Question

Problem 1-8A Analyzing effects of transactions LO C4, P1, P2, A1 Lita Lopez started Biz Consulting, a new business, and completed the following transactions during its first year of operations. a. Lita Lopez invested $62,000 cash and office equipment valued at $38.000 in the company b. The company purchased an office suite for $44,000 cash. c. The company purchased office equipment for $5,100 cash. d. The company purchased $3,000 of office supplies and $1,200 of office equipment on credit. e. The company paid a local newspaper $990 cash for printing an announcement of the office's opening. f. The company completed a financial plan for a client and billed that client $4,200 for the service. g. The company designed a financial plan for another client and immediately collected a 58,900 cash fee, h. Lita Lopez withdrew $1,500 cash from the company for personal use. The company received $3,200 cash as partial payment from the client described in transaction 1. The company made a partial payment of $600 cash on the equipment purchased in transaction d. k. The company paid $1,800 cash for the office secretary's wages for this period.

Answer 1

INSTRUCTION: IF U CONFRONT ANY DIFFICULTIES , JUST ADD THE AMOUNT THAT ARE TO BE ADDED UNDER RESPECTIVE HEAD (FOR EXAMPLE ADD AMOUNT UNDER CAPITAL ) AND LESS (SUBTRACT ) AMOUNT WHICH ARE TO BE DEDUCTED FROM RESPECTIVE HEAD. (FOR EXAMPLE LESS AMOUNT FROM CASH BALANCE)

NOTE: After each transaction balancing should be made (show net balance after making adjustments) do not get confused by closing balance which are show in the question's table

Answers:

a. Investment of 62,000 cash and office equipment 38,000 posted(Add) in to Lopez capital account.

Amount to be posted in Lopez capital = 62000+38000

= 100,000.

b. Company purchase office suite for cash 44,000. this should be deducted(less) from cash balance

Closing cash balance after purchase of office suite will be = 62,000- 44000

= 18,000.

c. company purchase office equipment for 5100 cash, this also deducted(less) from cash balance

closing cash balance after purchase of office equipment in cash of 5,100  = 18,000 (refer b answer) - 5100

= 12,900.

d.Total of purchase of office equipment 3000 office and office equipment 1200 on credit posted (Add) to Account payable

Account payable balance after this purchase will be = 3,000+1,200

= 4,200.

e. Amount paid to local new paper in cash 990 should be deducted (less) from cash balance

closing cash balance after this payment = 12,900(refer answer c)- 990

= 11,910.

f. company completed a financial plan and billed client 4,200 (on credit) ,it is revenue for the company hence  amount 4200 (posted) Add to Revenue.

g. company designed financial plan for another client and received cash fee 8,900. This amount of 8,900 should be posted (Add) to revenue.

h. Lopez withdrew cash 1,500 for personnel use this should be deducted from cash balance

i. 3200 cash received from client as partial payment deducted (less) from Account Receivable.

J. company made partial payment of 600 towards equipment purchased ,this should be deducted (less) from cash balance.

k. company paid 1800 to office secretary as wages in CASH this should be deducted(less) from Cash balance.