On October 1, Jill Jackson started Jill’s Apple Farm as a corporation. Jill started the firm by contributing $50,000 in exchange for common stock. On October 1, the new firm paid six months of rent in advance totaling $6,000 and paid eight months of insurance in advance totaling $3,000. Both rent and insurance coverage began on October 1. On October 6, the firm purchased supplies for $1,200. The firm hired one employee to help Jill and agreed to pay the worker $3,000 per month, paid on the last day of each month. Jill’s Apple Farm paid $100 for a newspaper advertisement to announce the opening of the business. The farm earned revenue of $8,000 in October, of which $5,000 was in cash. At the end of the month, the firm had only $400 worth of supplies on hand.

Requirements

1. Using an accounting equation worksheet, record the transactions that occurred during the month of October and the adjustments that must be made prior to the preparation of the financial statements for the month ended October 31.

2. Prepare the income statement, statement of changes in shareholder’s equity, and statement of cash flows for the month ended October 31 and the balance sheet at October 31.