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 $20,000 from personal funds.
2. Purchased office supplies on account, $2,060.
3. Paid creditor on account, $1,300.
4. Earned sales commissions, receiving cash, $20,980.
5. Paid rent on office and equipment for the month, $4,110.
6. Withdrew cash for personal use, $7,000.
7. Paid automobile expenses (including rental charge) for the month, $1,970, and miscellaneous expenses, $940.
8. Paid office salaries, $2,480.
9. Determined that the cost of supplies on hand was $690; therefore, the cost of supplies used was $1,370.

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.

2. Prepare 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		$

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		$
	$
Net income for July
Withdrawals
Decrease in owners equity
Pat Glenn, capital, July 31, 2019		$

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 each Transaction and balance after each Transaction:-

Half Moon Realty

Worksheet

For the Month of July,2019

No.	Assets			=	Liabilities	+	Owner's		Equity	Explanation
	Cash	+	Supplies	=	Accounts Payable	+	Pet Glenn, Capital	-	Pet Glenn, Drawing
a.	$20,000	+		=		+	$20,000	-
Bal.	$20,000	+		=		+	$20,000	-
b.		+	$2,060	=	$2,060	+		-
Bal.	$20,000	+	$2,060	=	$2,060	+	$20,000	-
c.	(1,300)	+		=	(1,300)	+		-
Bal.	$18,700	+	$2,060	=	$760	+	$20,000	-
d.	20,980	+		=		+	20,980	-		Earned Sales Commission
Bal.	$39,680	+	$2,060	=	$760	+	$40,980	-
e.	(4,110)	+		=		+	(4,110)	-		Rent Expense
Bal.	$35,570	+	$2,060	=	$760	+	$36,870	-
f.	(7,000)	+		=		+		-	$7,000	withdrawal cash
Bal.	$28,570	+	$2,060	=	$760	+	$36,870	-	$7,000
g.	(1,970)	+		=		+	(1,970)	-		Automobile Expense
	(940)	+		=		+	(940)	-		Miscellaneous Expense
Bal.	$25,660	+	$2,060	=	$760	+	$33,960	-	$7,000
h.	(2,480)	+		=		+	(2,480)	-		Salaries Expense
Bal.	$23,180	+	$2,060	=		+	$31,480	-	$7,000
I.		+	(1,370)	=		+	(1,370)	-		Supplies Expense
Bal.	$23,180	+	$690	=	$760	+	$30,110	-	$7,000

2. Preparing Income Statement and Statement of Owner's Equity for the Month of July:-

Half Moon Realty

Income Statement

For the Month Ended July 31,2019

Accounts	Amount	Amount
Sales Commission		$20,980
Less:- Expenses
Rent Expense	$4,110
Automobile Expense	1,970
Miscellaneous Expense	940
Salaries Expense	2,480
Supplies Expense	1,370
Total Expenses		($10,870)
Net Income		$10,110

Half Moon Realty

Statement of Owner's Equity

For the Month Ended July 31,2019

Accounts	Amount
Pat Glenn, Capital, July 1	$20,000
Add:- Net Income	10,110
Increase in Owner's Equity	$30,110
Less:- Drawings	(7,000)
Pat Glenn, Capital, July 31	$23,110

3. Preparing Balance Sheet for the Month of July:-

​​​​​​Half Moon Realty

Balance Sheet

July 31,2019

Accounts	Amount	Amount
Assets:-
Cash	$23,180
Supplies	690
Total Assets		$23,870
Liabilities:-
Accounts Payable	$760
Owner's Equity:-
Pat Glenn, Capital, July 31	$23,110
Total Liabilities and Owner's Equity		$23,870