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Problem A 1-5

Recording transactions in a financial transaction worksheet and preparing the financial statement
On August 1, 2014, John Carleo withdrew $6,500 from his personal savings account and opened a
checking account at the Middle National Bank in the name of Carleo Answering Service. The business
started by Mr. Carleo provides telephone answering service to clients as well as typing services. During
the first month of operations the following activities took place:
a. Acquired answering service equipment for $4,000, paying $1,000 cash, the remainder on a note
payable due February 1, 2015.
b. Acquired $925 of typing supplies on account from Miggans Office Supply Company.
c. Billed clients $2,750 for answering services rendered.
d. Mr. Carleo invested an additional $1,250 in the business.
e. Received $1,375 from clients billed in transaction (c).
f. Billed clients $560 for typing services rendered.
g. Paid telephone bill of $70.
h. Paid salaries of $290.
i. Received $170 cash for additional typing services rendered.
j. Paid rent of $250.
k. Paid Miggans Office Supply Company [see transaction (b)] $500.
Required:
1. Using a financial transaction worksheet, record the transactions listed above. Establish the following
accounts: Cash; Accounts Receivable; Typing Supplies on Hand; Answering Service Equipment; Notes
Payable; Account Payable; Carleo Capital.
2. Prepare the following three financial statements:
a. An income statement for the month ended August 31, 2014.
b. A statement of owners equity for the month of August 2014.
c. A balance sheet as of August 31, 2014.