Mary Sunny Began Business as Sunny Law Firm, Inc

question 87

Essay

Mary Sunny began business as Sunny Law Firm, Inc. on November 1. Record the following November transactions by making entries directly to the T-accounts provided. Then, prepare a trial balance, as of November 30.
a) Mary invested $15,000 cash and a law library valued at $6,000.
b) Purchased $7,500 of office equipment from John Bronx on credit.
c) Completed legal work for a client and received $1,500 cash in full payment.
d) Paid John Bronx. $3,500 cash in partial settlement of the amount owed.
e) Completed $4,000 of legal work for a client on credit.
f) The company paid $2,000 cash in dividends to the owner. (sole shareholder)
g) Received $2,500 cash as partial payment for the legal work completed for the client in (e).
h) Paid $2,500 cash for the legal secretary's salary.

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Definitions:

Interest Payment

The amount paid by a borrower to a lender as compensation for the use of borrowed money.

Cash Equivalent

Short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to insignificant risk of changes in value.

Current Assets

Assets that are expected to be converted into cash, sold, or used up within one year or within the operating cycle, whichever is longer.

Current Liabilities

Current liabilities are financial obligations that a company expects to pay within one year, such as accounts payable, short-term loans, and taxes owed.