Abraham Woody practiced accounting with a partnership for 5 years Recently he

Abraham woody practiced accounting with a partnership

This preview shows page 3 - 5 out of 6 pages.

Question 1Abraham Woody practiced accounting with a partnership for 5 years. Recently he opened his own accountingfirm, which he operates as a proprietorship. The name of the entity is Abraham Woody, CPA. Woody experiencedthe following events during the organizing phase of his new business and its first month of operations. Some ofthe events were personal and did not affect the business. Feb. 4 Received $75,000 cash from former accounting partners. 5Deposited $60,000 cash in a new business bank account titled Abraham Woody, CPA 6Paid $300 cash for letterhead stationery for the new office. 7Purchased office furniture for the office. Woody agreed to pay the account payable, $7,000, withinthree months. 10Sold personal investment in Amazon.com stock, which he had owned for several years, receiving$50,000. 11Deposited the $50,000 cash from sale of the Amazon stock in his personal bank account. 12A representative of a large company telephoned Woody and told him of the company’s intention totransfer its accounting business to Woody. 18 Finished tax hearing on behalf of a client and submitted a bill for accounting services, $5,000. Woodyexpected to collect from this client within two weeks. 25 Paid office rent $1,000. 28 Withdrew $3,000 cash from the business for personal use. Required: 1.Analyze the effects of the preceding events on the accounting equation of the proprietorship of Abraham Woody, CPA. 2.At February 28, compute: a)Total assets b)Total liabilities c)Total owner’s equity d)Net income or net loss for February. Question 2i)Sherman Lawn Service has been opened for one year and Haig Sherman, the owner, wants to know whether the business earned a net income or a net loss for the period. Mona School of Business & Management (MSBM), University of the West Indies, Mona. - 3 -
Image of page 3
First, he must identify the revenues earned and the expenses incurred during the year. What are revenues and expenses? ii)Compute the missing amount for Jupiter. You will need to prepare a statement of owner’s equity. Jupiter Company Beginning: Assets Liabilities $50,000 20,000 Ending: Assets Liabilities Owner’s Equity: Investments by ownerWithdrawals by owner IncomeStatement: Revenues Expenses $70,000 30,000 $ 45,000 $230,000? Did Jupiter earn a net income or suffer a net loss for the year? Compute the amount. Question 3Presented here are (a) the assets and liabilities of Gotcha Covered Security Systems at December 31, 20X7, and(b) the revenues and expenses of the business for the year ended on that date. 0
Image of page 4
Image of page 5

You've reached the end of your free preview.

Want to read all 6 pages?

  • '19

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture