Accounting in Action

Judi Salem opened a law office on July 1, 2018. On July 31, the balance sheet showed Cash $5,000, Account Receivable $1,500, Supplies $500, Equipment $6,000, Accounts Payable $4,200 and Owner's Capital $8,800. During August, the following transactions occurred:
  1. Collected $1,200 of accounts receivable.
  2. Paid $2,000 cash on accounts payable.
  3. Recognized revenue of $7,500 of which $3,000 is collected in cash and the balance is due in September
  4. Purchased additional equipment for $2,000, paying $400 in cash and the balance on account.
  5. Paid Salaries $2,500 rent for August $900, and advertising expenses $400.
  6. Withdrew $700 cash for personal use
  7. Received $2,000 from Standard Federal Bank--money borrowed on a note payable.
  8. Incurred utility expenses for month on account $270.

Instructions

  1. Prepare a tabular analysis of the August transactions beginning with July 31 balances. The column headings should be as follows: Cash + Accounts Receivable + Supplies + Equipment = Notes Payable + Accounts Payable + Owner's Capital - Owner's Drawings + Revenues - Expenses.
  2. Prepare an income statement for August, an owner's equity statement for August, and a balance sheet at August 31.

Solution

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