Linda McLean is an architect and was a partner with a large firm, a partnership, for 10 years after graduating from university. Recently she resigned her position to open her own architecture office, which she operates as a proprietorship. The name of the new entity is McLean Design.

McLean recorded the following events during the organizing phase of her new business and its first month of operations. Some of the events were personal and did not affect the practice of architecture. Others were business transactions and should be accounted for by the business.

July 1 McLean sold 1,000 shares of Canadian Tire stock, which she had owned for several years, receiving $60,000 cash from her stockbroker.

2 McLean deposited the $60,000 cash from the sale of the Canadian Tire shares into her personal bank account.

3 McLean received $100,000 cash from her former partners in the architecture firm from which she resigned.

5 McLean deposited $80,000 into a bank account in the name of McLean Design.

5 McLean Design paid office rent for the month of July, $4,000.

6 A representative of a large real estate company telephoned Linda McLean and told her of the company's intention to transfer its design business to her business, McLean Design.

7 McLean Design paid $3,000 cash for office supplies, including letterhead and stationery.

9 McLean Design purchased office furniture on account for $10,000, promising to pay in three months.

23 McLean Design finished design work for a client and submitted the bill for design services, $12,000. It expects to collect from this client within one month.

31 McLean withdrew $5,000 for personal use.

Required

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

a. A business transaction to be accounted for by the business, McLean Design.

b. A business-related event but not a transaction to be accounted for by McLean Design.

c. A personal transaction not to be accounted for by McLean Design.

2. Analyze the effects of the above events on the accounting equation of McLean Design.

Use a format similar to Exhibit 1-9, Panel B, on page 22.