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Magazine Chapter 1: Q 52PGB-1 (page 50)
Amos Sharp recently opened his own accounting firm on October 1, which he operates as a corporation. The name of the new entity is Amos Sharp, CPA. Sharp experienced the following events during the organizing phase of the new business and its first month of operations in 2018. Oct. 5 Sharp deposited \(45,000 in a new business bank account titled Amos Sharp, CPA. The business issued common stock to Sharp. 6 Paid \)300 cash for letterhead stationery for new office. 7 Purchased office furniture for the office on account, \(6,500. 10 Consulted with tax client and received \)3,300 for services rendered. 11 Paid utilities, \(340. 12 Finished tax hearings on behalf of a client and submitted a bill for accounting services, \)16,000. 18 Paid office rent, \(1,800. 25 Received amount due from client that was billed on October 12. 27 Paid full amount of Accounts Payable created on October 7. 31 Cash dividends of \)3,800 were paid to stockholders. Requirements 1. Analyze the effects of the events on the accounting equation of Amos Sharp, 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.
Short Answer
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 | |||
Oct.5 | +45,000 | +45,000 | |||||||||||||||||
Bal. | $45,000 | = | + | $45,000 | |||||||||||||||
Oct.6 | -300 | +300 | |||||||||||||||||
Bal. | $44,700 | + | $300 | = | $45,000 | ||||||||||||||
Oct.7 | +6,500 | +6,500 | |||||||||||||||||
Bal. | $44,700 | + | $300 | + | $6,500 | = | $6,500 | + | $45,000 | ||||||||||
Oct.10 | +3,300 | +3,300 | |||||||||||||||||
Bal. | $48,000 | + | $300 | + | $6,500 | = | $6,500 | + | $45,000 | + | $3,300 | ||||||||
Oct.11 | -340 | -340 | |||||||||||||||||
Bal. | $47,6 60 | + | $300 | + | $6,500 | = | $6,500 | + | $45,000 | + | $3,300 | - | $340 | ||||||
Oct.12 | +16,000 | +16,000 | |||||||||||||||||
Bal. | $47,660 | + | $16,000 | + | $300 | + | $6,500 | = | $6,500 | + | $45,000 | + | $19,300 | - | $340 | ||||
Oct.18 | -1,800 | -1,800 | |||||||||||||||||
Bal. | $45,860 | + | $16,000 | + | $300 | + | $6,500 | = | $6,500 | + | $45,000 | + | $19,300 | - | $1,800 | - | $340 | ||
Oct.25 | +16,000 | -16,000 | |||||||||||||||||
Bal. | $61,860 | + | $0 | + | $300 | + | $6,500 | = | $6,500 | + | $45,000 | + | $19,300 | - | $1,800 | - | $340 | ||
Oct.27 | -6,500 | -6,500 | |||||||||||||||||
Bal. | $55,360 | + | $0 | + | $300 | + | $6,500 | = | $0 | + | $45,000 | + | $19,300 | - | $1,800 | - | $340 | ||
Oct.31 | -3,800 | -3,800 | |||||||||||||||||
Bal. | $51,560 | + | $0 | + | $300 | + | $6,500 | = | $0 | + | $45,000 | - | $3,800 | + | $19,300 | - | $1,800 | - | $340 |
$58,360 |
| $58,360 |
Step by step solution
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