Question

The following events apply to Lewis and Harper, a public accounting firm, for the Year 1 accounting period: 1. Performed $102,000 of services for clients on account. 2. Performed $56,000 of services for cash. 3. Incurred $60,000 of other operating expenses on account. 4. Paid $23,000 cash to an employee for salary. 5. Collected $70,000 cash from accounts receivable. 6. Paid $20,000 cash on accounts payable. 7. Paid an $7,000 cash dividend to the stockholders. 8. Accrued salaries were $5.200 at the end of Year 1. Required a. Show the effects of the events on the financial statements using a horizontal financial statements model like the following one. In the Cash Flow column, use OA to designate operating activity, IA for investment activity. FA for financing activity, and NC for net change in cash. The first event is recorded as an example. (Enter any decreases to account balances with a minus sign. Not all cells in the "Statement of Cash Flows" column may require an input - leave cells blank if there is no corresponding Input needed.) LEWIS AND HARPER Horizontal Financial Statement Model For Accounting Year 1 Assets Liabilities Stockholders' Income Statement Equity Statement of Cash

Answer 1

Requirement a:

LEWIS AND HARPER
Horizontal Financial Statement Model
For Accounting Year 1
Event	Assets			=	Liabilities			+	Stockholders' Equity	Income Statement
	Cash	+	Accounts Receivable	=	Accounts Payable	+	Salaries Payable	+	Retained Earnings	Revenues	-	Expenses	=	Net income	Statement of Cash Flow
1		+	$102,000	=		+		+	$102,000	$102,000	-		=	$102,000
2	$56,000	+		=		+		+	$56,000	$56,000	-		=	$56,000	$56,000	OA
3		+		=	$60,000	+		+	($60,000)		-	$60,000	=	($60,000)
4	($23,000)	+		=		+		+	($23,000)		-	$23,000	=	($23,000)	($23,000)	OA
5	$70,000	+	($70,000)	=		+		+			-		=		$70,000	OA
6	($20,000)	+		=	($20,000)	+		+			-		=		($20,000)	OA
7	($7,000)	+		=		+		+	($7,000)		-		=		($7,000)	FA
8		+		=		+	$5,200	+	($5,200)		-	$5,200	=	($5,200)
Totals	$76,000	+	$32,000	=	$40,000	+	$5,200	+	$62,800	$158,000	-	$88,200	=	$69,800	$76,000

Requirement b:

Cash	$76,000
Accounts receivable	$32,000
Total assets	$108,000

Requirement c:

Accounts receivable

$32,000

Requirement d:

Accounts payable

$40,000

Requirement f:

Net income

$69,800

Requirement g:

Cash Sales	$56,000
Cash paid for salaries	($23,000)
Collections from customers	$70,000
Cash paid for accounts payable	($20,000)
Cash flows from operating Activities	$83,000