91影视

Using the accounting equation for transaction analysis and preparing financial statements Allen Shonton recently opened his own accounting firm on April 1, which he operates as a corporation. The name of the new entity is Allen Shonton, CPA. Shonton experienced the following events during the organizing phase of the new business and its first month of operations in 2018: Apr. 5 Shonton deposited \(75,000 in a new business bank account titled Allen Shonton, CPA. The business issued common stock to Shonton. 6 Paid \)300 cash for letterhead stationery for new office. 7 Purchased office furniture for the office on account, \(9,500. 10 Consulted with tax client and received \)4,000 for services rendered. 11 Paid utilities, \(190. 12 Finished tax hearings on behalf of a client and submitted a bill for accounting services, \)20,000. 18 Paid office rent, \(750. 25 Received amount due from client that was billed on April 12. 27 Paid full amount of accounts payable created on April 7. 30 Cash dividends of \)3,500 were paid to stockholders. Requirements 1. Analyze the effects of the events on the accounting equation of Allen Shonton, CPA. Use a format similar to Exhibit 1-6. 2. Prepare the following financial statements: a. Income statement. b. Statement of retained earnings. c. Balance sheet.

Step by step solution

01

Explanation on Transaction Analysis

Trasaction analysis helps in analyzing the effect of the transaction on the accounting equation.

02

Explanation on Accounting Equation

As per the accounting equation, both side of the accounting equation should be equal.

Effect of the transaction on the accounting equation is shown as follows:

	Assets	=	Liabilities	+	Equity
Contributed Capital	+	Retained Earnings
Cash	+	Accounts Receivable	+	Letterhead stationary	+	Office Furniture	Accounts Payable	Common Stock	-	Dividends	+	Service Revenue	-	Rent Expense	-	Utilities Expense
Apr.5	+75,000										+75,000
Bal.	$75,000									+	$75,000
Apr.6	-300				+300
Bal.	$74,700			+	$300			=		+	$75,000
Apr.7							+9,500		+9,500
Bal.	$74,700			+	$300	+	$9,500	=	$9,500	+	$75,000
Apr.10	+4,000														+4,000
Bal.	$78,700			+	$300	+	$9,500	=	$9,500	+	$75,000			+	$4,000
Apr.11	-190																		-190
Bal.	$78,510			+	$300	+	$9,500	=	$9,500	+	$75,000			+	$4,000			-	$190
Apr.12			+20,000												+20,000
Bal.	$78,510	+	$20,000	+	$300	+	$9,500	=	$9,500	+	$75,000			+	$24,000			-	$190
Apr.18	-750																-750
Bal.	$77,760	+	$20,000	+	$300	+	$9,500	=	$9,500	+	$75,000			+	$24,000	-	750	-	190
Apr.25	+20,000		-20,000
Bal.	$97,760	+	$0	+	$300	+	$9,500	=	$9,500	+	$75,000			+	$24,000	-	-$750	-	$190
Apr.27	-9,500								-9,500
Bal.	$88,260	+	$0	+	$300	+	$9,500	=	$0	+	$75,000			+	$24,000	-	$750	-	$190
Apr.30	-3500												-3,500
Bal.	$84,760	+	$0	+	$300	+	$9,500	=	$0	+	$75,000	-	$3,500	+	$24,000	-	$750	-	$190
	$94,560		$94,560

Unlock Step-by-Step Solutions & Ace Your Exams!

• Full Textbook Solutions

  Get detailed explanations and key concepts

• Unlimited Al creation

  Al flashcards, explanations, exams and more...

• Ads-free access

  To over 500 millions flashcards

• Money-back guarantee

  We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!