Question

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

Lita Lopez invested $70,000 cash and office equipment valued at $10,000 in the company.

The company purchased an office suite for $40,000 cash.

The company purchased office equipment for $15,000 cash.

The company purchased $1,200 of office supplies and $1,700 of office equipment on credit.

The company paid a local newspaper $500 cash for printing an announcement of the office's opening.

The company completed a financial plan for a client and billed that client $2,800 for the service.

The company designed a financial plan for another client and immediately collected a $4,000 cash fee.

Lita Lopez withdrew $3,275 cash from the company for personal use.

The company received $1,800 cash as partial payment from the client described in transaction f.

The company made a partial payment of $700 cash on the equipment purchased in transaction d.

The company paid $1,800 cash for the office secretary's wages for this period.

Required:

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

2. Determine the company's net income.

Answer 1

	Asset									=	Liabilites	+	Owners equity
													Owners capital			+	Retained earning
	Cash	+	Accounts receivable	+	Office supplies	+	Office equipment	+	Office suite	=	Accounts payable		L capital	-	L Drawings		Revenue	-	Expense
a	70000						10000						80000
b	-40000								40000
c					1200		1700				2900
d
e			2800														2800
f	4000																4000
g	-3275														3275
h	1800		-1800
g	-700										-700
h	-1800																		1800
Total	30025	+	1000	+	1200	+	11700	+	40000	=	2200	+	80000	-	3275	+	6800	-	1800

2)

Income statement
Revenue	6800
Less:
wage expense	(1800)
Net Income	5000