Prepare an income statement for july on an accrual basis

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Reference no: EM131341112

Luca & Lollo Srl, a wholesale distributor of home appliances, began business on July 2005. The following summarised transactions occurred during July:

1. On 1 July, two friends, Luca and Lorenzo, contributed EUR 120,000 in cash to the company.

2. On 1 July, a one-year rent contract for a warehouse was signed, paying EUR 30,000 in cash in advance for occupancy for 12 months.

3. On 1 July, warehouse equipment was acquired for EUR 50,000. A payment of EUR 20,000 was made the same day. EUR 30,000 was to be paid by the end of September.

4. On 1 July, EUR 12,000 was paid for a two-year insurance contract covering fire, casualty and related risks.

5. On 4 July, goods for EUR 112,500 were acquired, EUR 22,500 of which was paid in cash.

6. Total sales made in July amounted to EUR 100,000, of which EUR 15,000 was for cash.

7. Cost of inventory sold was EUR 80,000.

8. Depreciation expense of EUR 1,000 was recognised for July.

9. Collected EUR 20,000 from customers.

10. Paid EUR 40,000 to suppliers.

For simplicity, ignore all other possible expenses.

(a) Prepare an analysis of each transaction using the balance sheet equation. Show all amounts in thousands.

(b) Prepare an income statement for July on an accrual basis.

Reference no: EM131341112

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