Question

Question b Frank Petronick decided to start an accounting practice after graduation from university. The following is a list of events that occurred concerning Frank's practice during June 2021, the first month of operations. June 1 After shopping around, Frank found an office to lease and signed a lease agreement. The lease calls for a payment of $1,061 rent per month. 4 Borrowed $3,840 from his grandmother so that he could buy some office furniture for his new office. 4 Deposited the $3,840 plus $542 of his own cash in a new bank account at BMO under the name Petronick Accounting Services. 6 Paid the landlord the first month's rent. 8 Purchased furniture for $3,390 on account. 11 Moved into the office and obtained the first assignment from a client to prepare year-end financial statements for $1,855. 15 Performed the work on the assignment and sent an invoice to the customer for $1,855. 15 Paid half of the amount of the purchase of furniture. 18 Purchased supplies on account for $337. 26 Paid for Internet services, $45 cash. 28 Collected $897 of the June 15 billing to the customer. 30 Withdrew cash from the business of $136 for personal expenses. (a) Prepare a tabular analysis of the effects of the above transactions on the accounting equation. (If a transaction causes a decrease in Assets, Liabilities or Owner's Equity, place a negative sign (or parenthe Equity item that was reduced. See Illustration 1-13 for example. Record entries in the order presented in the problem.) Assets Liabilities Accounts Payable Accounts Receivable Transaction F.P D Cash Supplies F. Petronick, Capital Furniture = June 1 $ $ $ 4 4

part b )

From an analysis of the owner's equity, calculate the account balance in F. Petronick, Capital, at June 30.

Answer 1

Answer:

a) Prepare tabular analysis as follows:

Assets

Liabilities

Owners' Equity

Cash

+

Accounts Receivable

+

Supplies

+

Furniture

=

Accounts Payable

+

Notes Payable

+

Owners' Equity

−

Owners' Drawings

+

Revenue

−

Rent Expense

−

Internet Expense

June 1

N/A

June 4

$3840

=

$3840

June 4

$542

=

$542

June 6

($1061)

=

($1061)

June 8

$3390

=

$3390

June 11

N/A

June 15

$1855

=

$1855

June 15

($1695)

=

($1695)

June 18

$337

=

$337

June 26

($45)

=

($45)

June 28

$897

($897)

=

June 30

($136)

=

($136)

$2342

$958

$337

$3390

=

$2032

$3840

$542

($136)

$1855

($1061)

($45)

$7027

=

$7027

Note: the events on June 1 and 11 are not economic events of business and hence ignored.

b) Calculate the account balance as follows:

PA Services
Statement of Owners' Equity
For the Month Ended June 30, 2021
Initial investment	$542
Add: Net income	$749
Less: Owners' drawings	($136)
Capital at June 30	$1155

Note: Calculate net income as follows:

PA Services
Income statement
For the Month Ended June 30, 2021
Service revenues	$1855
Less: Operating expenses
Rent expense	$1061
Internet expense	$45
Net income	$749