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Answer
a. Effects of the given transactions on the six components of the company's financial statements for the month
of June is as follows:
Income Statement Balance Sheet
Transaction Revenue - Expenses = Net Income Assets = Liabilities + Owner's Equity
June . 1 NE - NE = NE I = NE + I
June . 2 NE - NE = NE I = I + NE
June . 4 NE - I = D D = NE + D
June . 15 I - NE = I I = NE + I
June . 15 NE - I = D D = NE + D
June . 18 NE - I = D D = NE + D
June . 25 NE - NE = NE NE = NE + NE
June . 30 I - NE = I I = NE + I
June . 30 NE - I = D D = NE + D
June . 30 NE - I = D NE = I + D
June . 30 NE - NE = NE NE = I + D
When Expense increase , Net Income Decrease and when Income increase , Net income increases
Also when Net Income increases, Owner's Equity increases and vice versa
When Cash is increased and Accounts Receivables are decreased, there is No Effect on Assets
b. Journal Entries for the month of June
Date Debit Credit
June . 1 Cash $ 60,000
Capital Stock $ 60,000
(To record issue of 60,000 capital stock for cash $60,000)

June . 2 Aircraft $ 220,000
Cash $ 40,000
Notes Payable $ 180,000
(To record purchase of a plane for $220,000
against cash of $40,000 andfor balance signed a Notes payable)
June . 4 Rent Expenses $ 2,500
Cash $ 2,500
(To record Rent expenses paid to Woodnow
for the month of June)
June . 15 Accounts Receivables $ 8,320
Aerial Photography Revenue $ 8,320
(To record revenue against bill raised on
a customer for aerial photography)
June . 15 Salaries Expenses $ 5,880
Cash $ 5,880
(To record salaries paid for the first half of June)
June . 18 Maintenance Expenses $ 1,890
Cash $ 1,890
(To record payment to Hannigan's Hanger
for repairs and maintenance of aircraft)

June . 25 Cash $ 4,910
Accounts Receivables $ 4,910
(To record collection of $4910 from customer
billed on June 15)
June . 30 Accounts Receivables $ 16,450
Aerial Photography Revenue $ 16,450
(To record revenue against bill raised on a customer
for aerial photography done in socond half of the month)
June . 30 Salaries Expenses $ 6,000
Cash $ 6,000
(To record salaries paid for the second half of June)
June . 30 Fuel Expenses $ 2,510
Accounts payable $ 2,510
(To record a bill received from Peatree Petroleum
for fuel purchased in June, payable in July 10)
June . 30 Dividends $ 2,000
Dividend Payable $ 2,000
(To record declaration of dividend payable on July 15)
c. On the basis of above entries Ledger accounts will be posted as follows:
Cash

Date Debit Credit Balance
June . 1 Capital Stock $ 60,000 $ 60,000 Dr
June . 2 Aircraft $ 40,000 $ 20,000 Dr
June . 4 Rent Expenses $ 2,500 $ 17,500 Dr
June . 15 Salaries Expenses $ 5,880 $ 11,620 Dr
June . 18 Maintenance Expenses $ 1,890 $ 9,730 Dr
June . 25 Accounts Receivables $ 4,910 $ 14,640 Dr
June. 30 Salaries Expenses $ 6,000 $ 8,640 Dr
Aircraft
Date Debit Credit Balance
June . 2 Cash $ 40,000 $ 40,000
Notes Payable $ 180,000 $ 220,000 Dr
Rent Expenses
Date Debit Credit Balance
June . 4 Cash $ 2,500 $ 2,500 Dr
Accounts Receivables
Date Debit Credit Balance
June . 15 Aerial Photography Revenue $ 8,320 $ 8,320 Dr
June . 25 Cash $ 4,910 $ 3,410 Dr
June . 30 Aerial Photography Revenue $ 16,450 $ 19,860 Dr
Salaries Expenses
Date Debit Credit Balance

June . 15 Cash $ 5,880 $ 5,880 Dr
June. 30 Cash $ 6,000 $ 11,880 Dr
Maintenance Expenses
Date Debit Credit Balance
June . 18 Cash $ 1,890 $ 1,890 Dr
Fuel Expenses
Date Debit Credit Balance
June. 30 Accounts payable $ 2,510 $ 2,510 Dr
Capital Stock
Date Debit Credit Balance
June . 1 Cash $ 60,000 $ 60,000 Cr
Aerial Photography Revenue
Date Debit Credit Balance
June . 15 Accounts Receivables $ 8,320 $ 8,320 Cr
June. 30 Accounts Receivables $ 16,450 $ 24,770 Cr
Accounts payable
Date Debit Credit Balance
June. 30 Fuel Expenses $ 2,510 $ 2,510 Cr
Dividend Payable

Date Debit Credit Balance
June. 30 Dividend $ 2,000 $ 2,000 Cr
Dividends
Date Debit Credit Balance
June. 30 Dividend Payable $ 2,000 $ 2,000 Dr
Notes Payable
Date Debit Credit Balance
June . 2 Utility Aircraft for Aircraft purchase $180,000 $180,000 Cr
d. Trial Balance date 30th June 2011 will be as follows (the balances of above ledgers will be taken):
Trial Balance
as at 30th June 2011
Debit Credit
Cash $ 8,640
Accounts Receivables $ 19,860
Aircraft $220,000
Accounts payable $ 2,510
Dividend Payable $ 2,000
Notes Payable $ 180,000
Capital Stock $ 60,000
Retained Earnings $ -
Dividends $ 2,000
Aerial Photography Revenue $ 24,770
Rent Expenses $ 2,500

Salaries Expenses $ 11,880
Maintenance Expenses $ 1,890
Fuel Expenses $ 2,510
Total $269,280 $269,280
Trial balance shows Retained Earnings opening balance is $0 as this is the first month of operations of the
organisation.
e. From the trial balance prepared in part d above , total assets , total liabilities and Owner's Equity will be
calculated as below:
Total Assets
Cash $ 8,640
Accounts Receivables $ 19,860
Aircraft $ 220,000
Total Assets $ 248,500
Total Liabilities
Accounts payable $ 2,510
Dividend Payable $ 2,000
Notes Payable $ 180,000
Total Liabilities $ 184,510
Owner's Equity
Capital Stock $ 60,000
Retained Earnings (beginning balance is reflecting in Trial balance) $ -
Dividends $ -2,000
Total Owner's Equity $ 58,000
In the above trial balance , closing entries are not considered for the Revenue , Expenses and Dividends for the
month of June 2011. and hence Owner's equity is not correct as Current month Net Income is not considered

therein.
Hence The company can not reflect the above figures related to Owner's equity in its Balance sheet as at 30th
June 2011.
However, Total Assets and Total Liabilities can be reported same as calculated above subject to no other
adjustments entries. Like there may be few entries needs to be posted as adjustments as at 30th June 2011 like
Depreciation expenses , Interest due but unpaid on Notes payable etc.
In the absense of information , assuming there are no other adjusting entries the above figures of total assets
and liabilities can be reported , however Owner's equity needs to be calculated first as below:
Thus, First we need to close the Revenue and Expenses and Dividend accounts and prepare Trial Balance after
closing on that basis we can calculate Total Owner's Equity.
Closing entries will be as follows:
Sr no Debit Credit
1 Aerial Photography Revenue $ 24,770
Revenue Summary $ 24,770
(To close revenue account)
2 Revenue Summary $ 18,780
Rent Expenses $ 2,500
Salaries Expenses $ 11,880
Maintenance Expenses $ 1,890
Fuel Expenses $ 2,510
(To close all expenses account)
3 Revenue Summary $ 5,990
Retained Earnings $ 5,990
(to close Revenue Summary account)
4 Retained Earnings $ 2,000
Dividends $ 2,000
Hence ,
Trial Balance after closing entries will be as follows:
Trial balance after closing entries
as at 30th June 2011

Debit Credit
Cash $ 8,640
Accounts Receivables $ 19,860
Aircraft $ 220,000
Accounts payable $ 2,510
Dividend Payable $ 2,000
Notes Payable $ 180,000
Capital Stock $ 60,000
Retained Earnings (5,990-2,000) $ 3,990
Total $ 248,500 $248,500
Thus , Owner's Equity to be reported as at 30th June 2011 will be as follows:
Owner's Equity
Capital Stock $ 60,000
Retained Earnings (*refer working below) $ 3,990
Total Owner's Equity $ 63,990
Retained Earnings can be calculated as below:
Beginning balance as at 1st june 2011 $ -
Add: Net Income for June 2011 (refer working below) $ 5,990
Less: Dividend $ -2,000
Ending balance as at 30th June 2011 $ 3,990
Net Income for June 2011
Aerial Photography Revenue A $ 24,770
Rent Expenses $ 2,500
Salaries Expenses $ 11,880

Maintenance Expenses $ 1,890
Fuel Expenses $ 2,510
Total Expenses B $ 18,780
Net Income (A-B) $ 5,990
Thus after posting closing entries , Total assets , liabilities and Owner's equity can be calculated as at 30th June
2011.
Adjusting Entries such as depreciation expenses and interest expenses accrued but not paid needs to be
posted as at the date of closing of period . and hence such entries needs to be considered before reporting
Total assets , total liabilities and Owner's equity as calculated above as on 30th June 2011 in the Balance Sheet
of this organisation.
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