Question

2.cel CHECK FIGURES: 2 Cash balance. December 31, 2020 - $43,800: 3. Profit $5.700: Total assets $324200 Lily Zhang started a new business on January 1, 2020, called Zhang Consulting. She develops financial ines ment plans for young adults. During the business's first year of operations, the following activities occur a. Zhang invested S120,000 cash and office equipment valued at $10.000 in the business b. Purchased a small building for $240.000 to be used as an office. Paid $50,000 in cash and signed payable promising to pay the balance over several years. e. Purchased $18,000 of office equipment for cash. d. Purchased $4,000 of office supplies and $6,400 of office equipment on credit. e. Paid a local online newspaper $4.500 for an announcement that the office had opened. f. Completed a financial plan on credit and billed the client 56.000 for the service. 3. Designed a financial plan for another client and collected an 58.000 cash fee. h. Zhang withdrew $5.500 cash from the company bank account to pay personal expenses. 1. Zhang signed a 520,000 contract for the office to be painted in February 2021. A deposit of $6,000 wil paid on January 15.2021 j. Received $4,000 from the client described in k. Paid for the equipment purchased in di Paid 53 800 cash for the administrative assistants we Required 1. Create a table like the one pecented in Exhibit 115, using the following headings for the columns Accounts Receivable Office Supplies omice Equipment Building: Accounts Payable. Notes Paypal and Lily Zhang Capital Lewe space for an Explanation of Equity Traction on to the right of the Capital column. Identify revenues and expenses by name in the Explanation column 2. Use additions and subtractions to show the effects of the above tractions on the elements of the thon. Do not determine new totals for the items of the equation after each transaction. No 70

Answer 1

1. Explanation -

Zhang Consulting's Assets are financed by 60% debt means Total Assets owned by the company is 60% through Total Debts and 40% by Total Equity.

Ratio Computation Debt to Assets Ratio Total Debt Total Assets $ 194,000 $324,200 = 60%

2. Accounting Equation -

Zhang Consulting Accounting Equation Sr. No. Cash + Accounts Receivable + Office Supplies + Office Equipment + Building Accounts Payable + Notes Payable + Lily Zang, Capital Lily Zang, Withdrawal + Consulting Service Revenue Advertising Expense Wages Expense $ 10,000 $130,000 a b $ 120,000 $ (50,000) $ (18,000) $ 240,000 $ 190,000 с $ $ 18,000 6,400 d $ 4,000 $ 10,400 e $ (4,500) $ 4,500 f $ 6,000 $ $ 6,000 8,000 $ 8,000 $ (5,500) h $ 5,500 i $ (4,000) j k $ 4,000 $ (6,400) $ (3,800) $ (6,400) I $ 3,800 $ 43,800 + $ 2,000 + $ 4,000 + $ 34,400 + + $240,000 = $ 4,000 + $190,000 + $130,000 $ 5,500 + $ 14,000 $ 4,500 $ 3,800

3. Income Statement -

Zhang Consulting Income Statement For Year Ended December 31, 2020 Revenue: Consulting Service Revenue $ 14,000 Operating Expenses: Wages Expense Advertising Expense Total Operating Expenses $ 3,800 $ 4,500 $ 8,300 Profit $ 5,700

4. Statement of Changes in Equity -

Zhang Consulting Statement of Changes in Equity For Year Ended December 31, 2020 Lily Zhang, Capital January 1 Investment by owner $ 130,000 Profit $ 5,700 Less: Withdrawals by owner $ (5,500) $ 200 Lily Zhang, Capital December 31 $ 130,200

5. Balance Sheet -

Zhang Consulting Balance Sheet December 31, 2020 Liabilities $ 43,800 Accounts Payable $ 2,000 Notes Payable $ 4,000 $ 34,400 Total Liabilities $ 240,000 Assets Cash Accounts Receivable Office Supplies Office Equipment Building $ 4,000 $ 190,000 $ 194,000 Equity Lily Zhang, Capital $ 130,200 Total Assets $ 324,200 Total Liabilities and Equity $ 324,200