On April 1, 2019, Maria Adams established Custom Realty. Maria completed the following transactions during the month of April:

On April 1, 2019, Maria Adams established Custom Realty. Maria completed the following transactions during the month of April:

a. Opened a business bank account with a deposit of $24,000 from personal funds.

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

c. Paid automobile expenses (including rental charge) for the month, $1,350, and miscellaneous expenses, $600.

d. Purchased office supplies on account, $1,200.

e. Earned sales commissions (revenue) from selling real estate, receiving cash, $19,800.

f. Paid creditor on account, $750.

g. Paid office salaries, $2,500.

h. Withdrew cash for personal use, $3,500.

i. Determined that the cost of supplies on hand was $300; 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 Accounts Payable + Maria Adams,  Capital – Maria Adams, Drawing + Sales Commissions – Rent Expense – Salaries   Expense – Auto Expense –

2. Prepare an income statement for April, a statement of owner’s equity for April, and a balance sheet as of April 30.

Answer:

1. = +

+ = + – + – – – – –

(a) + 24,000 + 24,000

(b) – 3,600– 3,600

Bal. 20,40024,000– 3,600

(c) – 1,950– 1,350 – 600

Bal. 18,45024,000– 3,600 – 1,350 – 600

(d) + 1,200 + 1,200

Bal. 18,450 1,200 1,200 24,000– 3,600 – 1,350 – 600

(e) + 19,800+ 19,800

Bal. 38,250 1,200 1,200 24,000 19,800 – 3,600 – 1,350 – 600

(f) – 750 – 750

Bal. 37,500 1,200 450 24,000 19,800 – 3,600 – 1,350 – 600

(g) – 2,500– 2,500

Bal. 35,000 1,200 450 24,000 19,800 – 3,600 – 2,500 – 1,350 – 600

(h) – 3,500– 3,500

Bal. 31,500 1,200 450 24,000 – 3,500 19,800 – 3,600 – 2,500 – 1,350 – 600

(i) – 900– 900

Bal. 31,500 300 450 24,000 – 3,500 19,800 – 3,600 – 2,500 – 1,350 – 900 – 600

2.

Sales commissions$19,800

Expenses:

Rent expense$3,600

Salaries expense2,500

Automobile expense1,350

Supplies expense900

Miscellaneous expense600

Total expenses8,950

Net income$10,850

Maria Adams, capital, April  1, 2019$ 0

Investment on April 1, 2019$24,000

Net income for April10,850

Withdrawals(3,500)

Increase in owner’s equity31,350

Maria Adams, capital, April 30, 2019$31,350

Cash$31,500

Supplies300

Total assets$31,800

Accounts payable$ 450

Maria Adams, capital31,350

Total liabilities and owner’s equity$31,800