The Following Are The Transactions Relating To The Formation

The Following Are The Transactions Relating To The Formation Of Cardin

The following are the transactions relating to the formation of Cardinal Mowing Services, Inc., and its first month of operations. a. The firm was organized and the owners invested cash of 600. b. The company borrowed 900 from a relative of the owners; a short-term note was signed. c. Two lawn mowers costing 480 each and a trimmer costing 130 were purchased for cash. The original list price of each mower was 610, but a discount was received because the seller was having a sale. d. Gasoline, oil, and several packages of trash bags were purchased for cash of 90. e. Advertising flyers announcing the formation of the business and a newspaper ad were purchased. The cost of these items, 170, will be paid in 30 days. f. During the first two weeks of operations, 47 lawns were mowed. The total revenue for this work was 705; 465 was collected in cash and the balance will be received within 30 days. g. Employees were paid 420 for their work during the first two weeks. h. Additional gasoline, oil, and trash bags costing 110 were purchased for cash. i. In the last two weeks of the first month, revenues totaled 920, of which 375 was collected. j. Employee wages for the last two weeks totaled 510; these will be paid during the first week of the next month. k. It was determined that at the end of the month the cost of the gasoline, oil, and trash bags still on hand was 30. l. Customers paid a total of 150 due from mowing services provided during the first two weeks. The revenue for these services was recognized in transaction f.

Paper For Above instruction

This paper examines the accounting transactions related to the formation and first month of operations of Cardinal Mowing Services, Inc., including recording initial investments, asset acquisitions, operational revenues, and expenses, as well as calculating end-of-month financial positions and net income.

Accounting for startup activities involves recognizing initial investments, liabilities, and asset acquisitions that establish the company's financial foundation. For Cardinal Mowing Services, Inc., the initial cash investment by owners was 600, and the company borrowed 900 from a relative, creating a liability (Notes Payable). Asset acquisition included purchasing two lawn mowers costing 480 each and a trimmer costing 130—these are recorded as equipment, valued at cost. Expenses, such as gasoline, oil, trash bags, advertising, wages, and supplies, are recognized when incurred, with adjustments made for supplies remaining at month-end.

Initially, the company's cash assets increased by 600 from owner investment and 900 from borrowing, totaling 1,500. Equipment assets increased by the cost of lawn mowers and the trimmer, totaling 1,090. Accounts payable include the 170 owed for advertising not yet paid and 90 for supplies purchased with cash. The company’s total assets include cash, equipment, and supplies, while liabilities encompass the note payable and accounts payable. Owner’s equity arises from the initial investment and retained earnings, which are determined by revenues minus expenses.

During the first month, the company generated revenue from mowing lawns, earning 705 in total, with 465 collected in cash and 240 on account, including 150 collected later. In subsequent weeks, revenue increased to 920, with 375 received in cash and 545 on account. Total revenue for the month amounted to 1,625 (705 + 920). Expenses included wages of 420 during the first two weeks and 510 during the last two weeks, totaling 930. Operating expenses such as gasoline, oil, and trash bags amounted to 200, with supplies remaining valued at 30 at month-end, indicating 170 worth of supplies consumed.

Net income for the month is calculated as total revenues minus total expenses. Revenue recognized includes cash and receivables for mowing services, while expenses include wages and supplies consumed. The net income reflects the profitability of the company's initial operations, which, after calculating all revenues and expenses, results in a positive figure indicating operational success.

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