On July 31, 2015, the general ledger of Hills Legal Services Inc. showed the following balances: Cash $4,000; Accounts Receivable $1,500; Supplies $500; Equipment $5,000; Accounts Payable $4,100; Common Shares $3,500; and Retained Earnings $3,400. During August, the following transactions occurred:
Aug. 3 Collected $1,200 of accounts receivable due from customers.
5 Received $1,300 cash for issuing common shares to new investors.
6 Paid $2,700 cash on accounts payable owing.
7 Earned fees of $6,500, of which $3,000 was collected in cash and the remainder was due on account.
12 Purchased additional equipment for $1,200, paying $400 in cash and the balance on account.
14 Paid salaries, $3,500, rent, $900, and advertising expenses, $275, for the month of August.
18 Collected the balance of the fees earned on August 7.
20 Paid dividends of $500 to shareholders.
24 Billed a client $1,000 for legal services provided.
26 Received $2,000 from Laurentian Bank; the money was borrowed on a bank loan payable that is due in six months.
27 Signed an engagement letter to provide legal services to a client in September for $4,500. The client will pay the amount owing aft er the work has been completed.
28 Received the utility bill for the month of August in the amount of $275; it is not due until September 15.
31 Paid income tax for the month, $500.
Instructions
(a) Beginning with the July 31 balances, prepare a tabular analysis of the effects of the August transactions on the expanded accounting equation.
(b) Prepare an income statement, a statement of changes in equity, and a statement of financial position for August.