Select your language

Suggested languages for you:
Log In Start studying!
Answers without the blur. Just sign up for free and you're in → Illustration

Q 53PGB-2b

Expert-verified
Horngren'S Financial And Managerial Accounting
Found in: Page 51

Short Answer

Abby Perry recently opened her own law office on December 1, which she operates as a corporation. The name of the new entity is Abby Perry, Attorney. Perry experienced the following events during the organizing phase of the new business and its first month of operation, December 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. Dec. 1 Sold personal investment in Nike stock, which she had owned for several years, receiving $30,000 cash. 2 Deposited the $30,000 cash from the sale of the Nike stock in her personal bank account. 3 Deposited $89,000 cash in a new business bank account titled Abby Perry, Attorney. The business issued common stock to Perry. 5 Paid $600 cash for ink cartridges for the printer. 7 Purchased computer for the law office, agreeing to pay the account, $8,000, within three months. 9 Received $2,900 cash from customers for services rendered. 15 Received bill from The Lawyer for magazine subscription, $300. (Use Miscellaneous Expense account.) 23 Finished court hearings on behalf of a client and submitted a bill for legal services, $8,000, on account. 28 Paid bill from The Lawyer. 30 Paid utilities, $900. 31 Received $2,800 cash from clients billed on Dec. 23. 31 Cash dividends of $3,000 were paid to stockholders. Requirements 1. Analyze the effects of the preceding events on the accounting equation of Abby Perry, Attorney. Use a format similar to Exhibit 1-6. 2. Prepare the following financial statements: a. Income statement. b. Statement of retained earnings. c. Balance sheet. d. Statement of cash flows

Statement of retained earnings is shown as follows:

Abby Perry, Attorney

Statement of Retained Earnings

Month Ended December 31, 2018

Retained Earnings, December 1, 2018

$0

Net income for the year

9,700

9,700

Dividends

(3,000)

Retained Earnings, December 31, 2018

$6,700

See the step by step solution

Step by Step Solution

Step-by-Step SolutionStep 1: Explanation on the statement of retained earnings

Statement of retained earnings records the change in the beginning balance of retained earnings.

Step 2: Explanation on retained earnings

Retained earnings represent the summation of profits of the prior or previous years.

Most popular questions for Business-studies Textbooks

Icon

Want to see more solutions like these?

Sign up for free to discover our expert answers
Get Started - It’s free

Recommended explanations on Business-studies Textbooks

94% of StudySmarter users get better grades.

Sign up for free
94% of StudySmarter users get better grades.