Question

A Record transactions, post to the Cash T-account, and prepare the statement of cash flows (LO4-7) [The following information applies to the questions displayed below.] Rocky owns and operates Balboa's Gym located in Philadelphia. The following transactions occur for the month of October: 1. October 2 Receive membership dues for the month of October totaling $8,500. 2. October 5 Issue common stock in exchange for cash, $12,000. 3. October 9 Purchase additional boxing equipment for $9,600, paying one-half of the amount in cash and issuing a note payable to the seller for the other one-half due by the end of the year. 4. October 12 Pay $1,500 for advertising regarding a special membership rate available during the month of October. 5. October 19 Pay dividends to stockholders, $4,400. 6. October 22 Pay liability insurance to cover accidents to members for the next six months, starting November 1, $6,900. 7. October 25 Receive cash in advance for November memberships, $5,600. 8. October 30 Receive, but do not pay, utilities bill for the month, $5,200. 9. October 31 Pay employees' salaries for the month, $7,300.

Answer 1

Answer:

1. October 2 Receive membership dues for the month of October totaling $8,500.

Dr Cash 8,500

    Cr Service revenue 8,500

2. October 5 Issue common stock in exchange for cash, $12,000.

Dr Cash 12,000

    Cr Common stock 12,000

3. October 9 Purchase additional boxing equipment for $9,600, paying one-half of the amount in cash and issuing a note payable to the seller for the other one-half due by the end of the year.

Dr Equipment 9,600

    Cr Cash 4,800

    Cr Notes payable 4,800

4. October 12 Pay $1,500 for advertising regarding a special membership rate available during the month of October.

Dr Advertising expense 1,500

    Cr Cash 1,500

5. October 19 Pay dividends to stockholders, $4,400.

Dr Retained earnings 4,400

    Cr Dividends payable 4,400

Dr Dividends payable 4,400

    Cr Cash 4,400

6. October 22 Pay liability insurance to cover accidents to members for the next six months, starting November 1, $6,900.

Dr Prepaid insurance 6,900

    Cr Cash 6,900

7. October 25 Receive cash in advance for November memberships, $5,600.

Dr Cash 5,600

    Cr Unearned revenue 5,600

   

8. October 30 Receive, but do not pay, utilities bill for the month, $5,200.

Dr Utilities expense 5,200

    Cr Accounts payable 5,200

9. October 31 Pay employees' salaries for the month, $7,300.

Dr Wages expense 7,300

    Cr Cash 7,300

        Cash account

Debit                      Credit

8,500                     4,800

12,000                    1,500

5,600                     4,400

                              6,900

                              7,300

1,200

             Balboa's Gym

       Cash Flow Statement

             October 31, xx

Cash flow from operating activities:

Cash inflows:

Cash from October membership dues     $8,500

Cash from November memberships         $5,600

Total cash inflows                                      $14,100

Cash outflows:

Advertisement expense                           ($1,500)

Prepaid insurance                                    ($6,900)

Employees' salaries                                  ($7,300)

Total cash outflows                                 ($15,700)

                                                                                 

Cash flow from operating activities         ($1,600)

Cash flow from investing activities:

Purchase of new equipment                    ($4,800)    

Cash flow from financing activities:

Issuance of common stock                      $12,000

Dividends paid                                          ($4,400)  

Cash flow from investing activities           $7,600

Net increase in cash                                 $1,200