Question

John Smith established Cornerstone Consulting in March by contribution $20,000 cash to the business in exchange for common stock and a used vehicle valued at $8,000. Cornerstone had the following transactions in April.

April 2   Purchased $7,500 of office equipment; the company paid $1,000 cash, with the balance due in 30 days.

April 3   Paid $3,600 cash for a two‑year (or 24‑month) premium toward insurance.

April 5 Purchased $1,500 of supplies on credit.

April 10 Received an advance of $2,500 cash from a client for an investigation to be completed during April and May.

April 12 Billed clients $8,500 for services performed.

April 18 Collected $5,200 cash from clients toward their accounts billed on April 12.

April 29 Paid $860 cash for vehicle fuel used in April.

April 30 Paid $100 cash for April newspaper advertising.

April 30 Paid $4,500 cash for the wages earned by the field agent.

April 30 Billed clients $6,000 for services performed.

April 30 Declared and paid cash dividends of $8,000.

Required

Record the effects of each using the financial

statement effects template.

1. Shareholders contribute $

1. Record the effects of each of above transactions for April using the financial statement effects template (note, some accounts have balances on March 31).
2. Continue in the FSET to record the effects of the following adjustments to the following accounts: insurance expense, supplies expense, depreciation expense—vehicle, depreciation expense—equipment, and service fees earned. Supplies still available on April 30 amount to $200. Depreciation for April was $250 on the vehicle and $50 on equipment. Two‑fifth of the fee received on April 10 for the investigation was earned by April 30.

Answer 1

+ Liabilities + Earned Capital Revenue Contributed Capital + 28,000 Expenses = Net Income Cash Asset 20,000 -1,000 -3,600 Noncash Assets 8,000 7,500 3,600 1,500 6,500 1,500 2,500 2,500 8,500 8,500 8,500 8,500 -5,200 20 21 Transaction 22 Received cash and vehicle 23 Purchased Office Equipment 24 Paid prepaid Insurance 25 Purchased Supplies 26 Received cash in advance 27 Billed clients for services 28 Collected from clients 29 Paid for vehicle fuel 30 Paid for Advertising 31 Paid wages 32 Billed clients for services 33 Paid Dividends 34 Insurance expense 35 Supplies expense 36 Depreciation expense 37 Fees earned 38 Balance -860 5,200 -860 -100 -4,500 -100 860 100 4,500 -860 -100 -4,500 6,000 6,000 6,000 -8,000 - 150 -4,500 6,000 -8,000 - 150 -1,300 -300 1,000 150 1,300 -150 -1,300 -1,300 -300 300 -1,000 9,500 1,000 15,500 -300 1,000 8,290 9,640 28,150 28,000 290 7,210 39 40