Ch1_P7A_Holden Graham_Accounting question

Question:

Holden Graham started The Graham Co., a new business that began operations on May 1. Graham Co.

completed the following transactions during that first month.

May 1H. Graham invested $40,000 cash in the business.

1Rented a furnished office and paid $2,200 cash for May’s rent.

3Purchased $1,890 of office equipment on credit.

5Paid $750 cash for this month’s cleaning services.

8Provided consulting services for a client and immediately collected $5,400 cash.

12Provided $2,500 of consulting services for a client on credit.

15Paid $750 cash for an assistant’s salary for the first half of this month.

20Received $2,500 cash payment for the services provided on May 12.

22Provided $3,200 of consulting services on credit.

25Received $3,200 cash payment for the services provided on May 22.

26Paid $1,890 cash for the office equipment purchased on May 3.

27Purchased $80 of advertising in this month’s (May) local paper on credit.

28Paid $750 cash for an assistant’s salary for the second half of this month.

30Paid $300 cash for this month’s telephone bill.

30Paid $280 cash for this month’s utilities.

31Graham withdrew $1,400 cash for personal use.

Required

1. Arrange the following asset, liability, and equity titles in a table like Exhibit 2.1: Cash; Accounts

Receivable; Office Equipment; Accounts Payable; H. Graham, Capital; H. Graham, Withdrawals;

Revenues; and Expenses.

2. Show effects of the transactions on the accounts of the accounting equation by recording increases and

decreases in the appropriate columns. Do not determine new account balances after each transaction.

Determine the final total for each account and verify that the equation is in balance.

3. Prepare an income statement for May, a statement of owner’s equity for May, and a May 31 balance

sheet.