Question

On August 1, 20Y9, Brooke Kline established Western Realty. Brooke completed the following transactions during the month of August:

a.	Opened a business bank account with a deposit of $25,000 in exchange for common stock.
b.	Paid rent on office and equipment for the month, $2,800.
c.	Paid automobile expenses for month, $1,500, and miscellaneous expenses, $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 after each transaction, using the tabular headings in the exhibit below. In each transaction row (rows indicated by a letter), you must indicate the math sign (+ or -) in columns affected by the transaction. You will not need to enter math signs in the balance rows (rows indicated by Bal.). Entries of 0 (zero) are not required and 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 list of Accounts, Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. You will not need to enter colons (:) on the income statement. If a net loss has been incurred, enter that amount 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 for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. If a net loss is incurred or dividends were paid, enter that amount as a negative number using a minus sign. If an amount is zero, enter "0".
	2. c. Prepare a balance sheet as of August 31. Refer to the list of Accounts, Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading.

Answer 1

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)	Income Statement
			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 of Stockholer'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)	Balance Sheet	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's Equity	34,300