Deriving Financial Statement Implications: [5006] For each of the ten descriptions below, indicate the proper effect on the following financial statement elements: total assets, total liabilities, owners equity, revenues, gains, expenses, losses and income. Treat each description as if the financial statements [balance sheet and income statement] were to be prepared immediately after each of the described transactions occur. The firm provides consulting services for clients. Place the proper dollar amount in the appropriate space and arrows up or down to indicate the effect on the financial statement element. The items are independent unless otherwise noted.

The firm was formed on January 1, Year 1 when four individuals each invested $10,000 cash. One individual also invested a truck worth $20,000 and loaned the firm $15,000.

__________Total Assets __________Revenues ________Total Liabilities __________Gains ______Owners Equity __________Expenses __________Losses __________Income

The firm performed $600,000 of consulting services for clients in Year 1, collecting $380,000 from clients. Included in the $380,000 is $30,000 paid by one client for services that would not be performed until Year 2.

__________Total Assets __________Revenues __________Total Liabilities __________Gains __________Owners Equity __________Expenses __________Losses __________Income

The salaries for the four consultants who performed the services in item #2 were $50,000 each. These consultants had been employed for all of Year 1. 80% of this total was paid to the consultants in Year 1.

__________Total Assets __________Revenues __________Total Liabilities __________Gains __________Owners Equity __________Expenses __________Losses __________Income

Incidental expenses of $2,000 were paid for as the expenses were incurred. Additionally, $8,000 was charged on credit cards for items consumed in Year 1.

__________Total Assets __________Revenues __________Total Liabilities __________Gains __________Owners Equity __________Expenses __________Losses __________Income

The firm paid $4,000 for insurance in Year 1 but only used up 30% of that amount during the year.

__________Total Assets __________Revenues __________Total Liabilities __________Gains __________Owners Equity __________Expenses __________Losses __________Income

Deriving Financial Statement Implications (continued): [5006] On May 31, Year 1, the firm leased office space for a three-year period at a monthly rate of $8,000 per month. The contract requires annual payments of $96,000 on May 31 of Year 2, Year 3 and Year 4. Show the effect of signing this contract on the financial statement elements.

__________Total Assets __________Revenues __________Total Liabilities __________Gains __________Owners Equity __________Expenses __________Losses __________Income

The firm bought Land in June Year 1 paying $60,000 cash.

__________Total Assets __________Revenues __________Total Liabilities __________Gains __________Owners Equity __________Expenses __________Losses __________Income

Half of the Land was sold for $45,000 in July Year 1.

__________Total Assets __________Revenues __________Total Liabilities __________Gains __________Owners Equity __________Expenses __________Losses __________Income

The remaining half of this Land was sold in November Year 1 for $20,000.

__________Total Assets __________Revenues __________Total Liabilities __________Gains __________Owners Equity __________Expenses __________Losses __________Income

In Year 2, the firm collected $650,000 from clients while performing $400,000 of services for them. The $30,000 that had been paid in advance during Year 1 [Item #1] is included in the $400,000. Assume Accounts Receivable balance does not change in Year 2.

__________Total Assets __________Revenues __________Total Liabilities __________Gains __________Owners Equity __________Expenses __________Losses __________Income