On July 1, 2019, Pat Glenn established Half Moon Realty. Pat completed the following transactions during the month of July:

On July 1, 2019, Pat Glenn established Half Moon Realty. Pat completed the following transactions during the month of July:

a. Opened a business bank account with a deposit of $25,000 from personal funds.

b. Purchased office supplies on account, $1,850.

c. Paid creditor on account, $1,200.

d. Earned sales commissions, receiving cash, $41,500.

e. Paid rent on office and equipment for the month, $3,600.

f. Withdrew cash for personal use, $4,000.

g. Paid automobile expenses (including rental charge) for the month, $3,050, and miscellaneous expenses, $1,600.

h. Paid office salaries, $5,000.

i. Determined that the cost of supplies on hand was $950; therefore, the cost of supplies used was $900.

Instructions

1. Indicate the effect of each transaction and the balances after each transaction, using the following tabular headings:

Assets 5 Liabilities 1 Owner’s Equity Cash + Supplies = Accounts Payable + Pat Glenn, Capital – Pat Glenn,  Drawing + Sales Commissions –

2. Prepare an income statement for July, a statement of owner’s equity for July, and a balance sheet as of July 31.

Answer:

1. = +

+ = + – + – – – – –

(a) + 25,000 + 25,000

(b)  + 1,850 + 1,850

Bal. 25,000 1,850 1,850 25,000

(c) – 1,200 – 1,200

Bal. 23,800 1,850 650 25,000

(d) + 41,500+ 41,500

Bal. 65,300 1,850 650 25,000 41,500

(e) – 3,600– 3,600

Bal. 61,700 1,850 650 25,000 41,500 – 3,600

(f) – 4,000– 4,000

Bal. 57,700 1,850 650 25,000 – 4,000 41,500 – 3,600

(g) – 4,650– 3,050 – 1,600

Bal. 53,050 1,850 650 25,000 – 4,000 41,500 – 3,600 – 3,050 – 1,600

(h) – 5,000– 5,000

Bal. 48,050 1,850 650 25,000 – 4,000 41,500 – 5,000 – 3,600 – 3,050 – 1,600

(i)  – 900– 900

Bal. 48,050 950 650 25,000 – 4,000 41,500 – 5,000 – 3,600 – 3,050 – 900 – 1,600

2.

Sales commissions$41,500

Expenses:

Salaries expense$5,000

Rent expense3,600

Automobile expense3,050

Supplies expense900

Miscellaneous expense1,600

Total expenses14,150

Net income$27,350

Pat Glenn, capital, July 1, 2019$ 0

Investment on July 1, 2019$25,000

Net income for July27,350

Withdrawals(4,000)

Increase in owner’s equity48,350

Pat Glenn, capital, July 31, 2019$48,350

Cash$48,050

Supplies950

Total assets$49,000

Accounts payable$ 650

Pat Glenn, capital48,350

Total liabilities and owner’s equity$49,000