Question

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 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.

Answer 1

	Assets		Liabilites+Shareholder's equity
	Cash+	Supplies =	Accounts payable+	Unearned revenue+	Retained earnings+	Revenue -	Expense =	Net Income	Cash flows
1	36,000	NA	NA	36,000	NA	36,000	NA	36,000	36,000	OA
2	54,000	NA	NA	NA	54,000	54,000	NA	54,000	54,000	OA
3	NA	2,800	2,800	NA	NA	NA	2,800	(2,800)	(2,800)	FA
4	(2,400)	NA	(2,400)	NA	NA	NA	2,400	(2,400)	(2,400)	FA
5	(5,000)	NA	NA	NA	(5,000)	NA	5,000	(5,000)	(5,000)	NC
6	(31,000)	NA	NA	NA	(31,000)	NA	31,000	(31,000)	(31,000)	OA
7	NA	(2,600)	NA	NA	(2,600)	NA	2,800	(2,800)	(2,800)	FA
8	NA	NA	NA	(33,000)	33,000	33,000	NA	33,000	33,000	OA
Total	51,600	200	400	3,000	48,400	123,000	44,000	79,000	79,000
	51,800		51,800