Rebecca Thompson started a small local law firm to provide various consulting services to clients. Her law firm experienced the following events in Year 1, its first year of operation: 1. Borrowed $80,000 cash from a local bank to assist in start-up operations. 2. On May 1, Year 1, the firm collected $30,000 cash for consulting services it agreed to provide over the next 12 months. 3. On December 31, Year 1, the firm adjusted the accounts to reflect the amount of consulting service revenue recognized in Year 1. Assume services are provided evenly throughout the 12 months. Required: Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. More specifically, record the amounts of the events into the model. The first transaction is shown as an example. Note: In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, and NC for net change in cash. Enter any decreases to account balances and cash outflows with a minus sign. Not all cells require input- leave cells blank if there is no corresponding input needed. Event Assets Number Cash 80,000 1. 2. 3. Total HW = Notes Payable Liabilities 80,000 ✦ + Balance Sheet + Unearned Revenue + Stockholders' Equity Common Stock + + + Retained Revenue Earnings Income Statement Expenses Net Income Statement of Cash Flows 80,000 FA
Rebecca Thompson started a small local law firm to provide various consulting services to clients. Her law firm experienced the following events in Year 1, its first year of operation: 1. Borrowed $80,000 cash from a local bank to assist in start-up operations. 2. On May 1, Year 1, the firm collected $30,000 cash for consulting services it agreed to provide over the next 12 months. 3. On December 31, Year 1, the firm adjusted the accounts to reflect the amount of consulting service revenue recognized in Year 1. Assume services are provided evenly throughout the 12 months. Required: Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. More specifically, record the amounts of the events into the model. The first transaction is shown as an example. Note: In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, and NC for net change in cash. Enter any decreases to account balances and cash outflows with a minus sign. Not all cells require input- leave cells blank if there is no corresponding input needed. Event Assets Number Cash 80,000 1. 2. 3. Total HW = Notes Payable Liabilities 80,000 ✦ + Balance Sheet + Unearned Revenue + Stockholders' Equity Common Stock + + + Retained Revenue Earnings Income Statement Expenses Net Income Statement of Cash Flows 80,000 FA
Chapter3: Corporations: Introduction And Operating Rules
Section: Chapter Questions
Problem 60P
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Transcribed Image Text:Rebecca Thompson started a small local law firm to provide various consulting services to clients. Her law firm experienced the
following events in Year 1, its first year of operation:
1. Borrowed $80,000 cash from a local bank to assist in start-up operations.
2. On May 1, Year 1, the firm collected $30,000 cash for consulting services it agreed to provide over the next 12 months.
3. On December 31, Year 1, the firm adjusted the accounts to reflect the amount of consulting service revenue recognized in Year 1.
Assume services are provided evenly throughout the 12 months.
Required:
Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of
cash flows. More specifically, record the amounts of the events into the model. The first transaction is shown as an example.
Note: In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, and NC
for net change in cash. Enter any decreases to account balances and cash outflows with a minus sign. Not all cells require input-
leave cells blank if there is no corresponding input needed.
Event Assets
Number
Cash
80,000
1.
2.
3.
Total
HW
=
Notes
Payable
Liabilities
80,000 ✦
+
Balance Sheet
+
Unearned
Revenue
+ Stockholders' Equity
Common
Stock
+
+
+
Retained Revenue
Earnings
Income Statement
Expenses
Net
Income
Statement of Cash
Flows
80,000 FA
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