Exercise 3-9B Supplies, unearned revenue, and the financial statements model Warren, Attorney at Law, experienced the following transactions in Year 1, the first year of operations: 1. Purchased $1,500 of office supplies on account. 2. Accepted $36,000 on February 1, Year 1, as a retainer for services to be performed evenly over the next 12 months. 3. Performed legal services for cash of $84,000. 4. Paid cash for salaries expense of $32,000. 5. Paid a cash dividend to the stockholders of $8,000. 6. Paid $1,200 of the amount due on accounts payable. 7. Determined that at the end of the accounting period, $150 of office supplies remained on hand. 8. On December 31, Year 1, recognized the revenue that had been earned for services performed in accordance with Transaction 2. Required Show the effects of the events on the financial statements using a horizontal statements model like the following one. In the Statement of Cash Flows column, use the initials OA to designate operating activ- ity, IA for investing activity, FA for financing activity, and NC for net change in cash. Use NA to indi- cate accounts not affected by the event. The first event has been recorded as an example. Balance Sheet Income Statement Stk. Assets Liabilities + Equity Statement of Cash Flows Event No. Cash + Supplies - Accts. Pay. + * Unearn. Rev. + Ret. Earn. Net Rev. Exp. Inc. 1. NA + 1,500 = 1,500 + NA + NA NA - NA = NA NA Warren, Attorney At Law Effect of Transactions on the Financial Statements for Year 1 Balance Sheet Liabilities Income Statement Statement of Acct. Unearn. S. Equity Retained Rev. Exp. Net Inc. Cash Flows +Supplies Payable Revenue Earnings 1,500 = 1,500+ NA + NA NA NA = NA NA Assets Event Cash 1. NA+ 2. 3. 4. 5. 6. 7. 8. Totals 78,800