Determine in which financial statement the account would most likely appear: income statement (1), balance sheet (B), or statement of owner's equity (E).
 Withdrawals

Holdes 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 1 H. Graham invested $40,000 cash in the business.
 1 Rested a fumished office and paid$2,200 cash for May's rent.
 3 Parchand $1,890 of office equipment on credit.
 5 Paid$750 cash for this month's cleaning services.
 8 Prided consulting services for a client and immediately collected $5,400 cash.
 12 Provided$2,500 of consulting services for a client on credit.
 15 Paid $750 cash for an assistant's salary for the first half of this month.
 20 Received$2,500 cash payment for the services provided on May 12.
 22 Provided $3,200 of consulting services on credit.
 25 Received$3,200 cash paymers for the services provided on May 22.
 26 Paid $1,890 cash for the office equipment purchased on May 3.
 27 Purchased$80 of advertising in this month's (May) local paper on credit.
 28 Paid $750 for an assistant's salary for the second half of this month.
 30 Paid$300 cash for this month's telephone bill.
 30 Paid $280 cash for this month's utilities.
 31 Graham withdrew$1,400 cash for personal use.

Required
1. Organize the following asses, liability, and equity titles in a table like Exhibit 2.1: Cash, Accounts Receivable, Office Equipment: Accounts Payable. H. Graham, Capital: H. Graham, Withdrawal 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 detennine new account balances after each trans- action. Determine the final total or 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

When the assets of a company increase by $100,000 during the year and its liabilities increase by$35,000 during the same year, then the change in equity of the company during the year should have been:
a. An increase of $135,000.
b. A decrease of$135,000.
c. A decrease of $65,000.
d. An increase of$65,000.
e. An increase of $100,000.

What do accountants define by the term revenue?

Determine how each of the following separate transactions affects financial statements. For the balance sheet, identify how each transaction affects total assets, total liabilities, and total equity. For the income statemet, identify how each transaction affects net income. For increases, place a "+" in the column or columns. For decreases, place a "-" in the column or columns. If both an increase and a decrease occur, place a "+/-" in the column or columns. The first transaction is completed as an example.

On October 1, 2010, Adriana Lopez began a computer services company, Success Systems, that provides consulting services, computer system installations, and custom program development. Lopez ex- pects to prepare the company's first set of financial statements on December 31, 2010.

Required
Create a table like the one in Exhibit 2.1 using the following headings for columns: Cash; Accounts Receivable; Computer Supplies; Computer System; Office Equipment; Accounts Payable; A. Lopez, Capital; A. Lopez, Withdrawals; Revenues; and Expenses. Then use additions and subtractions to show the effects of the October transactions for Success Systems on the individual items of the accounting equation. Show new balances after each transaction.

Oct. 1 Adriana Lopez invested $75,000 cash, a$25,000 computer system, and $10,000 of office equip- ment in the business.
 3 Purchased$1,600 of computer supplies on credit from Corvina Office Products.
 6 Billed Easy Leasing $6,200 for services performed in installing a new Web server.
 8 Paid$1,600 cash for the computer supplies purchased from Corvina Office Products on October 3.
 12 Billed Easy Leasing another $1,950 for services performed.
 15 Received$6,200 cash from Easy Leasing toward its account.
 17 Paid $900 cash to repair computer equipment damaged when moving it.
 20 Paid$1,790 cash for an advertisement in the local newspaper.
 22 Received $1,950 cash from Easy Leasing toward its account.
 28 Billed Clark Company$7,300 for services performed.
 31 Paid $1,050 cash for Michelle Jones's wages for seven days of work this month. 31 Lopez withdrew$4,000 cash for personal use.

If supplies are bought on account, which accounts increase or decrease?
a. Supplies increase; accounts payable increases.
b. Supplies increase; accounts receivable increases.
c. Supplies increase; accounts payable decreases.
d. Supplies increase; equity decreases.

Use the accounting equation to calculate the unknown financial statement amounts (a), (b), and (c ).

What events or transactions can change equity?

Label each of the following accounts as an asset (A), liability (L), or equity (E) account.

_____1. Accounts Payable
_____2. Loan (or Notes) Payable
_____3. Accounts Receivable
_____4. Cash
_____5. Supplies
_____6. Equipment
_____7. Rod Smith, Capital

Determine how each of the following separate transactions affects financial statements. For the balance sheet, identify how each transaction affects total assets, total liabilities, and total equity. For the income statemet, identify how each transaction affects net income. For increases, place a "+" in the column or columns. For decreases, place a "-" in the column or columns. If both an increase and a decrease occur, place a "+/-" in the column or columns. The first transaction is completed as an example.

Total assets of Martin Marine equal $500,000 and its liabilities and equity amounts are equal to each other. What is the balance of its liabilities? What is the balance of its equity?

Total assets of Charter Company equal $700,000 and its equity is$420,000. What is the balance of its liabilities?

Isabel Lopez's consulting business, Biz Consulting, reports the following accounting equation balances on December 31, 2010, the end of its first year of operations.

Required
1. Compute net income for 2010.
2. Prepare a statement of owner's equity for 2010 and a balance sheet as of December 31, 2010.