Hart, Attorney at Law, experienced the following transactions in Year 1, the fir

Question

Hart, Attorney at Law, experienced the following transactions in Year 1, the first year of operations:

1. Accepted $16,200 on April 1, Year 1, as a retainer for services to be performed evenly over the next 12 months.

2. Performed legal services for cash of $63,000.

3. Purchased $1,300 of office supplies on account.

4. Paid $1,170 of the amount due on accounts payable.

5. Paid a cash dividend to the stockholders of $5,400.

6. Paid cash for operating expenses of $20,200.

7. Determined that at the end of the accounting period $95 of office supplies remained on hand.

8. On December 31, Year 1, recognized the revenue that had been earned for services performed in accordance with Transaction 1.

Show the effects of the events on the financial statements using a horizontal statements model like the following one. In the Statement of Cash Flows column, use the initials OA to designate operating activity, IA for investing activity, FA for financing activity, NC for net change in cash and NA to indicate accounts not affected by the event. The first event has been recorded as an example. (Do not round intermediate calculations. Enter any decreases to account balances and cash outflows with a minus sign.)

Return to question HART, ATTORNEY AT LAW Effect of Transactions on the Financial Statements for Year 1 Balance Sheet Income Statement Stockholders Net Income Transaction Assets Liabilities RevenueExpense Equ Accounts Payable +Unearned Revenue Retained Earnings Cash 16,200 + 63,000+ +Supplies 16,200 + 6,000 63,000 63,000 1,300 (1,170)+ (5,400) + (20.200)+ 1,170)+ (5400) 20,200) 1,205) 16,200 52,395 20,200(20,200) 1,205) 16,200 57,795 (1,205) 1.205 = 16,200 79,200 (16,200) X+ Totals 52,430 95 130 + 21,405 Prey 4 of 4 Next

Explanation / Answer

Answer

Per month = 16200 / 12 = $ 1,350

No. of months from 1 April to 31 Dec= 9 months.

Amount of Revenue earned = $ 1,350 x 9 months = $ 12,150

Replace $ 16,200 with $ 12,150 and you’ll be good to go.

Retained Earnings = $ 12,150

Revenues = $ 12,150

Net Income = $ 12,150

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