Ross Attorney at Law experienced the following transactions

Ross, Attorney at Law, experienced the following transactions in 2014, the first year of operations: 1. Purchased $1,500 of office supplies on account. 2. Accepted $36,000 on February 1, 2014, 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, 2014, 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 Cash Flow column, use the initials OA to designate operating activity, IA for investing activity, FA for financing activity, NC for net change in cash and NA to indicate accounts not affected by the event. The first event has been recorded as an example. (Do not round intermediate calculations. Enter any decreases to account balances and cash outflows with a minus sign.) ROSS, ATTORNEY AT LAW Effect of Transactions on the Financial Statements for 2014 Stockholders Equit Retained Earnings Assets Liabilities Income Statement Statement of Cash Flow Transaction Supplies Accounts Payable Unearned Revenue Revenue Expense Net Income 1.5001 = 1,500+ 36,000+ 84,000+ (32,000) + (8,000)+ 1,200)+ NA OA OA OA 36.000 + 84,000 32.0001 = (8,000) (1,200)+ (1,350)| = 1.3501 = (33,000)+ 3,000+ 33,000 117,000 Totals 78,800+ 1501= 300+ (8,000) 33,350 0

Solution

Transaction Cash Supplies Accounts Payable Unearned Revenue Retained earnings Revenue Expenses Net income Statement of cash flows 1 1500 1500 2 36000 36000 36000 OA 3 84000 84000 84000 84000 84000 OA 4 -32000 -32000 32000 -32000 -32000 OA 5 -8000 -8000 -8000 FA 6 -1200 -1200 -1200 OA 7 -1350 -1350 1350 -1350 8 -33000 33000 33000 33000 Total 78800 150 300 3000 75650 117000 33350 83650 78800 NC 1 Service revenue Temporary 2 Dividends Temporary 3 Common stock Permanent 4 Notes payable Permanent 5 Cash Permanent 6 Rent expense Temporary 7 Accounts Receivable Permanent 8 Utilities expense Temporary 9 Prepaid insurance Permanent 10 Retained Earnings Permanent