Question

Hart, Attorney at Law, experienced the following transactions in Year 1, the first year of operations:

1. Accepted $18,700 on April 1, Year 1, as a retainer for services to be performed evenly over the next 12 months.
2. Performed legal services for cash of $64,000.
3. Purchased $1,250 of office supplies on account.
4. Paid $1,125 of the amount due on accounts payable.
5. Paid a cash dividend to the stockholders of $6,000.
6. Paid cash for operating expenses of $20,000.
7. Determined that at the end of the accounting period $125 of office supplies remained on hand.
8. On December 31, Year 1, recognized the revenue that had been earned for services performed in accordance with Transaction 1.
Required
Show the effects of the events on the financial statements using a horizontal statements model. The first event has been recorded as an example. (In the Statement of Cash Flows column, use the initials OA to designate operating activity, IA for investing activity, FA for financing activity, and NC for net change in cash. Do not round intermediate calculations. Enter any decreases to account balances and cash outflows with a minus sign. Not all cells require input.)

Answer 1

1. Cash will increase by $18,700 for the services to be rendered over the 12 months.

2. Cash will reduce by $64,000 for the legal service acquired.

3. No effect on cash as the transaction is on accounts.

4. Cash will decrease by $1,250 for the supplies purchased.

5. Cash will decrease by $6,000 for the dividends paid.

6. Cash will decrease by $20,000 due to operating expenses

7. no effect on cash

8. no effect on cash.

Step-by-step explanation:

The business transactions recorded by Hart, Attorney at Law, These transactions have impact on the cash. The inflow and outflow of cash is recorded in the cash flow statement. Transaction no. 3, 7 and 8 will have no effects on cash balance of the company.