Graff practices law with a large firm, a partnership for five year after graduating from law school.
Question:
Graff practices law with a large firm, a partnership for five year after graduating from law school. Recently, he resigned his position to open his own law office which he operates as a sole proprietorship. The name of the new entity is Graff, Attorney. Graff experienced the following events during the organizing phase of his new business and its first month of operations. Some of the events were personal and did not affect his law practice. Others were business transactions and should be accounted for by the business.
Feb. 4, Graff received $80,000 cash from his partners in the law firm from which he resigned.
Feb. 5, Graff deposited $60,000 cash in a new business bank account entitled Graff Attorney.
Feb. 6, Graff paid $300 cash for letterhead stationary for his new law office.
Feb. 7, Graff purchased office furniture for his new office. He agreed to pay the account payable, $7,000 within six months.
Feb. 10, Graff sold shares of IBM stock, which he and his wife had owned for several years.
Feb, 11, Graff deposited the $75,000 cash from sale of the IBM stock in his personal bank account.
Feb. 12, A representative of large company telephoned Graff and told him of the company’s intention to transfer its legal business to the new entity of Graff Attorney.
Feb. 18, Graff finished court hearings on behalf of a client and submitted his bill for legal services, $4,000. Graff expected to collect from this client within 2 weeks Feb.
25, Graff paid office rent $1,000
Feb, 28, Graff withdrew $2,000 cash from the business for personal living expenses
Required
1., Classify each of the proceeding events as one of the following:
a. A business transaction to be accounted for by the proprietorship of Graff, Attorney
b. A business related event but not a transaction to be accounted for by the proprietorship of Graff, Attorney
c. A personal transaction not to be accounted for by the proprietorship of Graff, Attorney.
2, Analyze the efforts of the above events on the accounting equation of the proprietorship of Graff, Attorney.
