On August 1, 20Y9, Brooke Klin
On August 1, 20Y9, Brooke Kline established Western Realty.Brooke completed the following transactions during the month ofAugust:
| a. | Opened a business bank account with a deposit of $25,000 inexchange for common stock. |
| b. | Paid rent on office and equipment for the month, $2,800. |
| c. | Paid automobile expenses for month, $1,500, and miscellaneousexpenses, $700. |
| d. | Purchased office supplies on account, $1,150. |
| e. | Earned sales commissions, receiving cash, $21,000. |
| f. | Paid creditor on account, $850. |
| g. | Paid office salaries, $3,100. |
| h. | Paid dividends, $3,200. |
| i. | Determined that the cost of supplies on hand was $450;therefore, the cost of supplies used was $700. |
| Required: | |
| 1. | Indicate the effect of each transaction and the balances aftereach transaction, using the tabular headings in the exhibit below.In each transaction row (rows indicated by a letter), you mustindicate the math sign (+ or -) in columns affected by thetransaction. You will not need to enter math signs in the balancerows (rows indicated by Bal.). Entries of 0 (zero) are not requiredand will be cleared if entered. |
| Assets | = | Liabilities | + | Stockholders’ Equity | ||||||||||||||||
| Accounts | Common | Sales | Salaries | Rent | Auto | Supplies | Miscellaneous | |||||||||||||
| Cash | + | Supplies | = | Payable | + | Stock | – | Dividends | + | Commissions | – | Expense | – | Expense | – | Expense | – | Expense | – | Expense |
| 2. a. Prepare an income statement for August. Refer to the listof Accounts, Labels and Amount Descriptions for the exact wordingof the answer choices for text entries. Be sure to complete thestatement heading. You will not need to enter colons (:) on theincome statement. If a net loss has been incurred, enter thatamount as a negative number using a minus sign. | |
| 2. b. Prepare a statement of stockholders’ equity for August.Refer to the list of Accounts, Labels and Amount Descriptions forthe exact wording of the answer choices for text entries. Be sureto complete the statement heading. If a net loss is incurred ordividends were paid, enter that amount as a negative number using aminus sign. If an amount is zero, enter “0”. | |
| 2. c. Prepare a balance sheet as of August 31. Refer to thelist of Accounts, Labels and Amount Descriptions for the exactwording of the answer choices for text entries. Be sure to completethe statement heading. |
Answer:
| 1.) | Amount $ | ||||||||||||||||||||||
| Assets | = | Liabilities | + | Stockholders’ Equity | |||||||||||||||||||
| Accounts | Common | Sales | Salaries | Rent | Auto | Supplies | Miscellaneous | ||||||||||||||||
| S.No. | Cash | + | Supplies | = | Payable | + | Stock | – | Dividends | + | Commissions | – | Expense | – | Expense | – | Expense | – | Expense | – | Expense | ||
| a | 25,000 | 25,000 | |||||||||||||||||||||
| b | -2,800 | 2,800 | |||||||||||||||||||||
| c | -2,200 | 1,500 | 700 | ||||||||||||||||||||
| d | 1,150 | 1,150 | |||||||||||||||||||||
| e | 21,000 | 21,000 | |||||||||||||||||||||
| f | -850 | -850 | |||||||||||||||||||||
| g | -3,100 | 3,100 | |||||||||||||||||||||
| h | -3,200 | 3,200 | |||||||||||||||||||||
| i | -700 | 700 | |||||||||||||||||||||
| Total | 33,850 | + | 450 | = | 300 | + | 25,000 | – | 3,200 | + | 21,000 | – | 3,100 | – | 2,800 | – | 1,500 | – | 700 | – | 700 |
| 2.) | (a) | IncomeStatement | |||
| Amount in $ | |||||
| Sales Commissions | 21,000 | ||||
| Less: Expenses | |||||
| Salaries Expense | 3,100 | ||||
| Rent Expense | 2,800 | ||||
| Auto Expense | 1,500 | ||||
| Supplies Expense | 700 | ||||
| Miscellaneous Expense | 700 | ||||
| Net Income | 12,200 | ||||
| ( b ) | Statement ofStockholer’s Equity | Amount in $ | |||
| Common Stock | Retained earnings | Total | |||
| Issue of Common Stock | 25,000 | 25,000 | |||
| Add: Net income | 12,200 | 12,200 | |||
| Less: Dividends | -3,200 | -3,200 | |||
| Balance on December 31,2019 | 25,000 | 9,000 | 34,000 | ||
| (c) | BalanceSheet | Amount in $ | |||
| Assets | |||||
| Current Assets | |||||
| Cash | 33,850 | ||||
| Supplies | 450 | ||||
| Total Assets | 34,300 | ||||
| Current Liabilities | |||||
| Accounts Payable | 300 | ||||
| Stock Holder’s Equity | |||||
| Common Stock | 25,000 | ||||
| Retained earnings | 9,000 | ||||
| Total Liabilities & Stockholder’sEquity | 34,300 | ||||
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