r Consulting began operations and completed the following transactions during the first half of December:
Dec 2
Received $18,000 cash and gave capital to Draper.
2
Paid monthly office rent, $550.
3
Paid cash for a Dell computer, $1,800. This equipment is expected to remain in service for five years.
4
Purchased office furniture on account, $4,200. The furniture should last for five years.
5
Purchased supplies on account, $900.
9
Performed consulting service for a client on account, $1,500.
12
Paid utility expenses, $250.
18
Performed service for a client and received cash of $1,100.Analyze the effects of Draper Consulting's transactions on the accounting equation. Use the format of Exhibit 1-6, and include these headings: Cash; Accounts receivable; Supplies; Equipment; Furniture; Accounts payable; and Draper, capital.
2. Prepare the income statement of Draper Consulting for the month ended December 31, 2012.
3. Prepare the statement of owner's equity for the month ended December 31, 2012.
4. Prepare the balance sheet at December 31, 2012. (Horngren 57)
Horngren, Charles T., Walter T. Harrison Jr., and M. Suzanne Oliver. Accounting for Ashford University, 9th Edition. Pearson Learning Solutions. <vbk:9781256056621#outline(11.17.6)>.
To analyze the effects of Draper Consulting's transactions on the accounting equation, you will need to use the format of Exhibit 1-6, which includes the following headings: Cash; Accounts receivable; Supplies; Equipment; Furniture; Accounts payable; and Draper, capital.
Here's how you can determine the effects of each transaction on the accounting equation:
1. Dec 2: Received $18,000 cash and gave capital to Draper.
- Increase Cash by $18,000 (Dr)
- Increase Draper, capital by $18,000 (Cr)
- No effect on other accounts
2. Dec 2: Paid monthly office rent, $550.
- Decrease Cash by $550 (Dr)
- No effect on other accounts
3. Dec 3: Paid cash for a Dell computer, $1,800. This equipment is expected to remain in service for five years.
- Decrease Cash by $1,800 (Dr)
- Increase Equipment by $1,800 (Cr)
- No effect on other accounts
4. Dec 4: Purchased office furniture on account, $4,200. The furniture should last for five years.
- Increase Furniture by $4,200 (Dr)
- Increase Accounts payable by $4,200 (Cr)
- No effect on other accounts
5. Dec 5: Purchased supplies on account, $900.
- Increase Supplies by $900 (Dr)
- Increase Accounts payable by $900 (Cr)
- No effect on other accounts
6. Dec 9: Performed consulting service for a client on account, $1,500.
- Increase Accounts receivable by $1,500 (Dr)
- Increase Consulting revenue by $1,500 (Cr)
- No effect on other accounts
7. Dec 12: Paid utility expenses, $250.
- Decrease Cash by $250 (Dr)
- No effect on other accounts
8. Dec 18: Performed service for a client and received cash of $1,100.
- Increase Cash by $1,100 (Dr)
- Increase Consulting revenue by $1,100 (Cr)
- No effect on other accounts
To prepare the income statement of Draper Consulting for the month ended December 31, 2012, you will need to list all the revenues and expenses incurred during the month and calculate the net income. Revenues include consulting revenue, and expenses include office rent and utility expenses.
To prepare the statement of owner's equity for the month ended December 31, 2012, you will need to calculate the beginning capital (if not provided), add any additional capital contributed by the owner, add net income (from the income statement), and subtract any withdrawals made by the owner. The final amount will be the ending capital.
To prepare the balance sheet at December 31, 2012, you will need to list all the assets, liabilities, and owner's equity accounts. Assets include Cash, Accounts receivable, Supplies, Equipment, and Furniture. Liabilities include Accounts payable. Owner's equity includes Draper, capital calculated from the statement of owner's equity.
Note: The calculations for the income statement, statement of owner's equity, and balance sheet will depend on the specific amounts provided in the transactions.