On August 1, 20Y9, Brooke Kline established Western Realty. Brooke completed the following transactions during the month of August:
a. Opened a bank account with a deposit of $35,000 in exchange for common stock.
b. Purchased supplies on account, $2,750.
c. Paid creditor on account, $1,800.
d. Earned commissions, receiving cash, $52,800.
e. Paid rent on office and equipment for the month, $4,500.
f. Paid dividends, $3,000.
g. Paid automobile for month, $1,100, and miscellaneous expenses, $1,200.
h. Paid office salaries, $5,250.
i. Determined that the cost of supplies on hand was $1,750; therefore, the cost of supplies used was $1,000.
Required:
- Indicate the effect of each transaction and the balances after each transaction, using the following tabular headings:
Assets = Liabilities + Stockholders Equity
Accounts Common Sales Salaries Rent Auto Supplies Miscellaneous
Cash + Supplies = Payable + Stock - Dividends + Commissions - Expense - Expense - Expense - Expense - Expense
- a. Prepare an for August.
- b. Prepare a statement of stockholders equity for August.
- c. Prepare a as of August 31.
Full Answer Section
| Aug 8 | Paid office salaries | Salaries Expense -5,250 | | | | | Cash -5,250 | | Aug 31 | Adjusted for supplies used | Supplies Expense -1,000 | Supplies -1,000 | | | | |
2. Financial Statements
a. Income Statement for the Month Ended August 31, 20Y9
Commissions Revenue: $52,800 Expenses:
- Rent Expense: $4,500
- Salaries Expense: $5,250
- Auto Expense: $1,100
- Supplies Expense: $1,000
- Total Expenses: $11,850
Net Income: $40,950
b. Statement of Stockholders' Equity for the Month Ended August 31, 20Y9
Common Stock, Beginning Balance: $35,000 Add: Net Income: $40,950 Less: Dividends: $3,000 Common Stock, Ending Balance: $72,950
c. Balance Sheet as of August 31, 20Y9
Assets:
- Cash: $37,100
- Supplies: $1,750
- Total Assets: $38,850
Liabilities:
- Accounts Payable: $950
- Total Liabilities: $950
Stockholders' Equity:
- Common Stock: $72,950
- Retained Earnings: $40,950
- Total Stockholders' Equity: $113,900
Total Liabilities and Stockholders' Equity: $113,900
Sample Answer
Western Realty
1. Journal Entries and Balance Sheet
| Date | Transaction | Asset | = | Liability | + | Stockholders Equity | |---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---| | Aug 1 | Opened bank account | Cash +35,000 | | | + | Common Stock +35,000 | | Aug 2 | Purchased supplies on account | Supplies +2,750 | | | | | Accounts Payable +2,750 | | Aug 3 | Paid creditor on account | Accounts Payable -1,800 | | | | | Cash -1,800 | | Aug 4 | Earned commissions | Cash +52,800 | | | | | Commissions +52,800 | | Aug 5 | Paid rent | Rent Expense -4,500 | | | | | Cash -4,500 | | Aug 6 | Paid dividends | Dividends -3,000 | | | | | Cash -3,000 | | Aug 7 | Paid automobile and miscellaneous expenses | Auto Expense -1,100 | | | | | Cash -1,100 |