ACCOUNTING

Exercise 2-19A on page 111

Exercise 2-19A Supplies, unearned revenue, and the financial statements model

Hart, Attorney at Law, experienced the following transactions in 2016, the first year of

operations:

1. Accepted $36,000 on April 1, 2016, as a retainer for services to be performed evenly over the

next 12 months.

2. Performed legal services for cash of $54,000.

3. Purchased $2,800 of office supplies on account.

4. Paid $2,400 of the amount due on accounts payable.

5. Paid a cash dividend to the stockholders of $5,000.

6. Paid cash for operating expenses of $31,000.

7. Determined that at the end of the accounting period $200 of office supplies remained on

hand.

8. On December 31, 2016, recognized the revenue that had been earned for services performed

in accordance with Transaction 1.

Required

Show the effects of the events on the financial statements using a horizontal statements model

like the following one. In the Cash Flows column, use the initials OA to designate operating activity, IA for investing activity, FA for financing activity, and NC for net change in cash. Use NA

to indicate accounts not affected by the event. The first event has been recorded as an example.

Event

Assets 5 Liabilities 1 Stk. Equity

No. Cash 1 Supplies 5 Accts. Pay 1 Unearn. Rev. 1 Ret. Earn. Rev. 2 Exp. 5 Net Inc. Cash Flow

1. 36,000 1 NA 5 NA 1 36,000 1 NA NA 2 NA 5 NA 36,000 OA

TABLE PROVIDED BELOW

 

 

 

Hart Attorney At Law

Effect of Transactions on the Financial Statements for 2016

 
    Balance Sheet   Income Statement   Statement of
    Assets = Liabilities + S. Equity   Rev Exp. = Net Inc.   Cash Flows
 

No.

   

Cash

 

+

 

Supplies

 

=

Accts. Payable  

+

Unearn. Rev.  

+

Retained

Earnings

               
1.     +   =   +   +         =      
2.     +   =   +   +         =      
3.     +   =   +   +         =      
4.     +   =   +   +         =      
5.     +   =   +   +         =      
6.     +   =   +   +         =      
7.     +   =   +   +         =      
8.     +   =   +   +         =      
Totals   51,600 + 200 = 400 + 9,000 + 42,400   81,000 33,600 = 47,400   51,600  NC
                                     

 

 

 

 

 

 

 

 

 

 

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