Michael Lee started his new executive coaching business on June 1. Lee Management Consulting completed the following transactions during June 2016:
Jun. 2 Received $25,000 cash from owner Michael Lee. The business gave owner’s equity in the business to Lee.
2 Lee found a great downtown loft from which to operate. He paid cash for rent for the month of June, $3,000.
3 Paid cash for a laptop, $1,000. The computer is expected to remain in service for four years. (Use the Equipment account for this transaction.)
4 Purchased office furniture on account, $5,000. The furniture is expected to last for five years.
5 Purchased supplies on account, $500.
9 Performed consulting services for a client on account, $3,000.
12 Paid utility expenses with cash, $250
18 Performed consulting services for a client and received cash of $2,000.
21 Received $2,000 in advance for client services to be performed at a rate of $100 per day for a period of 20 days. (Use the liability account Unearned Revenue for this transaction. We will learn more about this account in Chapter 3 .)
22 Hired an office manager on a part-time basis. She will be paid $2,000 per month. She started work on Monday, June 25.
23 Paid $500 cash for the supplies purchased on June 5.
26 Collected a partial payment of $1,500 from the consulting client invoiced on June 9.
28 Michael Lee withdrew $2,000 cash for personal use.
Required
Analyze the effects of Lee Management Consulting’s transactions on the accounting equation. Use the format of Exhibit 1-11, Panel B, on page 20, and use these headings: Cash; Accounts Receivable; Supplies; Equipment; Furniture; Accounts Payable; Unearned Revenue; and Michael Lee, Capital. In Chapter 2, we will account for these same transactions in a different way-as the accounting is actually performed in practice.
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