On April 1, 2019, Maria Adams established Custom Realty. Maria completed the following transactions during the month of April:
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 the month, $1,350, and miscellaneous expenses, $600.
d. Purchased office supplies on account, $1,200.
e. Earned sales commissions (revenue) from selling real estate, 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 Accounts Payable + Maria Adams, Capital – Maria Adams, Drawing + Sales Commissions – Rent Expense – Salaries Expense – Auto 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. = +
+ = + – + – – – – –
(a) + 24,000 + 24,000
(b) – 3,600– 3,600
Bal. 20,40024,000– 3,600
(c) – 1,950– 1,350 – 600
Bal. 18,45024,000– 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.
Sales commissions$19,800
Expenses:
Rent expense$3,600
Salaries expense2,500
Automobile expense1,350
Supplies expense900
Miscellaneous expense600
Total expenses8,950
Net income$10,850
Maria Adams, capital, April 1, 2019$ 0
Investment on April 1, 2019$24,000
Net income for April10,850
Withdrawals(3,500)
Increase in owner’s equity31,350
Maria Adams, capital, April 30, 2019$31,350
Cash$31,500
Supplies300
Total assets$31,800
Accounts payable$ 450
Maria Adams, capital31,350
Total liabilities and owner’s equity$31,800