Transactions On September 1 of the current year, Joy Tucker established a busine
ID: 2330833 • Letter: T
Question
Transactions
On September 1 of the current year, Joy Tucker established a business to manage rental property. She completed the following transactions during September:
Opened a business bank account with a deposit of $38,000 in exchange for common stock.
Purchased office supplies on account, $2,440.
Received cash from fees earned for managing rental property, $6,830.
Paid rent on office and equipment for the month, $2,990.
Paid creditors on account, $1,110.
Billed customers for fees earned for managing rental property, $5,530.
Paid automobile expenses for month, $660, and miscellaneous expenses, $330.
Paid office salaries, $2,100.
Determined that the cost of supplies on hand was $1,440; therefore, the cost of supplies used was $1,000.
Paid dividends $1,990.
Required:
1. Indicate the effect of each transaction and the balances after each transaction:
For those boxes in which no entry is required, leave the box blank.
For those boxes in which you must enter subtractive or negative numbers use a minus sign. (Example: -300)
2. Stockholders' equity is the right of stockholders' to the assets of the business. These rights are by issuances of capital stock and revenues and by dividends and expenses.
3. Determine the net income for September.
$
4. How much did September's transactions (a-j) increase or decrease retained earnings?
by $
Explanation / Answer
Answer: Item Assets Liabilities + Stockholders' Equity Cash + Accounts Receivable + Supplies = Accounts Payable + Common Stock - Dividends + Fees Earned - Rent expenses - Sal. Expenses - Supp. Expense - Auto Expense - Misc. Expense Explanation Receipt of common stock in cash would increase both cash and common stock. The effect on accounting equiation after this transaction would be as follows: a. 38000 + + = + 38000 - - - - - - Explanation Purchase of office supplies on credit would increase both office supplies and accounts payable by $2440. The effect on accounting equiation and balance after this transaction would be as follows: b. + + 2440 = 2440 + - - - - - - Bal. 38000 + 0 + 2440 = 2440 + 38000 - 0 0 - 0 - 0 - 0 - 0 - 0 Explanation Revenue earned in cash would increase both cash and fee earned by $6830 c. 6830 + + = + - 6830 - - - - - Bal. 44830 + 0 + 2440 = 2440 + 38000 - 0 6830 - 0 - 0 - 0 - 0 - 0 Explanation Rent paid in cash on office and equipent would decrease cash by $2,990 and retained earning by $2,990. The effect on accounting equiation and balance after this transaction would be as d. -2990 + + = + - - 2990 - - - - Bal. 41840 + 0 + 2440 = 2440 + 38000 - 0 6830 - 2990 - 0 - 0 - 0 - 0 Explanation Cash paid to creditor would decrease both cash and accounts payable by $1,110 e. -1110 + + = -1110 + - - - - - - Bal. 40730 + 0 + 2440 = 1330 + 38000 - 0 6830 - 2990 - 0 - 0 - 0 - 0 Explanation Revenue earned on account would increase both accounts receivable and fees earned by $5,530. f. + 5530 + = + - 5530 - - - - - Bal. 40730 + 5530 + 2440 = 1330 + 38000 - 0 12360 - 2990 - 0 - 0 - 0 - 0 Explanation Expenses paid would decrease cash and increase expenses g. -990 + + = + - - - - - 660 - 330 Bal. 39740 + 5530 + 2440 = 1330 + 38000 - 0 12360 - 2990 - 0 - 0 - 660 - 330 Explanation Salaries Expenses paid would decrease cash and increase expenses h. -2100 + + = + - - - 2100 - - - Bal. 37640 + 5530 + 2440 = 1330 + 38000 - 0 12360 - 2990 - 2100 - 0 - 660 - 330 Explanation Supplies used would be deducted from supplies i. + + -1000 = + - - - - 1000 - - Bal. 37640 + 5530 + 1440 = 1330 + 38000 - 0 12360 - 2990 - 2100 - 1000 - 660 - 330 Explanation Dividend paid would decrease both cash and retained earning by $1,990 j. -1990 + + = + - 1990 - - - - - Bal. 35650 + 5530 + 1440 = 1330 + 38000 - 1990 12360 - 2990 - 2100 - 1000 - 660 - 330
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