Dynamic Services Inc. was organized on March 1 by two former college roommates. The corporation…
Dynamic Services Inc. was organized on March 1 by two former college roommates. The corporation will provide computer tax services to small businesses. The following transactions occurred during the first month of operations:
March 2: Received contributions of $10,000 from each of the two principal owners in exchange for shares of stock. March 7: Signed a two-year promissory note at the bank and received cash of $7,500. Interest, along with the $7,500, will be repaid at the end of the two years. March 12: Purchased miscellaneous supplies on account for $350, payment due in 30 days. March 19: Billed a client $2,000 for tax preparation services. According to an agreement between the two companies, the client is to pay 25% of the bill upon its receipt and the remaining balance within 30 days. March 20: Paid a $650 bill from the local newspaper for advertising for the month of March. March 22: Received 25% of the amount billed the client on March 19. March 26: Received cash of $1,400 for services provided in assisting a client in preparing its tax return. March 29: Purchased a computer system for $4,000 in cash. March 30: Paid $1,650 in salaries and wages for March. March 31: Received and paid $700 of gas, electric, and water bills.
Required 1. Prepare a table to summarize the preceding transactions as they affect the accounting equation. Use the format in Exhibit 3-1. Identify each transaction with the date. 2. Prepare an income statement for the month of March. 3. Prepare a classified balance sheet at March 31. 4. From reading the balance sheet you prepared in part (3), what events would you expect to take place in April? Explain your answer.