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Chapter 1: Q 52PGB-2b (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

Statement of retained earnings is shown as follows:

Amos Sharp, CPA

Statement of Retained Earnings

Year Ended October 31, 2018

Retained Earnings, October 1, 2018

$0

Net income for the year

17,160

17,160

Dividends

(3,800)

Retained Earnings, October 31, 2018

$11,450

Step by step solution

01

Step-by-Step SolutionStep 1: Explanation on the statement of retained earnings

Statement of retained earnings reports changes in the beginning balance of retained earnings

02

Explanation on retained earnings

Retained earnings are the accumulated profits of the prior or previous years.

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Most popular questions from this chapter

You would like to start a cellular telephone equipment service business. You are considering organizing the business as a sole proprietorship. Identify the advantages and disadvantages of owning a sole proprietorship.

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Michael McNamee is the proprietor of a property management company,Apartment Exchange, near the campus of Pensacola State College. The business has cash of \(8,000 and furniture that cost \)9,000 and has a marketvalue of \(13,000. The business debts include accounts payable of \)6,000. Michael's personal home is valued at \(400,000, and his personal bank accounthas a balance of \)1,200. Consider the accounting principles and assumptionsdiscussed in the chapter, and identify the principle or assumption that best matches the situation:

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