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46PGA_2a

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Horngren'S Financial And Managerial Accounting
Found in: Page 47

Short Answer

Annette Pachelo recently opened her own law office on March 1, which she operates as a corporation. The name of the new entity is Annette Pachelo, Attorney. Pachelo experienced the following events during the organizing phase of the new business and its first month of operation, March 2018. Some of the events were personal and did not affect the law practice. Others were business transactions and should be accounted for by the business. Mar. 1 Sold personal investment in Amazon stock, which she had owned for several years, receiving $35,000 cash. 2 Deposited the $35,000 cash from the sale of the Amazon stock in her personal bank account. 3 Deposited $73,000 cash in a new business bank account titled Annette Pachelo, Attorney. The business issued common stock to Pachelo. 5 Paid $700 cash for ink cartridges for the printer. 7 Purchased computer for the law office, agreeing to pay the account, $5,000, within three months. 9 Received $2,800 cash from customers for services rendered. 15 Received bill from The Lawyer for magazine subscription, $400. (Use Miscellaneous Expense account.) 23 Finished court hearings on behalf of a client and submitted a bill for legal services, $10,000, on account. 28 Paid bill from The Lawyer. 30 Paid utilities, $1,200. 31 Received $3,300 cash from clients billed on March 23. 31 Cash dividends of $5,500 were paid to stockholders. Requirements Prepare the following financial statements: a. Income statement.

The net income of the company is $11,200.

See the step by step solution

Step by Step Solution

Calculation of net income

Net income is calculated as follows:

Explanation of net income

In this situation, when the total revenues are greater than the total expenses, it results in net income.

Income statement is shown as follows:

Annette Pachelo, Attorney

Income Statement

Month Ended March 31, 2018

Revenues

Service Revenue

$12,800

Expenses

Miscellaneous Expense

400

Utilities Expense

1,200

Total Expenses

(1,600)

Net Income

$11,200

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