Chapter 1, Problem 8PSA

Problem 1-8.4 Analyzing effects of transactions C4 P1 P2 A1

Lila Lope: stalled Biz Consulting; a new business, and completed die following transactions during its fust year of operations.

1. Lita Lopez invested S 70.000 cash and office equipment valued at S10,000 in the company in exchange for its common stock,
2. The company purchased an office suite lot $40,000 cash.
3. The company purchased office equipment for $15,000 cash.
4. The company purchased $ 1,200 of office supplies and $ 1,700 of office equipment on credit.
5. The company paid a local newspaper $500 cash for printing an announcement of the office’s opening,
6. The company completed a financial plan for a client and billed that client $2.800 fin the service.
7. The company designed a financial plan to another client and immediately collected a $4,000 cash fee.
8. The company paid $3,275 cash in dividends to the owner (sole shareholder).
9. The company received S 1,800 cash as partial payment from the client described in transaction/
10. The company made a partial payment of $700 cash on the equipment purchased in transaction d.
11. The company paid S 1,800 cash for the office secretary 3 wages for this period.

Required

1. Create the following table similar to the one in Exhibit 19

Assets

= Liabilities +

Equity Cash + Accounts + Office + Office + Office =

Receivable Supplies Equipment suite Accounts + Common -

Payable Stock Dividends + Revenues - Expenses

Use additions and subtractions within the table to show the dollar effects of each transaction on individual items of the accounting equation. Show new balances alter each transaction.

Check (1) Ending balance: Cash, $14,525; Expenses, $2,300; Accounts Payable, $2,200

Determine the company’s net income.

(2) Net income, $4,500.