a. Opened a business bank account with a deposit of $18,000 from personal funds.
b. Purchased office supplies on account, $3,200.
c. Paid creditor on account, $1,800.
d. Earned sales commissions, receiving cash, $36,750.
e. Paid rent on office and equipment for the month, $4,000.
f. Withdrew cash for personal use, $3,000.
g. Paid automobile expenses (including rental charge) for month, $2,500, and miscellaneous expenses, $1,200.
h. Paid office salaries, $3,750.
i. Determined that the cost of supplies on hand was $1,550; therefore, the cost of supplies
used was $1,650.
Instructions
1. Indicate the effect of each transaction and the balances after each transaction, using the following tabular headings:
Assets 5 Liabilities 1 Owner’s Equity
Cash + Supplies =
Accounts
Payable +
Kevin
Bosley,
Capital –
Kevin
Bosley,
Drawing +
Sales
Commissions –
Rent
Expense –
Salaries
Expense –
Auto
Expense –
Supplies
Expense –
Misc.
Expense
2. Prepare an income statement for October, a statement of owner’s equity for October, and a balance sheet as of October 31.
Answer:
1. Assets = Liabilities +
Kevin Kevin
Owner’s Equity
Cash + Supplies =
Accts.
Payable +
Bosley,
Capital
Bosley,
– Drawing +
Sales
Comm. –
Rent
Exp.
Salaries
– Exp. –
Auto
Exp.
Supplies
– Exp. –
Misc.
Exp.
(a) + 18,000 + 18,000
(b) + 3,200 + 3,200
Bal. 18,000 3,200 3,200 18,000
(c) – 1,800 – 1,800
Bal. 16,200 3,200 1,400 18,000
(d) + 36,750 + 36,750
Bal. 52,950 3,200 1,400 18,000 36,750
(e) – 4,000 – 4,000
Bal. 48,950 3,200 1,400 18,000 36,750 – 4,000
(f) – 3,000 – 3,000
Bal. 45,950 3,200 1,400 18,000 – 3,000 36,750 – 4,000
(g) – 3,700 – 2,500 – 1,200
Bal. 42,250 3,200 1,400 18,000 – 3,000 36,750 – 4,000 – 2,500 – 1,200
(h) – 3,750 – 3,750
Bal. 38,500 3,200 1,400 18,000 – 3,000 36,750 – 4,000 – 3,750 – 2,500 – 1,200
(i) – 1,650 – 1,650
Bal. 38,500 1,550 1,400 18,000 – 3,000 36,750 – 4,000 – 3,750 – 2,500 – 1,650 – 1,200
2. SUNRISE REALTY
Income Statement
For the Month Ended October 31, 2014
Sales commissions $36,750
Expenses:
Rent expense $4,000
Salaries expense 3,750
Automobile expense 2,500
Supplies expense 1,650
Miscellaneous expense 1,200
Total expenses 13,100
Net income $23,650
SUNRISE REALTY
Statement of Owner’s Equity
For the Month Ended October 31, 2014
Kevin Bosley, capital, October 1, 2014 $ 0
Investment on October 1, 2014 $18,000
Net income for October 23,650
$41,650
Less withdrawals 3,000
Increase in owner’s equity 38,650
Kevin Bosley, capital, October 31, 2014 $38,650
SUNRISE REALTY
Balance Sheet
October 31, 2014
Assets Liabilities
Cash $38,500 Accounts payable $ 1,400
Supplies 1,550
Owner’s Equity
Kevin Bosley, capital 38,650
Total liabilities and
Total assets $40,050 owner’s equity $40,050