Question

Problem 1-8B Analyzing transactions and preparing financial statements LO6, 7, 8 e cel ties owed by Company CHECK FIGURES: 2. Cash balance, December 31, 2020 = $43,800; 3. Profit = $5,700; Total assets = $324,200 Lily Zhang started a new business on January 1, 2020, called Zhang Consulting. She develops financial invest. ment plans for young adults. During the business's first year of operations, the following activities occurred: a. Zhang invested $120,000 cash and office equipment valued at $10,000 in the business. b. Purchased a small building for $240,000 to be used as an office. Paid $50,000 in cash and signed a note payable promising to pay the balance over several years. c. Purchased $18,000 of office equipment for cash. d. Purchased $4,000 of office supplies and $6,400 of office equipment on credit. e. Paid a local online newspaper $4,500 for an announcement that the office had opened. f. Completed a financial plan on credit and billed the client $6,000 for the service. g. Designed a financial plan for another client and collected an $8,000 cash fee. h. Zhang withdrew $5,500 cash from the company bank account to pay personal expenses. i. Zhang signed a $20,000 contract for the office to be painted in February 2021. A deposit of $6,000 will be paid on January 15, 2021. j. Received $4,000 from the client described in (f). k. Paid for the equipment purchased in (d). 1. Paid $3,800 cash for the administrative assistant's wages. Required 1. Create a table like the one presented in Exhibit 1.15, using the following headings for the columns: Cash; Accounts Receivable; Office Supplies; Office Equipment; Building; Accounts Payable; Notes Payable; and Lily Zhang, Capital. Leave space for an Explanation of Equity Transaction column to the right of the Capital column. Identify revenues and expenses by name in the Explanation column. 2. Use additions and subtractions to show the effects of the above transactions on the elements of the equa- tion. Do not determine new totals for the items of the equation after each to 70

Answer 1

1. Accounting Equation -

Zhang Consulting Accounting Equation Sr. No. Cash + Accounts Receivable + Office Supplies + + Building Accounts Payable + Office Equipment $ 10,000 Notes Payable + Explanation Lily Zang, Capital $130,000 a b $ 120,000 $ (50,000) $ (18,000) $ 240,000 $190,000 с $ $ 18,000 6,400 d $ 4,000 $ 10,400 $ (4,500) e f $ 6,000 $ (4,500) Advertising Expense $ 6,000 Consulting Service Revenue $ 8,000 Consulting Service Revenue $ (5,500) Lily Zang, Withdrawal g h i $ 8,000 $ (5,500) $ (4,000) j k $ 4,000 $ (6,400) $ (3,800) $ (6,400) $ (3,800) Wages Expense $ 43,800 + $ 2,000 + $ 4,000 + $ 34,400 + $ 240,000 = $ 4,000 + $ 190,000 + $130,200 $324,200 = $324,200

2. Income Statement -

Zhang Consulting Income Statement For Year Ended December 31, 2020 Revenue: Consulting Service Revenue $ 14,000 Operating Expenses: Wages Expense Advertising Expense Total Operating Expenses $ 3,800 $ 4,500 $ 8,300 Profit $ 5,700

3. Statement of Changes in Equity -

Zhang Consulting Statement of Changes in Equity For Year Ended December 31, 2020 Lily Zhang, Capital January 1 Investment by owner $ 130,000 Profit $ 5,700 Less: Withdrawals by owner $ (5,500) $ 200 Lily Zhang, Capital December 31 $ 130,200

4. Balance Sheet -

Zhang Consulting Balance Sheet December 31, 2020 Liabilities $ 43,800 Accounts Payable $ 2,000 Notes Payable $ 4,000 $ 34,400 Total Liabilities $ 240,000 Assets Cash Accounts Receivable Office Supplies Office Equipment Building $ 4,000 $ 190,000 $ 194,000 Equity Lily Zhang, Capital $ 130,200 Total Assets $ 324,200 Total Liabilities and Equity $ 324,200