The following events concern Anita Letourneau, a Manitoba law school graduate, for March 2014: 1. On March 4, she spen
The following events concern Anita Letourneau, a Manitoba law school graduate, for March 2014:
1. On March 4, she spent $20 on a lottery ticket.
2. On March 7, she won $250,000 in the lottery and immediately quit her job as a junior lawyer.
3. On March 10, she decided to open her own law practice, and deposited $50,000 of her winnings in a business chequing account, Letourneau Legal Services.
4. On March 14, she purchased a new luxury condominium with a down payment of $150,000 from her personal funds plus a home mortgage of $200,000.
5. On March 15, Ms. Letourneau signed a rental agreement for her law office space for $2,500 a month, starting March 15. She paid the first month's rent, as it is due on the 15th of each month.
6. On March 19, she hired a receptionist. He will be paid $500 a week and will begin working on March 24.
7. On March 20, she purchased equipment for her law practice from a company that had just declared bankruptcy.
The equipment was worth at least $15,000 but Anita was able to buy it for only $10,000.
8. On March 21, she purchased $400 of supplies on account.
9. On March24, she purchased an additional $6,500 of equipment for her law practice for $3,000 plus a $3,500 note payable due in six months.
10. On March 31, she performed $3,500 of legal services on account.
11. On March 31, she received $2,500 cash for legal services to be provided in April.
12. On March 31, she paid her receptionist $500 for the week.
13. On March 31, she paid $400 for the supplies purchased on account on March 21.
(a) Prepare a tabular analysis of the effects of the above transactions on the accounting equation.
(b) Calculate profit and owner's equity for the month ended March 31.
(c) Prepare a balance sheet at March 31.
TAKING IT FURTHER How should Anita determine which transactions should be recorded and which ones should not be recorded?