Question

Transactions

On June 1 of the current year, Chad Wilson established a business to manage rental property. He completed the following transactions during June:

1. Opened a business bank account with a deposit of $28,000 from personal funds.
2. Purchased office supplies on account, $3,450.
3. Received cash from fees earned for managing rental property, $9,680.
4. Paid rent on office and equipment for the month, $4,230.
5. Paid creditors on account, $1,570.
6. Billed customers for fees earned for managing rental property, $7,840.
7. Paid automobile expenses (including rental charges) for the month, $940, and miscellaneous expenses, $470.
8. Paid office salaries, $2,980.
9. Determined that the cost of supplies on hand was $2,040; therefore, the cost of supplies used was $1,410.
10. Withdrew cash for personal use, $2,820.

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)

Assets

=

Liabilities

+

Owner's Equity

Item

Cash

+

Accounts Receivable

+

Supplies

=

Accounts Payable

+

Chad Wilson, Capital

-

Chad Wilson, Drawing

+

Fees Earned

-

Rent Expense

-

Salaries Expense

-

Supplies Expense

-

Auto Expense

-

Misc. Expense

a.

b.

Bal.

c.

Bal.

d.

Bal.

e.

Bal.

f.

Bal.

g.

Bal.

h.

Bal.

i.

Bal.

j.

Bal.

2. Owner's equity is the right of owners to the assets of the business. These rights are   by owner's investments and revenues and   by owner's withdrawals and expenses.

3. Determine the net income for June.
$

4. June's transactions (a-j) increased or decreased Chad Wilson's capital to?

Answer 1

	Assets				Liabilities	Equity		Revnue	expenses
	Cash	Accounts Receivable	Supplies	=	Accounts Payable	Chad Wilson Capital	Chad Wilson Drawing	Fees earned	Rental expense	Salaries expense	Supplies expense	Auto expense	Miscellaneous expense
1.	28,000			=		28,000
2.			3450	=	3450
3.	9,680			=				9,680
4.	-4230			=					-4230
5.	-1570			=	-1570
6.		7,840		=				7,840
7.	-1,410			=								-940	-470
8.	-2980			=						-2980
9			-1410	=							-1410
10	-2820			=			-2820
Total	24,670	7,840	2,040	=	1,880	28,000	-2,820	17,520	-4,230	-2980	-1410	-940	-470

2. Owner's equity is the right of owners to the assets of the business. These rights are INCREASED by owner’s investments and revenues and DECREASED by owner's withdrawals and expenses.

3.

Computation of Net Income ($)

Revenue: Fees		17,520
Less: Expenses
Rental expenses	(4230)
Salaries expenses	(2980)
Supplies expenses	(1410)
Auto expense	(940)
Miscellaneous expense	(470)
Total Expenses		(10,030)
Net Income		7,490

Capital Balance ($)

Investment made	28,000
Add: Net Income	7,490
Less: Drawings	(2,820)
Ending balance	32,670

Hence increase by $ 4,670.