Reference no: EM132664362

Grace Main began the Main Answering Service in December 2015. The firm provides services for professional people and is currently operating with leased equipment. On January 1, 2016, the assets and liabilities of the business were:

Cash   $4,700

Accounts Receivable  7,200

Accounts Payable      900

Notes Payable         1,800

Common Stock          9,200

Retained Earnings          -

The following transactions occurred during the month of January:

1. Jan1 Paid rent on office and equipment for January, $1,100.
2. 2 Collected $4,800 on account from clients.
3. 3 Borrowed $2,300 from a bank and signed a note payable for that amount.
4. 4 Billed clients for work performed on account, $9,800.
5. 5 Paid $700 on accounts payable.
6. 6 Received invoice for January advertising, $850.
7. 7 Paid January salaries, $4,100.
8. 8 Paid January utilities, $730.
9. 9 Paid stockholders a dividend of $2,900 cash.
10. 10Purchased fax machine (on January 31) for business use, $1,700.
11. 11 Paid $35 to bank as January interest on the outstanding note payable.

Required

Problem (a) Set up an accounting equation in columnar form with the following individual assets, liabilities, and stockholders' equity accounts: Cash, Accounts Receivable, Equipment, Accounts Payable, Notes Payable, Common Stock, and Retained Earnings. Enter the January 1 balances below each item. (Note: The beginning Equipment account balance is $0.)

Problem (b) Show the impact (increase or decrease) of the January transactions on the beginning balances, and total all columns to show that assets equal liabilities plus stockholders' equity as of January 31.