a. Opened a business bank account with a deposit of $24,000 from personal funds.
b. Paid rent on office and equipment for the month, $3,600.
c. Paid automobile expenses (including rental charge) for month, $1,350, and miscellaneous expenses, $600.
d. Purchased office supplies on account, $1,200.
e. Earned sales commissions, receiving cash, $19,800.
f. Paid creditor on account, $750.
g. Paid office salaries, $2,500.
h. Withdrew cash for personal use, $3,500.
i. Determined that the cost of supplies on hand was $300; therefore, the cost of supplies used was $900.
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 +
Maria
Adams,
Capital –
Maria
Adams,
Drawing +
Sales
Commissions –
Rent
Expense –
Salaries
Expense –
Auto
Expense –
Supplies
Expense –
Misc.
Expense
2. Prepare an income statement for April, a statement of owner’s equity for April, and a balance sheet as of April 30.
Answer:
1. Assets = Liabilities +
Maria Maria
Owner’s Equity
Cash + Supplies =
Accts.
Payable +
Adams,
Capital
Adams,
– Drawing +
Sales
Comm. –
Rent
Exp.
Salaries
– Exp. –
Auto
Exp.
Supplies
– Exp. –
Misc.
Exp.
(a) + 24,000 + 24,000
(b) – 3,600 – 3,600
Bal. 20,400 24,000 – 3,600
(c) – 1,950 – 1,350 – 600
Bal. 18,450 24,000 – 3,600 – 1,350 – 600
(d) + 1,200 + 1,200
Bal. 18,450 1,200 1,200 24,000 – 3,600 – 1,350 – 600
(e) + 19,800 + 19,800
Bal. 38,250 1,200 1,200 24,000 19,800 – 3,600 – 1,350 – 600
(f) – 750 – 750
Bal. 37,500 1,200 450 24,000 19,800 – 3,600 – 1,350 – 600
(g) – 2,500 – 2,500
Bal. 35,000 1,200 450 24,000 19,800 – 3,600 – 2,500 – 1,350 – 600
(h) – 3,500 – 3,500
Bal. 31,500 1,200 450 24,000 – 3,500 19,800 – 3,600 – 2,500 – 1,350 – 600
(i) – 900 – 900
Bal. 31,500 300 450 24,000 – 3,500 19,800 – 3,600 – 2,500 – 1,350 – 900 – 600
2. CUSTOM REALTY
Income Statement
For the Month Ended April 30, 2014
Sales commissions $19,800
Expenses:
Rent expense $3,600
Salaries expense 2,500
Automobile expense 1,350
Supplies expense 900
Miscellaneous expense 600
Total expenses 8,950
Net income $10,850
CUSTOM REALTY
Statement of Owner’s Equity
For the Month Ended April 30, 2014
Maria Adams, capital, April 1, 2014 $ 0
Investment on April 1, 2014 $24,000
Net income for April 10,850
$34,850
Less withdrawals 3,500
Increase in owner’s equity 31,350
Maria Adams, capital, April 30, 2014 $31,350
CUSTOM REALTY
Balance Sheet
April 30, 2014
Assets Liabilities
Cash $31,500 Accounts payable $ 450
Supplies 300
Owner’s Equity
Maria Adams, capital 31,350
Total liabilities and
Total assets $31,800 owner’s equity $31,800