Question

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

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)

1. Opened a business bank account with a deposit of $28,000 from personal funds.
2. Purchased office supplies on account, $2,120.
3. Received cash from fees earned for managing rental property, $5,790.
4. Paid rent on office and equipment for the month, $2,600.
5. Paid creditors on account, $960.
6. Billed customers for fees earned for managing rental property, $4,810.
7. Paid automobile expenses (including rental charges) for the month, $580, and miscellaneous expenses, $290.
8. Paid office salaries, $1,830.
9. Determined that the cost of supplies on hand was $1,250; therefore, the cost of supplies used was $870.
10. Withdrew cash for personal use, $1,730.

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?
  to $

Answer 1

Answer 1

   Assets = Liabilities + Owner's Equity   

Item	Cash	+	Accounts Receivables	+	Supplies	=	Accounts Payable	+	Chad Wilson, Capital	-	Chad Wilson, Drawings	+	Fees Earned	-	Rent Expenses	-	Salaries Expenses	-	Supplies Expenses	-	Auto Expenses	-	Miscellaneous Expenses
a.	28,000	+		+		=		+	28,000	-		+		-		-		-		-		-
Balance	28,000	+		+		=		+	28,000	-		+		-		-		-		-		-
b.		+		+	2,120	=	2,120	+		-		+		-		-		-		-		-
Balance	28,000	+		+	2,120	=	2,120	+	28,000	-		+		-		-		-		-		-
c.	5,790	+		+		=		+		-		+	5,790	-		-		-		-		-
Balance	33,790	+		+	2,120	=	2,120	+	28,000	-		+	5,790	-		-		-		-		-
d.	-2,600	+		+		=		+		-		+		-	-2,600	-		-		-		-
Balance	31,190	+		+	2,120	=	2,120	+	28,000	-		+	5,790	-	-2,600	-		-		-		-
e.	-960	+		+		=	-960	+		-		+		-		-		-		-		-
Balance	30,230	+	0	+	2,120	=	1,160	+	28,000	-		+	5,790	-	-2,600	-		-		-		-
f.		+	4,810	+		=		+		-		+	4,810	-		-		-		-		-
Balance	30,230	+	4,810	+	2,120	=	1,160	+	28,000	-		+	10,600	-	-2,600	-		-		-		-
g.	-870	+		+		=		+		-		+		-		-		-		-	-580	-	-290
Balance	29,360	+	4,810	+	2,120	=	1,160	+	28,000	-		+	10,600	-	-2,600	-		-		-	-580	-	-290
h.	-1,830	+		+		=		+		-		+		-		-	-1,830	-		-		-
Balance	27,530	+	4,810	+	2,120	=	1,160	+	28,000	-		+	10,600	-	-2,600	-	-1,830	-		-	-580	-	-290
i.		+		+	-870	=		+		-		+		-		-		-	-870	-		-
Balance	27,530	+	4,810	+	1,250	=	1,160	+	28,000	-		+	10,600	-	-2,600	-	-1,830	-	-870	-	-580	-	-290
j.	-1,730	+		+		=		+		-	-1,730	+		-		-		-		-		-
Balance	25,800	+	4,810	+	1,250	=	1,160	+	28,000	-	-1,730	+	10,600	-	-2,600	-	-1,830	-	-870	-	-580	-	-290

Therefore

Assets=Liabilities+Owner's Equity

31,860 = 1,160+30,700

Answer 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.

Answer 3 : Net Income of the June is

Particulars	Amount In $
Fees Earned	10,600
Salaries Expense	(1,830)
Supplies Expense	(870)
Auto Exp	(580)
Misc Exp.	(290)
Rent Exp.	(2600)
Net Income	4,430

Answer 4 : June's transactions (a-j) increased or decreased Chad Wilson's capital to $30,700

Opening Capital	$28,000
Net Income	$4,430
Withdrawal	($1,730)
Closing Capital	$30,700