Hart, Attorney At Law, experienced the following transactions in 2016, the first year of...
Question:
Hart, Attorney At Law, experienced the following transactions in 2016, the first year of operations:
1. Accepted $16, 000 on April 1, 2016, as a retainer for services to be performed evenly over the next 12 months.
2. Performed legal services for cash of $70, 000.
3. Purchased S1, 150 of office supplies on account.
4. Paid $1.035 of the amount due on accounts payable.
5. Paid a cash dividend to the stockholders of $4, 400.
6. Paid cash for operating expenses of S20.300.
7. Determined that at the end of the accounting period. $145 of office supplies remained on hand.
8. On December 31, 2016, recognized the revenue that had been earned for services performed in accordance with Transaction 1.
Required:
Show the effects of the events on the financial statements using a horizontal statements model like the following one. In the Cash Flow column, use the initials OA to designate operating activity. IA for investing activity. FA for financing activity, NC for net change in cash and NA to indicate accounts not affected by the event. The first event has been recorded as an example. (Do not round immediate calculations. Enter any decreases to account balances and cash outflows with a minus sign.)
| HART ATTORNEY AT LAW | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Effect of Transactions on the Financial Statements for 2016 | ||||||||||||||||
| Transaction | Assets | = | Liabilities | + | Stockholders' Equity | Income Statement | Statement of Cash Flow | |||||||||
| Cash | + | Supplies | = | Accounts Payable | + | Unearned Revenue | + | Retained Earnings | Revenue | - | Expense | = | Net Income | |||
| 1. | 16,000 | + | = | + | 16,000 | + | - | = | 16,000 | OA | ||||||
| 2. | + | = | + | + | - | = | ||||||||||
| 3. | + | = | + | + | - | = | ||||||||||
| 4. | + | = | + | + | - | = | ||||||||||
| 5. | + | = | + | + | - | = | ||||||||||
| 6. | + | = | + | + | - | = | ||||||||||
| 7. | + | = | + | + | - | = | ||||||||||
| 8. | + | = | + | + | - | = | ||||||||||
| Totals | + | = | + | + | - | = | ||||||||||
Accounting Equation:
It is the equation that helps to relay on the principle of the double-entry bookkeeping system. It helps to keep the debit balance and credit balance equal and maintain the account balance.
Answer and Explanation: 1
| Assets | = | Liabilities | + | Stockholders' Equity | Income Statement | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash | + | Supplies | = | Accounts Payable | + | Unearned Revenue | + | Retained Earnings | Revenue | - | Expense | = | Net Income | Statement of cash Flow | ||
| 1. | 16,000 | + | = | + | 16,000 | + | - | = | 16,000 | OA | ||||||
| 2. | 70,000 | + | = | + | + | 70,000 | - | = | 70,000 | 70,000 | OA | |||||
| 3. | + | 1, 150 | = | 1, 150 | + | + | - | = | ||||||||
| 4. | -1,035 | + | = | -1,035 | + | + | - | = | -1,035 | OA | ||||||
| 5. | -4,400 | + | = | + | + | -4,400 | - | = | -4,400 | FA | ||||||
| 6. | -20,300 | + | = | + | + | - | 20,300 | = | -20,300 | -20,300 | OA | |||||
| 7. | + | = | + | + | - | = | ||||||||||
| 8. | + | = | + | -16,000 | + | 16,000 | - | = | 16,000 | |||||||
| Totals | 60,265 | + | 1,150 | = | 115 | + | 0 | + | 61,300 | 86,000 | - | 20,300 | = | 65,700 | ||
Learn more about this topic:
from
Chapter 3 / Lesson 1Learn about the accounting equation. Understand what the accounting equation is, learn the elements of the basic accounting equation, and see examples.