Mandy Arnold opened a law office, Mandy Arnold, Attorney at Law, on July 1, 2006.

On July 31, the balance sheet showed Cash $4,000, Accounts Receivable $1,500, Supplies $500, Office Equipment $5,000. Accounts Payable $4,200, Common Stock $6,000, and Retained Earnings

$800. During August the following transactions occurred.

1. Collected $1,400 of accounts receivable.

2. Paid $2,700 cash on accounts payable.

3. Earned revenue of $7,500 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. Paid dividends of $550.

7. Received $2,000 from Standard Federal Bank—money borrowed on a note payable.

8. Incurred utility expenses for month on account $250.

Instructions

(a) Prepare a tabular analysis of the August transactions beginning with July 31 balances. The column headings should be as follows: Cash -I- Accounts Receivable + Supplies + Office Equipment = Notes Payable + Accounts Payable + Common Stock + Retained Earnings.

(b) Prepare an income statement for August, a retained earnings statement for August, and a balance sheet at August 31.