Question

Prepare an accounting equation from the list of transactions that has been provided.

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

1. Lita Lopez invested $64,000 cash and equipment valued at $32,000 in the company in exchange for its
   common stock.
2. The company purchased a building for $43,000 cash.
3. The company purchased equipment for $5,800 cash.
4. The company purchased $3,900 of supplies and $1,800 of equipment on credit.
5. The company paid $930 cash for advertising expenses.
6. The company completed a financial plan for a client and billed that client $4,600 for the service.
7. The company designed a financial plan for another client and immediately collected a $8,600 cash fee.
8. The company paid $1,600 cash in dividends to the owner (sole shareholder).
9. The company received $3,600 cash as partial payment from the client described in transaction f.
10. The company made a partial payment of $900 cash on the equipment purchased in transaction d.
11. The company paid $2,400 cash for the secretary’s wages for this period.

  
Required:
1. Enter the amount of each transaction on individual items of the accounting equation.
2. Determine the company's net income.

Answer 1

Separate heads are prepared under the different heads of the accounting equation that has been prepared. These heads are based on the different accounts that have been created as per the transactions provided.

For the Net Income, all the expenses provided, namely Advertisement Expense and Wages Expense are deducted from the Net Income of the business.

Net Income: $9870