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Chapter 1: Q 52PGB-2a (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

Expert verified

Income statement is shown as follows:

Amos Sharp, CPA

Income Statement

Year Ended October 31, 2018

Revenues

Service Revenue

$19,300

Expenses

Rent Expense

1,800

Utilities Expense

340

Total Expenses

2,140

Net Income

$17,160

Step by step solution

01

Step-by-Step Solution. Step 1: Calculation of net income

Net income is calculated as follows:

NetIncome=TotalRevenues-TotalExpenses=$19,300-$2,140=$17,160

02

Explanation of net income

Net income is generated when total revenues are higher than the total expenses.

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Most popular questions from this chapter

Annette Pachelo recently opened her own law office on March 1, which she operates as a corporation. The name of the new entity is Annette Pachelo, Attorney. Pachelo experienced the following events during the organizing phase of the new business and its first month of operation, March 2018. Some of the events were personal and did not affect the law practice. Others were business transactions and should be accounted for by the business. Mar. 1 Sold personal investment in Amazon stock, which she had owned for several years, receiving \(35,000 cash. 2 Deposited the \)35,000 cash from the sale of the Amazon stock in her personal bank account. 3 Deposited \(73,000 cash in a new business bank account titled Annette Pachelo, Attorney. The business issued common stock to Pachelo. 5 Paid \)700 cash for ink cartridges for the printer. 7 Purchased computer for the law office, agreeing to pay the account, \(5,000, within three months. 9 Received \)2,800 cash from customers for services rendered. 15 Received bill from The Lawyer for magazine subscription, \(400. (Use Miscellaneous Expense account.) 23 Finished court hearings on behalf of a client and submitted a bill for legal services, \)10,000, on account. 28 Paid bill from The Lawyer. 30 Paid utilities, \(1,200. 31 Received \)3,300 cash from clients billed on March 23. 31 Cash dividends of $5,500 were paid to stockholders. Requirements 2. Prepare the following financial statements: b. Statement of retained earnings.

Requirements 1. Prepare the income statement for Wilson Towing Service for the month ending June 30, 2018. 2. What does the income statement report?

Describe the similarities and differences among the four different types of business entities discussed in the chapter.

Using the accounting equation Thompson Handyman Services has total assets for the year of \(18,400 and total liabilities of \)9,050. Requirements 1. Use the accounting equation to solve for equity. 2. If next year assets increased by \(4,300 and equity decreased by \)3,850, what would be the amount of total liabilities for Thompson Handyman Services?

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 2. Prepare the following financial statements: a. Income statement.

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