Preparing an income statement, a statement of owner’s equity, and a balance sheet.
The equation below shows the transactions of Linda Carter, Attorney and Counselor of Law, during August. This law firm is owned by Linda Carter.
|
|
| Assets |
|
| = | Liab. | + |
|
| Owner’s Equity | ||||
|
|
| Accts. |
|
|
|
|
| Accts. |
| L. Carter, |
|
|
|
|
| Cash | + | Rec. | + | Supp. | + | Equip. | = | Pay. | + | Capital | 4- | Rev. | − | Exp. |
Balances, Aug. 1 | 7,200 |
| 1,800 | + | 5,400 | + | 10,000 | = | 1,200 | + | 23,200 4 |
| 0 | − | 0 |
Paid for utilities | −600 |
| ______ |
| ______ |
| ______ |
| ______ |
| ______ |
| ______ |
| + 600 |
New balances | 6,600 | + | 1,800 | + | 5,400 | + | 10,000 | = | 1,200 | + | 23,200 + |
| 0 | − | 600 |
Performed services for cash | + 6,000 |
| ______ |
| ______ |
| ______ |
| ______ |
| ______ |
| +6,000 |
| ______ |
New balances | 12,600 | + | 1,800 | + | 5,400 | + | 10,000 | = | 1,200 | + | 23,200 + |
| 6,000 | − | 600 |
Paid a creditor | −600 |
| ______ |
| ______ |
| ______ |
| −600 |
| ______ |
| ______ |
| ______ |
New balances | 12,000 | + | 1,800 | + | 5,400 | + | 10,000 | = | 600 | + | 23,200 + |
| 6,000 | − | 600 |
Performed services on credit | ______ |
| + 4,800 |
| ______ |
| ______ |
| ______ |
| ______ |
| + 4,800 |
| ______ |
New balances | 12,000 | + | 6,600 | + | 5,400 | + | 10,000 | = | 600 | + | 23,200 + |
| 10,800 | − | 600 |
Paid salaries | − 5,400 |
| ______ |
| ______ |
| ______ |
| ______ |
| ______ |
| ______ |
| +5,400 |
New balances | 6,600 | + | 6,600 | + | 5,400 | + | 10,000 | = | 600 | + | 23,200 + |
| 10,800 | − | 6,000 |
Paid telephone bill | − 600 |
| ______ |
| ______ |
| ______ |
| ______ |
| ______ |
| ______ |
| +600 |
New balances | 6,000 | + | 6,600 | + | 5,400 | + | 10,000 | = | 600 | + | 23,200 4 |
| 10,800 | − | 6,600 |
Withdrew cash for personal expenses | −1,200 |
| ______
|
| ______ |
| ______ |
| ______ |
| −1,200 |
| ______ |
| ______ |
New balances | 4,800 | + | 6,600 | + | 5,400 | + | 10,000 | = | 600 | + | 22,000 4 |
| 10,800 | − | 6,600 |
INSTRUCTIONS
Analyze each transaction carefully. Prepare an income statement and a statement of owner’s equity for the month. Prepare a balance sheet for August 31, 2010. List the expenses in detail on the income statement.
Analyze: In order to complete the statement of owner’s equity, which amount was transferred from the income statement?
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