Question

Transactions; Financial Statements

On July 1, 2019, Pat Glenn established Half Moon Realty. Pat completed the following transactions during the month of July:

1. Opened a business bank account with a deposit of $25,000 from personal funds.
2. Purchased office supplies on account, $2,530.
3. Paid creditor on account, $1,600.
4. Earned sales commissions, receiving cash, $25,850.
5. Paid rent on office and equipment for the month, $5,070.
6. Withdrew cash for personal use, $8,000.
7. Paid automobile expenses (including rental charge) for the month, $2,430, and miscellaneous expenses, $1,160.
8. Paid office salaries, $3,050.
9. Determined that the cost of supplies on hand was $850; therefore, the cost of supplies used was $1,680.

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. If required, enter negative values as negative numbers.

Assets

=

Liabilities +

Owner's Equity

Cash

+

Supplies

=

Accounts Payable

+

Pat Glenn, Capital

-

Pat Glenn, Drawing

+

Sales Commissions

-

Rent Expense

-

Office Salaries Expense

-

Auto Expense

-

Supplies Expense

-

Miscellaneous Expense

a.

b.

Bal.

c.

Bal.

d.

Bal.

e.

Bal.

f.

Bal.

g.

Bal.

h.

Bal.

i.

Bal.

repare an income statement for July.

Half Moon Realty
Income Statement
For the Month Ended July 31, 2019
Sales commissions		$
Expenses:
Rent expense	$
Office salaries expense
Automobile expense
Supplies expense
Miscellaneous expense
Total expenses
Net income		$

Feedback

2. An income statement reports the revenues and expenses. When revenues are larger than the expenses, the difference is net income.

Prepare a statement of owner's equity for July. If an amount is zero, enter "0".

Half Moon Realty
Statement of Owner's Equity
For the Month Ended July 31, 2019
Pat Glenn, capital,July 1, 2019		$
Investment on July 1, 2019	$
Net income for July
Withdrawals
Increase in owners equity
Pat Glenn, capital, July 31, 2019		$

Feedback

3. Follow Example Exercise 1-5. Recall that the statement of owner's equity considers beginning owner capital, additional investments of the owner and net income for the year and withdrawals to calculate the ending capital. The net income from the income statement is needed to complete the statement of owner's equity.

Prepare a balance sheet as of July 31.

Half Moon Realty
Balance Sheet
July 31, 2019
Assets
Cash	$
Supplies
Total assets	$
Liabilities
Accounts payable	$
Owner's Equity
Pat Glenn, capital
Total liabilities and owner's equity	$

Answer 1

1. Indicating the Effect of Transactions:-

			Assets	=	Liabilities	+	Owners		Equity
	Cash	+	Supplies	=	Accounts Payable	+	Pat Glenn, Capital	-	Pat Glenn, Drawings	+	Sales Commissions	-	Rent Expense	-	Office Salaries Expense	-	Auto Expense	-	Supplies Expense	-	Miscellaneous Expense
a.	$25,000	+		=		+	$25,000	-		+		-		-		-		-		-
b.		+	$2,530	=	$2,530	+		-		+		-		-		-		-		-
Bal.	$25,000	+	$2,530	=	$2,530	+	$25,000	-		+		-		-		-		-		-
c.	(1,600)	+		=	(1,600)	+		-		+		-		-		-		-		-
Bal.	$23,400	+	$2,530	=	$930	+	$25,000	-		+		-		-		-		-		-
d.	25,850	+		=		+		-		+	25,850	-		-		-		-		-
Bal.	$49,250	+	$2,530	=	$930	+	$25,000	-		+	$25,850	-		-		-		-		-
e.	(5,070)	+		=		+		-		+		-	5,070	-		-		-		-
Bal.	$44,180	+	$2,530	=	$930	+	$25,000	-		+	$25,850	-	$5,070	-		-		-		-
f.	(8,000)	+		=		+		-	8,000	+		-		-		-		-		-
Bal.	$36,180	+	$2,530	=	$930	+	$25,000	-	$8,000	+	$25,850	-	$5,070	-		-		-		-
g.	(3,590)	+		=		+		-		+		-		-		-	2,430	-		-	1,160
Bal.	$32,590	+	$2,530	=	$930	+	$25,000	-	$8,000	+	$25,850	-	$5,070	-		-	$2,430			-	$1,160
h.	(3,050)	+		=		+		-		+		-		-	3,050	-		-		-
Bal.	$29,540	+	$2,530	=	$930	+	$25,000	-	$8,000	+	$25,850	-	$5,070	-	$3,050	-	$2,430	-		-	$1,160
I.		+	(1,680)	=		+		-		+		-		-		-		-	1,680	-
Bal.	$29,540	+	$850	=	$930	+	$25,000	-	$8,000	+	$25,850	-	$5,070	-	$3,050	-	$2,430	-	$1,680	-	$1,160

Preparing Trial Balance:-

Half Moon Realty

Trial Balance

July 31,2019

Accounts	Debit	Credit
Cash	$29,540
Supplies	850
Accounts Payable		$930
Pat Glenn, Capital		25,000
Pat Glenn, Drawings	8,000
Sales Commissions		25,850
Rent Expense	5,070
Office Salaries Expense	3,050
Auto Expense	2,430
Supplies Expense	1,680
Miscellaneous Expense	1,160
Totals	$51,780	$51,780

1. Preparing Income Statement:-

Half Moon Realty

Income Statement

For the Month Ended July 31,2019

Accounts	Amount	Amount
Sales Commissions		$25,850
Less:- Expenses:-
Rent Expense	$5,070
Office Salaries Expense	3,050
Auto Expense	2,430
Supplies Expense	1,680
Miscellaneous Expense	1,160
Total Expenses		$(13,390)
Net Income		$12,460

Half Moon Realty

Statement of Owner's Equity

For the Month Ended July 31,2019

Accounts	Amount
Pat Glenn, Capital, July 1,2019	$25,000
Add:- Net Income	12,460
	$37,460
Less:- Pat Glenn, Drawings	(8,000)
Pat Glenn, Capital, July 31,2019	$29,460

Half Moon Realty

Balance Sheet

July 31,2019

Accounts	Amount	Amount
Assets:-
Cash	$29,540
Supplies	$850
Total Assets		$30,390
Liabilities:-
Accounts Payable	$930
Total Liabilities		$930
Owner's Equity:-
Pat Glenn, Capital, July 31,2019	$29,460
Total Owner's Equity		$29,460
Total Liabilities and Owner's Equity		$30,390