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(solution) You open a consulting business on January 1st and must account


You open a consulting business on January 1st and must account for the following transactions during a one month period:

 

Day 1: You contribute $10,000 of your own money to the business for initial expenses.

Day 1: Hire an administrative assistant who will work Monday - Friday; pay: $500/week; pay-day: every 2 weeks. He begins on day 1.

Day 2: Take care of normal business start-up issues:

1.Rent Office Space: You pay $6,000 in advance for the entire first year's rent and $500 as a security deposit.

2.Buy Insurance: you pay $600 for 6 months coverage

3.Buy Office Supplies: you pay $100

4.Rent Office Equipment and Furniture: you pay $750 for a 3-month lease

Day 4: You staff a table at a Career Fair and secure 20 clients during the day; you charge $100/client for the advice you provide but offer a 10% discount for cash; half pay you cash, the other half promise to pay at the end of the month (Career Fair lasts one day)

Day 12: You receive a $500 fee for making a luncheon presentation at the local Kiwanis Club.

Day 14: Payday for your administrative assistant for two weeks of work.

Day 17: Pay contracting consultant $1000 to create training program. Delivery date for program materials is February 15th.

Day 25 : You sign a consulting contract that will begin February 1st and pay you $1,000 per month for the remainder of the year.

Day 27: Meet with attorney to discuss copyright options for training program the contracting consultant will create. Pay the attorney $500 ($250 per hour) to cover the cost of the meeting.

Day 29: Payday for your administrative assistant for two weeks of work.

Day 30: You secure a loan of $50,000 from your favorite bank and receive the money that day.

 

Determine:

 

Of those transactions listed above, complete the Worksheet_Lesson3.docx as follows:

 

?Step 1 ? Use the Worksheet_Lesson3.docx document to list the following types of entries that would be made to an income statement:

?Revenue

?Direct Costs

?Indirect Costs

?Step 2 ? Identify how the appropriate category would be affected by each transaction (i.e., increased or decreased), and the dollar amount of the transaction (e.g., +$250, or -$400). (Provide whatever comment you believe necessary to explain your decisions.

?Step 3 - Based upon the above transactions, assemble an income statement to determine net profit or net loss using the Accrual Method of Accounting.

?Step 4 - Submit your completed document for grading by uploading it as an attachment.


Worksheet/Lesson 3

 

Entry

 

Luncheon fee of $500

 

on Day 5 Revenue

 

x Category

 

Direct

 

Cost Indirect

 

Cost Effect of

 

Revenue

 

or Cost

 

+ 500.00 Comments

 


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