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:

Opened a business bank account with a deposit of $30,000 from personal funds.

Purchased office supplies on account, $1,800.

Received cash from fees earned for managing rental property, $10,000.

Paid rent on office and equipment for the month, $4,500.

Paid creditors on account, $1,250.

Billed customers for fees earned for managing rental property, $16,800.

Paid automobile expenses (including rental charges) for the month, $750, and miscellaneous expenses, $980.

Paid office salaries, $4,000.

Determined that the cost of supplies on hand was $680; therefore, the cost of supplies used was $1,120.

Withdrew cash for personal use, $7,500.

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 increased by owner's investments and revenues and decreased 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?
Increased to $

Answer 1

• All working forms part of the answer
• Requirement 1

	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.	$        30,000.00	+		+		=		+	$            30,000.00	-		+		-		-		-		-		-
b.		+		+	$              1,800.00	=	$         1,800.00	+		-		+		-		-		-		-		-
Bal.	$        30,000.00	+	$                          -	+	$              1,800.00	=	$         1,800.00	+	$            30,000.00	-	$                           -	+	$                       -	-	$             -	-	$          -	-	$                    -	-	$           -	-	$           -
c.	$        10,000.00	+		+		=		+		-		+	$            10,000.00	-		-		-		-		-
Bal.	$        40,000.00	+	$                          -	+	$              1,800.00	=	$         1,800.00	+	$            30,000.00	-	$                           -	+	$            10,000.00	-	$             -	-	$          -	-	$                    -	-	$           -	-	$           -
d.	$         (4,500.00)	+		+		=		+		-		+		-	$   4,500.00	-		-		-		-
Bal.	$        35,500.00	+	$                          -	+	$              1,800.00	=	$         1,800.00	+	$            30,000.00	-	$                           -	+	$            10,000.00	-	$   4,500.00	-	$          -	-	$                    -	-	$           -	-	$           -
e.	$         (1,250.00)	+		+		=	$        (1,250.00)	+		-		+		-		-		-		-		-
Bal.	$        34,250.00	+	$                          -	+	$              1,800.00	=	$            550.00	+	$            30,000.00	-	$                           -	+	$            10,000.00	-	$   4,500.00	-	$          -	-	$                    -	-	$           -	-	$           -
f.		+	$               16,800.00	+		=		+		-		+	$            16,800.00	-		-		-		-		-
Bal.	$        34,250.00	+	$               16,800.00	+	$              1,800.00	=	$            550.00	+	$            30,000.00	-	$                           -	+	$            26,800.00	-	$   4,500.00	-	$          -	-	$                    -	-	$           -	-	$           -
g.	$         (1,730.00)	+		+		=		+		-		+		-		-		-		-	$    750.00	-	$    980.00
Bal.	$        32,520.00	+	$               16,800.00	+	$              1,800.00	=	$            550.00	+	$            30,000.00	-	$                           -	+	$            26,800.00	-	$   4,500.00	-	$          -	-	$                    -	-	$    750.00	-	$    980.00
h.	$         (4,000.00)	+		+		=		+		-		+		-		-	$ 4,000.00	-		-		-
Bal.	$        28,520.00	+	$               16,800.00	+	$              1,800.00	=	$            550.00	+	$            30,000.00	-	$                           -	+	$            26,800.00	-	$   4,500.00	-	$ 4,000.00	-	$                    -	-	$    750.00	-	$    980.00
i.		+		+	$             (1,120.00)	=		+		-		+		-		-		-	$           1,120.00	-		-
Bal.	$        28,520.00	+	$               16,800.00	+	$                680.00	=	$            550.00	+	$            30,000.00	-	$                           -	+	$            26,800.00	-	$   4,500.00	-	$ 4,000.00	-	$           1,120.00	-	$    750.00	-	$    980.00
j.	$         (7,500.00)	+		+		=		+		-	$                  7,500.00	+		-		-		-		-		-
Bal.	$        21,020.00	+	$              16,800.00	+	$                680.00	=	$            550.00	+	$            30,000.00	-	$                  7,500.00	+	$            26,800.00	-	$   4,500.00	-	$ 4,000.00	-	$           1,120.00	-	$    750.00	-	$    980.00

• Requirement 3

Net Income calculation

Fees Earned	$       26,800.00
Expenses:
Rent Expense	$         4,500.00
Salaries Expense	$         4,000.00
Supplies Expense	$         1,120.00
Auto Expense	$             750.00
Misc. Expense	$             980.00
Total Expenses	$       11,350.00
Net Income	$       15,450.00

• Requirement 4

Chad’s beginning capital = $ 0

Chad’s Ending Capital = Chad’s Capital balance + Net Income – Chad’s Withdrawals

= $ 30,000 invested + $ 15,450 Net Income – $ 7,500 Withdrawals = $ 37,950

Hence, June's transactions (a-j) has increased Chad Wilson’s capital to $ 37,950