Reference no: EM132772245
On January 3, 2003, Alemu Haba, an ex-manager of the CBE Finfine Branch, established his own consultancy business. He named his business "AH Consultancy Services". The objective of the business is to render financial consultancy services to clients on a fee basis.
The following business activities occurred during the first month of operations of the business (January 3 to January 31, 2003).
1. Alemu deposited $20,000 cash in a bank account in the name of his business - AH Consultancy Services. He has $250,000 cash in his personal bank account with Dashen Bank and $50,000 cash in a safe deposit box at his residence.
2. Alemu transferred furniture worth $30,000 from his home for office purposes by AH Consultancy Services. He also has extra home furniture, residential house and personal car worth $620,000, $800,000 and $360,000, respectively.
3. Alemu purchased office supplies worth $5,000 from various suppliers agreeing to pay the sum in the near future. Two-fifth of the supplies will be used for personal purposes while the remaining is for use by AH. Three-fifth of the liability is arranged to be settled from business cash sources.
4. AH received $20,000 cash for consultancy services it rendered to a cash client.
5. AH paid $3,000 cash for advertising aired through ETV.
6. AH forecasted that services fees in the next two weeks will amount to $5,000.
7. AH received $10,000 additional cash investment from Alemu - its owner.
8. AH rendered consultancy services worth $15,000 to clients promising to pay in the near future.
9. AH sold one of the furniture invested by its owner for $5,000 cash. The furniture had a recorded value of $5,000.
10. AH collected $5,000 cash from clients who received services in item-7 above.
11. AH paid $2,000 cash to suppliers on credit.
12. AH purchased a used car for business purposes. The business paid $8,000 cash for the car. Brokers estimated that the car currently worth only $5,000 and the Inland Revenue assessed the car at $12,000 for property tax purposes.
13. AH borrowed $4,000 cash from Dashen Bank. The loan is repayable over ten months.
14. AH employed an accountant and a secretary for monthly salary of $1,200 and $700, respectively.
15. AH incurred and paid for the following expenses
16. Wages................................................. $6,000
17. Rent.................................................... 4,500
18. Utilities................................................ 1,200
19. Others.................................................. 800
20. AH determined that cost of supplies remained on hand at the end of the current month total $1,300.
21. AH paid $450 cash to Dashen Bank consisting of $400 principal and $50 one month interest on the loan due in January.
22. AH paid its owner $5,000 cash for personal uses (to pay house utility expenses).
Required:
Problem a) Analyze the above transactions and record them in the accounting records of AH Consultancy Services and
Problem b) Prepare financial statements for the business for the month of January 2003.