Question

Lita Lopez started Biz Consulting, a new business, and completed the following transactions during its first year of operations.

1. Lita Lopez invested $65,000 cash and office equipment valued at $39,000 in the company.
2. The company purchased an office suite for $42,000 cash.
3. The company purchased office equipment for $5,900 cash.
4. The company purchased $3,700 of office supplies and $1,600 of office equipment on credit.
5. The company paid a local newspaper $830 cash for printing an announcement of the office’s opening.
6. The company completed a financial plan for a client and billed that client $4,700 for the service.
7. The company designed a financial plan for another client and immediately collected a $8,700 cash fee.
8. Lita Lopez withdrew $1,400 cash from the company for personal use.
9. The company received $3,700 cash as partial payment from the client described in transaction f.
10. The company made a partial payment of $800 cash on the equipment purchased in transaction d.
11. The company paid $1,700 cash for the office secretary’s wages for this period.

  
Required:

2. Enter the amount of each transaction on individual items of the accounting equation. (Reductions in account balances should be indicated with a minus sign.)

Assets

cash + Accounts receivable + office supplies + office equipment + officeSuit = accounts payable + L. Lopez Capital - L. Lopez, withdrawals + revenues - expenses

a.

b.

bal.

c.

bal.

d.

bal.

e.

bal.

f.

bal.

g.

bal.

h.

bal.

i

bal.

j.

bal.

k.

bal.

   
3. Determine the company's net income.

Answer 1

	cash	+	Accounts receivable	+	office supplies	+	office equipment	+	officeSuit	=	accounts payable	+	L. Lopez Capital	+	L. Lopez, withdrawals	+	revenues	-	expenses
a	65,000	+		+		+	39,000	+		=		+	104,000	+		+		-
Balance	65,000	+	-	+	-	+	39,000	+	-	=	-	+	104,000	+	-	+	-	-	-
b	(42,000)	+		+		+		+	42,000	=		+		+		+		-
Balance	23,000	+	-	+	-	+	39,000	+	42,000	=	-	+	104,000	+	-	+	-	-	-
c	(5,900)	+		+		+	5,900	+		=		+		+		+		-
Balance	17,100	+	-	+	-	+	44,900	+	42,000	=	-	+	104,000	+	-	+	-	-	-
d		+		+	3,700	+	1,600	+		=	5,300	+		+		+		-
Balance	17,100	+	-	+	3,700	+	46,500	+	42,000	=	5,300	+	104,000	+	-	+	-	-	-
e	(830)	+		+		+		+		=		+		+		+		-	830
Balance	16,270	+	-	+	3,700	+	46,500	+	42,000	=	5,300	+	104,000	+	-	+	-	-	830
f		+	4,700	+		+		+		=		+		+		+	4,700	-
Balance	16,270	+	4,700	+	3,700	+	46,500	+	42,000	=	5,300	+	104,000	+	-	+	4,700	-	830
g	8,700	+		+		+		+		=		+		+		+	8,700	-
Balance	24,970	+	4,700	+	3,700	+	46,500	+	42,000	=	5,300	+	104,000	+	-	+	13,400	-	830
h		+		+		+		+		=		+	(1,400)	+	1,400	+		-
Balance	24,970	+	4,700	+	3,700	+	46,500	+	42,000	=	5,300	+	102,600	+	1,400	+	13,400	-	830
i	3,700	+	(3,700)	+		+		+		=		+		+		+		-
Balance	28,670	+	1,000	+	3,700	+	46,500	+	42,000	=	5,300	+	102,600	+	1,400	+	13,400	-	830
j	(800)	+		+		+		+		=	(800)	+		+		+		-
Balance	27,870	+	1,000	+	3,700	+	46,500	+	42,000	=	4,500	+	102,600	+	1,400	+	13,400	-	830
k	(1,700)	+		+		+		+		=		+		+		+		-	1,700
Balance	26,170	+	1,000	+	3,700	+	46,500	+	42,000	=	4,500	+	102,600	+	1,400	+	13,400	-	2,530

Total Revenue	13,400
Total Expenses	2,530
Net Income	10,870

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