Leida Cruz, a recent law school graduate, was penniless on December 25, 20X0.

1. On December 26, Cruz inherited an enormous sum of money.

2. On December 27, she placed $60,000 in a business checking account for her unincorporated law practice.

3. On December 28, she purchased a home for a down payment of $120,000 plus a home mortgage payable of $230,000.

4. On December 28, Cruz agreed to rent a law office. She provided a $1,000 cash damage deposit (from her business cash), which will be fully refundable when she vacates the premises. This deposit is a business asset. She will make rental payments in advance on the first business day of each month. (The first payment of $700 is not to be made until January 2, 20X1.)

5. On December 28, Cruz purchased a computer for her law practice for $2,000 cash, plus a $3,000 promissory note due in 90 days.

6. On December 28, she purchased legal supplies for $1,000 on open account.

7. On December 28, Cruz purchased office furniture for her practice for $4,000 cash.

8. On December 29, Cruz hired a legal assistant receptionist for $380 per week. She was to report to work on January 2.

9. On December 30, Cruz’s law practice lent $3,000 cash in return for a 1-year note from Sam Whitman, a local candy store owner. Whitman had indicated that he would spread the news about the new lawyer.

Required

1. Use the format demonstrated in Exhibit to analyze the transactions of Leida Cruz, lawyer. To avoid crowding, put your numbers in thousands of dollars. Do not restrict yourself to the account titles in Exhibit.

2. Prepare a balance sheet as of December 31, 20X0.

Transcribed Image Text:

Description of Transactions Assets Liabilities Owner's Equity Lopez, Cash nventory +EquipmentPayable Payable Capital Merchandise Store Note Accounts (1) Initial investment (2) Loan from ban!k (3) Acquire store equipment +400.000 +400.000 +100,000 = +100,000 15,000 (4) Acquire inventory for cash-120,000 for cash +15,000 = +120,000 +10,000 +30,000 (5) Acquire inventory on credit +10,000 (6) Acquire inventory for cash plus credit (7) Sale of equipment (8) Return of inventory -10,000 +1,000 +20,000 -1,000 acquired on January 6 (9) Payment to creditor Balance ,January 12, 20X2 -800 4,000 352,000 + -800 -4,000 25, 200+ 159,200 + 14.000 100.000 + 400.000 = 525,200 525,200