Computing assest, laibilities, owners equity & netincome
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Lynn Greenspan practiced law with a partnership for 10years. Recently she opened her own law office, which she operates as a proprietorship. The name of the new entity is Lynn Greenspan, Attorney. Greenspan experienced the following events during the organizing phase of the new business and its first month of operation. 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.
July 1- Sold 1,000 shares of Eastman Kodak stock, which she had owned for several years, receiving $68,000 cash.
July 2- Deposited the $68,000 cash from sale of the Eastman Kodak stock in her personal bank account.
July 3- Received $170,000 cash from former law partners.
July 5- Deposited $100,000 cash in a new business bank account titled Lynn Greenspan, Attorney.
July 6- A representative of a large company telephoned Greenspan and told her of the company's intention to transfer it's legal business to Lynn Greenspan, Attorney.
July 7- Paid $500 cash for letterhead stationery for the new law office.
July 9- Purchased office furniture for the law office, agreeing to pay the account, $9,500, within 3 months.
July 23- Finished court hearings on behalf of a client and submitted her bill for legal services, $3,000.
July 30- Paid office rent, $1,900.
July 31- Withdrew $10,000 cash from the business for personal use.
1.- Analyze the effects of the preceding events on the accounting equation of the proprietorship of Lynn Greenspan, Attorney.
2. At July 31, compute the business's
a. Total assest's
b. Total Liabilities
c. Total owner's equities
d. Net income or net loss for the month
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Solution Summary
1 Lynn Greenspan, Attorney
Assets - Liabilities = Capital + Income - Expenses
Cash Furniture Accounts receivable Notes payable Capital Income Expenses
5-Jul $100,000 $100,000
7-Jul $(500) $500
9-Jul $9,500 $(9,500)
23-Jul $3,000 $3,000
30-Jul $(1,900) $1,900
31-Jul $(10,000) $(10,000)
$87,600 $9,500 $3,000 $(9,500) $90,000 $3,000 $2,400
2
a Total assets $100,100
b Total liabilities $9,500
c Total owner's equity $90,000
d Net income for the month $600
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