Question

Solve the follwing Problem.

First create an Accounting Equation Grid. Then, Income statement, Retained Earning statment and Balance Sheet.

On August 1, 2018, Brooke Kline established Western Realty. Brooke completed the following transactions during the month of August.

A.	Opened a business  bank account with a deposit of $22,000 in exchange for common stock.
B.	Paid rent on office and equipment for the month, $2,500.
C.	Paid automobile expenses (including rental charge) for month, $1,350, and miscellaneous expenses, $500.
D.	Purchased office supplies on account, $1,150.
E.	Earned sales commissions, receiving cash, $18,000.
F.	Paid creditor on account, $650.
G.	Paid office salaries, $2,900.
H.	Paid dividends, $3,000.
I.	Determined that the cost of supplies on hand was $400; therefore, the cost of supplies used was $750.

Required:

1.

Indicate the effect of each transaction and the balances after each transaction, using the tabular headings in the exhibit below. In each transaction row (rows indicated by a letter), you must indicate the math sign (+ or -) in columns affected by the transaction. You will not need to enter math signs in the balance rows (rows indicated by Bal.). Entries of 0 (zero) are not required and will be cleared if entered.

Assets		= Liabilities +	Stockholders’ Equity
		Accounts	Common		Sales	Salaries	Rent	Auto	Supplies	Miscellaneous
Cash	+ Supplies	= Payable	+ Stock	- Dividends	+ Commissions	- Expense	- Expense	- Expense	- Expense	- Expense

	2. a. Prepare an income statement for August. If a net loss has been incurred, enter that amount as a negative number using a minus sign. Refer to the list of Labels, Accounts and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. You will not need to enter colons (:) on the income statement.
	2. b. Prepare a retained earnings statement for August. Refer to the list of Labels, Accounts and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. If a net loss is incurred or dividends were paid, enter that amount as a negative number using a minus sign. The word “Less” or “Add” is not needed in the Retained Earnings Statement. If an amount is zero, enter "0".
	2. c. Prepare a balance sheet as of August 31. Refer to the list of Labels, Accounts and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading.

Answer 1

1. EFFECT OF EACH TRANSACTION :
	Cash	+	Supplies	=	Account payable	+	Common stock	-	Dividends	+	Sales commission	-	Salaries expenses	-	Rent expenses	-	Auto expenses	-	Supplies expenses	-	Misc.expenses
A	$22,000						$22,000
B	-$2,500														$2,500
C	-$1,850																$1,350				$500
D			$1,150		$1,150
E	$18,000										$18,000
F	-$650				-$650
G	-$2,900												$2,900
H	-$3,000								$3,000
I			-$750																$750
	$29,100		$400		$500		$22,000		$3,000		$18,000		$2,900		$2,500		$1,350		$750		$500
	$29,500				$29,500

2. Income statement :
Revenue
Sales commission	$18,000
Total revenue		$18,000
Less: Expenses
Rent expenses	$2,500
Salaries expenses	$2,900
supplies expenses	$750
Automobile expenses	$1,350
Miscellaneous expenses	$500
Total expenses		$8,000
Net income		$10,000

2. b.Statement of retained earnings
Opening balance	$0
Add; Net income	$10,000
Less : DIvidend	-$3,000
ENding balance	$7,000

Balance sheet :
Assets
Cash	$29,100
supplies	$400
Total assets	$29,500
Liabilities
Account payable	$500
Total liabilities	$500
Shareholder's equity
common stock	$22,000
retained earnings	$7,000
Total shareholder's equtiy	$29,000
Total liabilities and shareholder's equity	$29,500