Problem:
Steve Sims started a consulting business on January 1, 2012, and the business engaged in the following transactions during the year:
- Issued $20,000 of common stock for cash
- Delivered services on account, $200,000
- Incurred $127,000 of operating expense, paid $57,000 cash, the rest on account
- Collected $165,000 of the revenue that was previously recorded on account
- Obtained a bank loan of $25,000 to purchase a truck
Required:
Question 1: Write the accounting equation.
Question 2: Show the effects of the above transactions on the accounting equation.
Question 3: Prepare an income statement for 2012. Use proper form and be sure to show your calculations.
Note: Please provide step by step solution.