Lita Lopez started Biz Consulting, a new business, and completed the following transactions during its first year of operations. Lita Lopez invested $70,000 cash and equipment valued at $10,000 in the company in exchange for its common stock. The company purchased a building for $40,000 cash. The company purchased equipment for $15,000 cash. The company purchased $1,200 of supplies and $1,700 of equipment on credit. The company paid $500 cash for advertising expenses. The company completed a financial plan for a client and billed that client $2,800 for the service. The company designed a financial plan for another client and immediately collected a $4,000 cash fee. The company paid $3,275 cash in dividends to the owner (sole shareholder). The company received $1,800 cash as partial payment from the client described in transaction f. The company made a partial payment of $700 cash on the equipment purchased in transaction d. The company paid $1,800 cash for the secretary's wages for this period. Required:

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anthougo anthougo · Answer 1 · 2022-09-11T15:29:27-04:00

1. The effects of each transaction on the individual items of the accounting equation are as follows:

Cash $70,000 + (40,000) + (15,000) + (500) + 4,000 + (3,275) + 1,800 + (700) + (1,800) = $14,525

Accounts Receivable $2,800 - 1,800 = $1,000

Office Supplies $1,200

Equipment $10,000 + 15,000 + 1,700 = $26,700

Office Suites $40,000

Accounts Payable $1,200 + $1,700 + (700) = $2,200

Capital–L. Lopez $70,000 + 10,000 = $80,000

Dividends $3,275

Revenues $2,800 + 4,000 = $6,800

Advertising Expenses $500

Wages Expense $1,800

Total $2,300

2. The company's Net income is $4,500.

Net income = Revenue - Expenses

= $2,300 ($6,800 - $2,300).

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1. Use additions and subtractions within the table to show the dollar effects of each transaction on individual items of the accounting equation.

2. Determine the company’s net income.