Financial information related to the proprietorship of Ebony Interiors for February and March 2014 is as follows:

Financial information related to the proprietorship of Ebony Interiors for February and March  2014 is as follows:


February 28, 2014 March 31, 2014 Accounts payable $310,000 $400,000 Accounts receivable 800,000 960,000 Cash 320,000 380,000 Justin Berk, capital ? ? Supplies 30,000 35,000 


a. Prepare balance sheets for Ebony Interiors as of February 28 and March 31, 2014.

b. Determine the amount of net income for March, assuming that the owner made no additional investments or withdrawals during the month.

c. Determine the amount of net income for March, assuming that the owner made no additional investments but withdrew $50,000 during the month.

Answer:

a. EBONY INTERIORS Balance Sheet February 28, 2014 Assets Liabilities Cash $   320,000 Accounts payable $   310,000 Accounts receivable 800,000   Supplies 30,000 Owner’s Equity   Justin Berk, capital 840,000   Total liabilities and  Total assets $1,150,000 owner’s equity $1,150,000      EBONY INTERIORS Balance Sheet March 31, 2014 Assets Liabilities Cash $   380,000 Accounts payable $   400,000 Accounts receivable 960,000   Supplies 35,000 Owner’s Equity   Justin Berk, capital 975,000   Total liabilities and  Total assets $1,375,000 owner’s equity $1,375,000 



b.
Owner’s equity, March 31                  $975,000
Owner’s equity, February 28                840,000
Net income                                         $135,000

c.
Owner’s equity, March 31                  $975,000
Owner’s equity, February 28                840,000
Increase in owner’s equity                 $135,000
Add withdrawal                                     50,000
Net income                                        $185,000