows (Indirect Method)
For period ended Aug 31, 2017
Cash Flow from opearating activities:
Net Income       340,750
Add/(Less) non cash effects on operating activities
Loss on Sale of Investments            3,000
Increase in Accounts Receivables     (189,000)
Decrease in Interest Receivable                150
Decrease in Spares Parts & Supplies          16,000
Increase in Advance Salaries          (9,000)
Decrease in Accounts Payables       (67,000)
Decrease in Salaries Payable       (36,000)
Decrease in Unearned Revenue       (18,000)
Increase in Utilities Payable            1,200     (298,650)
Net Cash provided by operating activities          42,100
Cash flow from Investing Activities
Sale of Investments            5,000
Cash Flow / (used) from Investing activities            5,000
Cash Flow from Financing Activities                   –
Net Increase / (Decrease) in Cash          47,100
Cash balance at the beginning       250,000
Cash balance at the end       297,100

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