Brief Exercise $2-7($Algo$)$ Unearned items on financial statements LO $2-7$

Rebecca Thompson started a small local law firm to provide various consulting services to clients. Her law firm experienced the

following events in Year $1,$ its first year of operation:

Borrowed $$78,600$ cash from a local bank to assist in start$-$up operations.

On May $1,$ Year $1,$ the firm collected $$35,100$ cash for consulting services it agreed to provide during the coming year.

On December $31,$ Year $1,$ the firm adjusted the accounts to reflect the amount of consulting service revenue recognized in Year $1.$

Required:

Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of

cash flows. More specifically, record the amounts of the events into the model. Also, in the Statement of Cash Flows column, classify

the cash flows as operating activities $($OA$),$ investing activities $($IA$),$ or financing activities $($FA$).$ The first transaction is shown as an

example.

Note: Enter any decreases to account balances and cash outflows with a minus sign. Leave cells blank if no input is needed.

Answer is complete but not entirely correct.