Question

Transactions

On June 1 of the current year, Maria Edsall established a business to manage rental property. She completed the following transactions during June:

Opened a business bank account with a deposit of $45,000 from personal funds.

Purchased supplies (pens, file folders, and copy paper) on account, $3,180.

Received cash from fees earned for managing rental property, $8,810.

Paid rent on office and equipment for the month, $3,900.

Paid creditors on account, $1,440.

Billed customers for fees earned for managing rental property, $7,220.

Paid automobile expenses for month, $870, and miscellaneous expenses, $430.

Paid office salaries, $2,740.

Determined that the cost of supplies on hand was $1,880; therefore, the cost of supplies used was $1,300.

Withdrew cash for personal use, $2,600.

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

+

Maria Edsall, Capital

-

Maria Edsall, Drawing

+

Fees Earned

-

Rent Expense

-

Sal. Expense

-

Supp. Expense

-

Auto Expense

-

Misc. Expense

Item

a.

a.

b.

b.

Bal.

Bal.

c.

c.

Bal.

Bal.

d.

d.

Bal.

Bal.

e.

e.

Bal.

Bal.

f.

f.

Bal.

Bal.

g.

g.

Bal.

Bal.

h.

h.

Bal.

Bal.

i.

i.

Bal.

Bal.

j.

j.

Bal.

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 Maria Edsall's capital to?
to $

Answer 1

• All working forms part of the answer
• Requirement 1

	Assets					=	Liabilities	+	Owner's Equity
Item	Cash	+	Accounts Receivable	+	Supplies	=	Accounts Payable	+	Maria Edsall, Capital	-	Maria Edsall, Drawing	+	Fees Earned	-	Rent Expense	-	Sal. Expense	-	Supp. Expense	-	Auto Expense	-	Misc. Expense	Item
a.	$                  45,000.00	+		+		=		+	$       45,000.00	-		+		-		-		-		-		-		a.
b.		+		+	$                 3,180.00	=	$                3,180.00	+		-		+		-		-		-		-		-		b.
Bal.	$                  45,000.00	+	$                          -	+	$                 3,180.00	=	$                3,180.00	+	$       45,000.00	-	$                   -	+	$                  -	-	$              -	-	$                           -	-	$                   -	-	$                -	-	$                    -	Bal.
c.	$                    8,810.00	+		+		=		+		-		+	$        8,810.00	-		-		-		-		-		c.
Bal.	$                 53,810.00	+	$                          -	+	$                 3,180.00	=	$                3,180.00	+	$       45,000.00	-	$                   -	+	$        8,810.00	-	$              -	-	$                           -	-	$                   -	-	$                -	-	$                    -	Bal.
d.	$                   (3,900.00)	+		+		=		+		-		+		-	$     3,900.00	-		-		-		-		d.
Bal.	$                  49,910.00	+	$                          -	+	$                 3,180.00	=	$                3,180.00	+	$       45,000.00	-	$                   -	+	$        8,810.00	-	$     3,900.00	-	$                           -	-	$                   -	-	$                -	-	$                    -	Bal.
e.	$                   (1,440.00)	+		+		=	$               (1,440.00)	+		-		+		-		-		-		-		-		e.
Bal.	$                  48,470.00	+	$                          -	+	$                 3,180.00	=	$                1,740.00	+	$       45,000.00	-	$                   -	+	$        8,810.00	-	$     3,900.00	-	$                           -	-	$                   -	-	$                -	-	$                    -	Bal.
f.		+	$                 7,220.00	+		=		+		-		+	$        7,220.00	-		-		-		-		-		f.
Bal.	$                  48,470.00	+	$                 7,220.00	+	$                 3,180.00	=	$                1,740.00	+	$       45,000.00	-	$                   -	+	$       16,030.00	-	$     3,900.00	-	$                           -	-	$                   -	-	$                -	-	$                    -	Bal.
g.	$                   (1,300.00)	+		+		=		+		-		+		-		-		-		-	$         870.00	-	$             430.00	g.
Bal.	$                  47,170.00	+	$                 7,220.00	+	$                 3,180.00	=	$                1,740.00	+	$       45,000.00	-	$                   -	+	$       16,030.00	-	$     3,900.00	-	$                           -	-	$                   -	-	$         870.00	-	$             430.00	Bal.
h.	$                   (2,740.00)	+		+		=		+		-		+		-		-	$                 2,740.00	-		-		-		h.
Bal.	$                  44,430.00	+	$                 7,220.00	+	$                 3,180.00	=	$                1,740.00	+	$       45,000.00	-	$                   -	+	$       16,030.00	-	$     3,900.00	-	$                 2,740.00	-	$                   -	-	$         870.00	-	$             430.00	Bal.
i.		+		+	$                (1,300.00)	=		+		-		+		-		-		-	$          1,300.00	-		-		i.
Bal.	$                  44,430.00	+	$                 7,220.00	+	$                 1,880.00	=	$                1,740.00	+	$       45,000.00	-	$                   -	+	$       16,030.00	-	$     3,900.00	-	$                 2,740.00	-	$          1,300.00	-	$         870.00	-	$             430.00	Bal.
j.	$                   (2,600.00)	+		+		=		+		-	$          2,600.00	+		-		-		-		-		-		j.
Bal.	$                  41,830.00	+	$                 7,220.00	+	$                 1,880.00	=	$                1,740.00	+	$       45,000.00	-	$          2,600.00	+	$       16,030.00	-	$    3,900.00	-	$                 2,740.00	-	$          1,300.00	-	$         870.00	-	$             430.00	Bal.

• Requirement 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.

• Requirement 3

Fees Earned		$               16,030.00
Rent Expense	$                 3,900.00
Sal. Expense	$                 2,740.00
Supp. Expense	$                 1,300.00
Auto Expense	$                   870.00
Misc. Expense	$                   430.00
Total Expenses		$                       9,240.00
Net Income		$                       6,790.00

• Requirement 4

A	Capital Introduced		$           45,000.00
B	Net Income		$             6,790.00
C=A+B	Total		$           51,790.00
D	Drawings		$             2,600.00
E=C-D	Ending Balance		$           49,190.00
F=D - A	Increase in Capital balance		$             4,190.00

June’s transactions have resulted in increase of Capital by $4190 to $ 49,190