2-A-2.^† Daniel Peavy owns and operates an architectural firm called Peavy Design. Table P2-A-2 summarizes the financial position of his business on April 30, 2015.

During May 2015, the following events occurred:

 

          Peavy received $12,000 as a gift and deposited the cash in the business bank account.

 

           He paid off the beginning balance of accounts payable.

 

          He performed services for a client and received cash of $1,100.

           He collected cash from a customer on account, $750.

          Peavy purchased supplies on account, $720.

 

         He consulted on the interior design of a major office building and billed the client for services rendered, $5,000.

 

          He invested personal cash of $1,700 in the business.

 

           He recorded the following business expenses for the month:

 

          Paid office rent, $1,200.

          Paid advertising, $660.

 

         Peavy sold supplies to another interior designer for $80 cash, which was the cost of the supplies.

         He withdrew cash of $4,000 for personal use.

 

Required

 

             Analyze the effects of the preceding transactions on the accounting equation of Peavy Design. Adapt the format of Figure 2-A-1.

 

 

 

ABLE P2-A-2     Data for Problem 2-A-2

 

Assets	Â	=	Liabilities	+	Owner’s Equity
Accounts	Â	=	Accounts	+	Daniel Peavy,
Cash + Receivable + Supplies + Land			Payable		Capital
Bal. 1,7203,240	24,100	Â	5,400	Â	23,660

=          Prepare the income statement of Peavy Design for the month ended May 31, 2015. List expenses in decreasing order by amount.

 

=         Prepare the balance sheet of Peavy Design at May 31, 2015.