1. Analyze the effects of each of the 16 transactions within the basic accounting equation. Be sure to indicate the names of all accounts impacted (using the following chart of accounts), and whether they increase or decrease. Use the method demonstrated in class and in your textbook on pages 53-55. Please use ruled paper and be sure to label each transaction with the date indicated. Assume that no additional entries need to be recorded for the month and ignore income taxes. Sayer CPAs' Chart of Accounts includes the following, but not all will need to be used this month:
CashShort-term InvestmentsAccounts ReceivableOffice SuppliesPrepaid InsuranceOffice EquipmentAccumulated Depreciation, EquipmentAccounts PayableNote PayableInterest PayableUnearned Service RevenueCommon StockAdditional Paid-in CapitalRetained EarningsService RevenueInvestment RevenueSalaries ExpenseRent ExpenseUtility ExpenseAdvertising ExpenseSupplies ExpenseInsurance ExpenseDepreciation ExpenseInterest ExpenseDividends
On August 1, 2021, Lia Sayer and her brother started their own accounting firm, Sayer CPAs, Inc. in Norwood, Ohio. The following business transactions occurred during the first month: Aug. 2: Issued 1,000 shares of stock in exchange for $15,000 received from stockholders. The stocks par value is $5 per share, and the remainder is in excess of par value. Aug. 3: Paid $600 for rent for office space for the month of August. Aug. 4: Purchased office equipment for $4.000, paying half in cash and the other half on account. Aug. 6: Paid $150 to run advertisements in this week's Xavier Newswire and Cincinnati Enquirer. Aug. 10: Received $2.400 for accounting services performed on this date. Aug. 12: Performed $6,200 of accounting services on account. Aug. 13: Borrowed $5,000 from 5/3 Bank under the terms of a 36-month note. All principal and interest will be paid on the maturity date. Aug. 13: Paid $2,400 for employee salaries. Aug. 16: Purchased $500 of supplies on account. None of the supplies were used yet during August. Aug. 23: Collected $1,200 from clients for the services performed on August 12th. Aug. 27: Paid a $200 dividend. Aug. 28: Paid for the supplies that were purchased on August 16th Aug. 31: Paid $2,400 for employee salaries. Aug. 31: Recorded an adjustment to accrue utilities for the month of August, estimated at $190, to be paid in mid-September. Aug. 31: Recorded an adjustment to recognize $40 of depreciation on the equipment. Aug. 31: Recorded an adjustment to accrue $10 of interest on the 5/3 Bank note. Prepare a journal, presenting a journal entry for each of the 16 transactions. Your journal should be properly formatted according to the example in your textbook on page 59. Please use ruled paper and be sure to label each journal entry with the date used in your analysis. (8 points) Prepare a ledger that displays a T-account for each account, and post the effects of each journal entry to the proper T-accounts. Keep in mind that all of the T-accounts will have a beginning balance of zero since this is a newly formed entity. Use the template provided in class (also available in Canvas), and be sure to label each posting with the date used in the journal. (8 points) Prepare a trial balance in proper form, showing the balances at the end of August for each of the accounts in your ledger. Also be sure to show column totals. Please use ruled paper and follow the format presented in your textbook on page 68.3 points) Prepare an Income Statement* for Sayer CPAs for the month ended August 31, 2021. (5 points) Prepare a Statement of Stockholders' Equity* for Sayer CPAs for the month ended August 31, 2021. (4 points) Please use the following column headings in this statement: Contributed Capital, Retained Earnings, and Total Stockholders' Equity. (Keep in mind that the beginning balances on this statement will be zero since this is a newly formed entity. Also note that Contributed Capital = Common Stock + Additional Paid-in Capital.) Prepare a Classified Balance Sheet* for Sayer CPAs at August 31, 2021. (4 points)
