John Arrow is an architect who operates his own business. The accounts and transactions for the business follow.
(1) Analyze the transactions for January 2016. Record each in the appropriate T accounts. Use plus and minus signs in front of the amounts to show the increases and decreases. Identify each entry in the T account by writing the letter of the transaction next to the entry.
(2) Determine the account balances. Prepare a trial balance, an income statement, a statement of owner’s equity, and a balance sheet.
John Arrow, Capital
John Arrow, Drawing
a. John Arrow invested $40,000 in cash to start the business.
b. Paid $4,000 for advertisements in a design magazine.
c. Purchased office furniture for $4,600 in cash.
d. Performed services for $9,100 in cash.
e. Paid $420 for the monthly telephone bill.
f. Performed services for $3,120 on credit.
g. Purchased a fax machine for $650; paid $150 in cash with the balance due in 30 days.
h. Paid a bill for $1,100 from the office cleaning service.
i. Received $4,260 from clients on account.
j. Purchased additional office chairs for $1,090; received credit terms of 30 days.
k. Paid $8,000 for salaries.
l. Issued a check for $550 in partial payment of the amount owed for office chairs.
m. Received $4,600 in cash for services performed.
n. Issued a check for $920 for utilities expense.
o. Performed services for $4,300 on credit.
p. Collected $1,800 from clients on account.
q. John Arrow withdrew $5,000 in cash for personal expenses.
r. Paid $1,200 to Quick Copy Service for photocopy work performed during the month.
Analyze: Using the basic accounting equation, what is the financial condition of John Arrow’s business at month-end?
(1) Post the above transactions into the appropriate T accounts.