Problem
Lane Kohler opened a consulting practice that he operates as a corporation. The name of the new entity is Lane Kohler, Consultant, Inc. Kohler experienced the following events during the organizing phase of his new business and its first month of operations. Some of the events were personal transactions of the shareholder and did not affect the consulting practice. Others were transactions that should be accounted for by the business.
March
1 Kohler sold 1,000 shares of BlackBerry stock and received $100,000 cash from his stockbroker.
2 Kohler deposited in his personal bank account the $100,000 cash from sale of the BlackBerry shares.
3 Kohler received $150,000 cash through an inheritance from his grandfather.
5 Kohler deposited $50,000 cash in a new business bank account titled Lane Kohler, Consultant, Inc. The business issued common shares to Kohler.
6 A representative of a large company telephoned Kohler and told him of the company's intention to give $15,000 of consulting business to Kohler.
7 The business paid $450 cash for letterhead stationery for the consulting office.
9 The business purchased office furniture. Kohler paid cash of $5,000 and agreed to pay the account payable for the remainder, $10,500, within three months.
23 Kohler finished an analysis for a client and submitted his bill for services $4,000. He expected to collect from this client within one month.
29 The business paid $5,000 of its account payable on the furniture purchased on March 9.
30 The business paid office rent of $2,100.
31 The business declared and paid a cash dividend of $1,000.
Task
a) Analyze the effects of the preceding events on the accounting equation of the business of Lane Kohler, Consultant, Inc. Use a format similar to Exhibit 2-1, Panel B.
b) Record the transactions of the business in its journal. Include an explanation for each entry.