Jon Conlin, CPA, was an accountant and partner in a large firm. Recently, he resigned his position to open his own accounting business, which he operates as a proprietorship. The following events took place during the organizing phase of his new business and its first month of operations:

Required

1. Classify each of the preceding events as one of the following (list each date, then choose a, b, or c):

a. A business transaction to be accounted for by the business.

b. A business-related event but not a transaction to be accounted for by the business at this time.

c. A personal transaction not to be accounted for by the business.

2. Analyze the effects of the above events on the accounting equation of the business. Use a format similar to Exhibit 1–11, Panel B, Shown below.

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Jul. 4 5567 10 11 12 29 31 Conlin received $100,000 cash from his former partners in the firm from which he resigned. Conlin invested $50,000 cash in his business. The business paid office rent expense for the month of July, $3,000. The business paid $1,000 cash for letterhead stationery for the office. The business purchased office furniture on account for $7,000, promising to pay within 6 months. Conlin sold 2,000 shares of Royal Bank stock, which he had owned for several years, receiving $25,000 cash from his stockbroker. Conlin deposited the $25,000 cash from the sale of the Royal Bank shares in his personal bank account. A representative of a large construction company telephoned Conlin and told him of the company's intention to transfer its accounting work to Conlin's business. The business performed an audit for a client and submitted the bill for services, $10,000. The business expected to collect from this client within 2 weeks. Conlin withdrew $3,000 cash from the business.