Using the accounting equation for transaction analysis and

preparing financial statements

Aaron Woody recently opened his own accounting firm, which he operates as a

corporation. The name of the new entity is Aaron Woody, CPA. Woody

experienced the following events during the organizing phase of the new business

and its first month of operation, December 2014.

Dec 5 Woody deposited the $35,000 in a new business bank account titled Aaron

Woody, CPA. The business issued common stock to Woody.

6 Paid $200 cash for letterhead stationery for new office.

7 Purchased office furniture for the office on account, $9,500.

10 Consulted with tax client and received $3,000 for services rendered.

11 Paid utilities, $250.

12 Finished tax hearings on behalf of a client and submitted a bill for legal

services, $14,000, on account.

18 Paid office rent $1,900.

25 Received amount due from client that was billed on December 12.

27 Paid full amount of accounts payable created on December 7.

28 Cash dividends of $8,000 were paid to stockholders.

Requirements

1. Analyze the effects of the preceding events on the accounting equation of

Aaron Woody, CPA. Use a format similar to Exhibit 1-5.

2. Prepare the following financial statements:

A. Income statement

B. Statement of Retained Earnings

C. Balance Sheet