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
