The following events apply to Lewis and Harper, a public accounting firm, for the 2016 accounting
period:
1. Performed $70,000 of services for clients on account.
2. Performed $40,000 of services for cash.
3. Incurred $36,000 of other operating expenses on account.
4. Paid $10,000 cash to an employee for salary.
5. Collected $47,000 cash from accounts receivable.
6. Paid $16,000 cash on accounts payable.
7. Paid a $8,000 cash dividend to the stockholders.
8. Accrued salaries were $2,000 at the end of 2016.
Required
a. Show the effects of the events on the financial statements using a horizontal statements model like the following one. In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, NC for net change in cash and NA to indicate the element is not affected by the event. The first event is recorded as an example. (Enter any decreases to account balances and cash outflows with a minus sign.)
a. LEWIS AND HARPER
Statements Model
For Accounting Year 2016
Event No. Assets = Liabilities + Stockholders' Equity Income Statement Statement of Cash Flows
Cash + Accounts Receivable = Accounts Payable + Salaries Payable + Retained Earnings Revenue – Expense = Net Income
1. + 70,000 = + + 70,000 70,000 – = 70,000 NA
2. + = + + – =
3. + = + + – =
4. + = + + – =
5. + = + + – =
6. + = + + – =
7. + = + + – =
8. + = + + – =
Totals + = + + – =
b. What is the amount of total assets at the end of 2016?
c. What is the balance of accounts receivable at the end of 2016?
d. What is the balance of accounts payable at the end of 2016?