Nico Mitchell started a new business, Financial Management, and completed the following transactions during its first year of operations.
a. N. Mitchell invests $70,000 cash and office equipment valued at $12,000 in exchange for common stock.
b. The company purchased a $141,000 building to use as an office. It paid $15,000 in cash and signed a note payable promising to pay the $126,000 balance over the next ten years.
c. The company purchased office equipment for $11,000 cash.
d. The company purchased $600 of office supplies and $1,300 of office equipment on credit.
e. The company paid a local newspaper $500 cash for printing an announcement of the office’s opening.
f. The company completed a financial plan for a client and billed that client $2,400 for the service.
g. The company designed a financial plan for another client and immediately collected a $4,000 cash fee.
h. The company paid $3,325 cash for dividends.
i. The company received $1,750 cash as a partial payment from the client described in transaction f.
j. The company made a partial payment of $700 cash on the equipment purchased in transaction d.
k. The company paid $1,750 cash for the office secretary’s wages.
1. Create a table like the one in Exhibit 1.9, using the following headings for the columns: Cash; Accounts Receivable; Office Supplies; Office Equipment; Building; Accounts Payable; Notes Payable; Common Stock; Dividends; Revenues; and Expenses.
2. Use additions and subtractions within the table created in part 1 to show the dollar effects of each transaction on individual items of the accounting equation. Show new balances after each transaction.
3. Once you have completed the table, determine the company’s net income.