Reference no: EM131771400

Using the accounting equation for transaction analysis and preparing financial statements

Angela Petrillo recently opened her own law office, which she operates as a sole proprietorship. The name of the new entity is Angela Petrillo, Attorney. Petrillo experienced the following events during the organizing phase of the new business and its first month of operation, March 2016. Some of the events were personal and did not affect the law practice. Others were business transactions and should be accounted for by the business.

Mar. 1 Sold personal investment in Amazon stock, which she had owned for several years, receiving $31,000 cash.

2 Deposited the $31,000 cash from the sale of the Amazon stock in her personal bank account.

3 Deposited $72,000 cash in a new business bank account titled Angela Petrillo, Attorney. The business gave capital to Petrillo.

5 Paid $350 cash for ink cartridges for the printer.

7 Purchased computers for the law office, agreeing to pay the account, $5,500, within three months.

9 Received $2,500 cash from customers for services rendered.

15 Received bill from The Lawyer for magazine subscription, $340. (Use Miscellaneous Expense account.)

23 Finished court hearings on behalf of a client and submitted a bill for legal services, $18,000, on account.

28 Paid bill from The Lawyer.

30 Paid utilities, $1,300.

31 Received $1,800 cash from clients billed on Mar. 23.

31 Petrillo withdrew cash of $2,000.

Requirements

1. Analyze the effects of the preceding events on the accounting equation of Angela Petrillo, Attorney. Use a format similar to Exhibit 1-5.

2. Prepare the following financial statements:

a. Income statement.

b. Statement of owner's equity.

c. Balance sheet.