Question

Lita Lopez started Biz Consulting, a new business, and completed the following transactions during its first year of operations. a. Lita Lopez invests $70,000 cash and office equipment valued at $10,000 in the company. b. The company purchased a $150,000 building to use as an office. Biz Consulting paid $20,000 in cash and signed a note payable promising to pay the $130,000 balance over the next 10 years. c. The company purchased office equipment for $15,000 cash. d. The company purchased $1,200 of office supplies and $1,700 of office equipment on credit. e. The company paid a local newspaper $500 cash for printing an announcement of the office's opening. f. The company completed a financial plan for a client and billed that client $2,800 for the service. g. The company designed a financial plan for another client and immediately collected a $4,000 cash fee. h. Lita Lopez withdrew $3,275 cash from the company for personal use. i. The company received $1,800 cash as partial payment from the client described in transaction f. j. The company made a partial payment of $700 cash on the equipment purchased in transaction d. k. The company paid $1,800 cash for the office secretary's wages for this period.

Required:

2.

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

3.	Determine the company's net income.

Answer 1

Solution 2:

S. No.	Assets									=	Liabilities			+	Owner's Equity
																		Retained Earnings
	Cash	+	Building	+	Office Equipment	+	Office Supplies	+	Accounts Receivables	=	Note Payable	+	Accounts Payable		Captial	-	Drawings	Revenue	-	Expenditure
a.	$70,000.00				$10,000.00										$80,000.00
b.	-$20,000.00		$150,000.00								$130,000.00
c.	-$15,000.00				$15,000.00
d.					$1,700.00		$1,200.00						$2,900.00
e.	-$500.00																			$500.00
f.									$2,800.00									$2,800.00
g.	$4,000.00																	$4,000.00
h.	-$3,275.00																$3,275.00
i.	$1,800.00								-$1,800.00
j.	-$700.00												-$700.00
k.	-$1,800.00																			$1,800.00
Total	$34,525.00		$150,000.00		$26,700.00		$1,200.00		$1,000.00		$130,000.00		$2,200.00		$80,000.00		$3,275.00	$6,800.00		$2,300.00

Solution 3:

Company's Net Income = Revenue - Expenditure = $6,800 - $2,300 = $4,500