On January 1, 2019, Sharon Matthews established Tri-City Realty, which completed the following transactions during the month:
a. Sharon Matthews transferred cash from a personal bank account to an account to be used for the business, $40,000.
b. Paid rent on office and equipment for the month, $6,000.
c. Purchased supplies on account, $3,200.
d. Paid creditor on account, $1,750.
e. Earned fees, receiving cash, $18,250.
f. Paid automobile expenses (including rental charge) for month, $1,880, and miscellaneous expenses, $420.
g. Paid office salaries, $5,000.
h. Determined that the cost of supplies used was $1,400.
i. Withdrew cash for personal use, $2,000.
Instructions
1. Journalize entries for transactions (a) through (i), using the following account titles: Cash; Supplies; Accounts Payable; Sharon Matthews, Capital; Sharon Matthews, Drawing; Fees Earned; Rent Expense; Office Salaries Expense; Automobile Expense; Supplies Expense; Miscellaneous Expense. Explanations may be omitted.
2. Prepare T accounts, using the account titles in (1). Post the journal entries to these accounts, placing the appropriate letter to the left of each amount to identify the transactions. Determine the account balances after all posting is complete. Accounts containing only a single entry do not need a balance.
3. Prepare an unadjusted trial balance as of January 31, 2019.
4. Determine the following:
a. Amount of total revenue recorded in the ledger.
b. Amount of total expenses recorded in the ledger.
c. Amount of net income for January.
5. Determine the increase or decrease in owner’s equity for January.
Answer:
1. (a) Cash40,000
Sharon Matthews, Capital40,000
(b) Rent Expense6,000
Cash6,000
(c) Supplies3,200
Accounts Payable3,200
(d) Accounts Payable1,750
Cash1,750
(e) Cash18,250
Fees Earned18,250
(f) Automobile Expense1,880
Miscellaneous Expense420
Cash2,300
(g) Office Salaries Expense5,000
Cash5,000
(h) Supplies Expense1,400
Supplies1,400
(i) Sharon Matthews, Drawing 2,000
Cash2,000 2.
(a) 40,000 (b) 6,000 (e) 18,250
(e) 18,250 (d) 1,750
(f) 2,300
(g) 5,000 (b) 6,000
(i) 2,000
Bal. 41,200
(c) 3,200 (h) 1,400 (g) 5,000
Bal. 1,800
(d) 1,750 (c) 3,200 (f) 1,880
Bal. 1,450
(a) 40,000 (h) 1,400
(i) 2,000 (f) 420
3.
Cash41,200
Supplies1,800
Accounts Payable1,450
Sharon Matthews, Capital40,000
Sharon Matthews, Drawing2,000
Fees Earned18,250
Rent Expense6,000
Office Salaries Expense5,000
Automobile Expense1,880
Supplies Expense1,400
Miscellaneous Expense420
4. a. $18,250
b. $14,700 ($6,000 + $5,000 + $1,880 + $1,400 + $420)
c. $3,550 ($18,250 – $14,700)
5. $41,550, which is the initial investment of $40,000 plus net income of $3,550 minus
the withdrawals of $2,000.