Question

• 	Assets			=	Liabilities	+	Stockholder's Equity
  	Cash	+	Land		Notes Payable		Common Stocks		Retained Earnings	Affected Account
  Balances	$     2,000	+	$ 12,000	=	$                  -	+	$                6,000	+	$                    8,000
  1	$   30,000	+		=		+	$              30,000	+
  2		+		=		+		+
  3		+		=		+		+
  4		+		=		+		+
  5		+		=		+		+
  6		+		=		+		+
  7		+		=		+		+
  8		+		=		+		+
  Totals		+		=		+		+

  Company transactions during the accounting period:
  1. Acquired cash from common stock issuance. $30,000
  2. Paid cash a portion of land. $12,000
  3. Borrowed cash to pay later. $10,000
  4. Provided professional services that wer paid in cash. $20,000
  5. Paid the rent expense in cash. $1,000
  6. Paid the operating expenses in cash. $15,000
  7. Paid the dividends to the stockholders in cash. $2,000
  8. Determined the fair market value of the portion of land has increased. $12,700

  Actions to take:
  1. Register the transactions.
  2. Identify the accounts affected.
  3. Prepare the Income Statement
  4. Prepare the Statement of Changes in Stockholder's Equity
  5. Prepare the Balance Sheet

Answer 1

Requirement 1&2:

	Assets				Liabilities	+	Stockholders' Equity
	Cash	+	Land	=	Notes payable	+	Common stock	+	Retained earnings	Affected account
Balances	$2,000	+	$12,000	=		+	$6,000	+	$8,000
1	$30,000	+		=		+	$30,000	+
2	($12,000)	+	$12,000	=		+		+
3	$10,000	+		=	$10,000	+		+
4	$20,000	+		=		+		+	$20,000	Service revenue
5	($1,000)	+		=		+		+	($1,000)	Rent expense
6	($15,000)	+		=		+		+	($15,000)	Operating expenses
7	($2,000)	+		=		+		+	($2,000)	Dividends
8		+		=		+		+
Totals	$32,000	+	$24,000	=	$10,000	+	$36,000	+	$10,000

Requirement 3:

Income Statement
Revenues:
Service revenue		$20,000
Expenses:
Rent expense	$1,000
Operating expenses	$15,000
Total expenses		$16,000
Net income		$4,000

Requirement 4:

Statement of retained earnings
Retained earnings, beginning	$8,000
Add: Net income	$4,000
	$12,000
(Less): Dividends	($2,000)
Retained earnings, ending	$10,000

Requirement 5:

Balance Sheet
Assets		Liabilities
Cash	$32,000	Notes payable	$10,000
Land	$24,000
		Stockholders' equity:
		Common stock	$36,000
		Retained earnings	$10,000
Total assets	$56,000	Total liabilities and stockholders' equity	$56,000