Mandy Arnold opened a law office, Mandy Arnold, Attorney at Law Ltd., on July 1, 2017. On July 31, the statement of financial position showed Cash £4,000, Accounts Receivable £1,500, Supplies £500, Equipment £5,000, Accounts Payable £4,200, Share Capital-Ordinary £6,000, and Retained Earnings £800. During August, the following transactions occurred.
1. Collected £1,400 of accounts receivable due from clients.
2. Paid £2,700 cash for accounts payable due.
3. Recognized revenue of £7,900 of which £3,000 is collected in cash and the balance is due in September.
4. Purchased additional office equipment for £1,000, paying £400 in cash and the balance on account.
5. Paid salaries £3,000, rent for August £900, and advertising expenses £350.
6. Declared and paid a £450 cash dividend.
7. Received £2,000 from Standard Federal Bank; the money was borrowed on a 4-month note payable.
8. Incurred utility expenses for month on account £210.
Instructions
(a) Prepare a tabular analysis of the August transactions beginning with July 31 balances. The column headings should be as follows: Cash + Accounts Receivable + Supplies + Equipment = Notes Payable + Accounts Payable + Share Capital + Retained Earnings + Revenues − Expenses − Dividends.
(b) Prepare an income statement for August, a retained earnings statement for August, and a statement of fi nancial position at August 31, 2017.