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P1-40B Arron Woody practiced accounting with a partnership for five years. Recently he

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P1-40B Applying the entity concept, using the accounting equation for
transaction analysis, and preparing financial statements [20–30 min]

Arron Woody practiced accounting with a partnership for five years. Recently he
opened his own accounting firm, which he operates as a professional corporation.
The name of the new entity is Arron Woody, CPA, P.C. Woody experienced the following
events during the organizing phase of the new business and its first month of
operations. Some of the events were personal and did not affect the business.

4-Feb Woody received $31,000 cash from former accounting partners.*
5 Deposited $40,000 in a new business bank account titled Arron Woody,
CPA, P.C. The business issued common stock to Woody.
6 Paid $200 cash for letterhead stationery for the new office.
7 Purchased office furniture for the office. The business will pay the account
payable, $9,500, within three months.
10 Woody sold personal investment in stock, which he had owned
for several years, receiving $51,000 cash.*
11 Woody deposited the $51,000 cash from sale of the stock in
his personal bank account.*
12 A representative of a large company telephoned Woody and told him of the
company’s intention to transfer its accounting business to Woody.
18 Finished tax hearings on behalf of a client and submitted a bill for
accounting services, $14,000. Woody expected to collect from this client
within two weeks.
25 Paid office rent, $1,900.
28 Paid cash dividends of $8,000.

1. Analyze the effects of the events on the accounting equation of the corporation
of Arron Woody, CPA, P.C. Use a format similar to Exhibit 1-6.
2. As of February 28, compute Arron Woody’s
a. total assets.
b. total liabilities.
c. total stockholders’ equity.
d. net income or net loss for February

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