The financial statements at the end of Atlas Realty’s first month of operations follow:

The financial statements at the end of Atlas Realty’s first month of operations follow:

Atlas Realty Income Statement For the Month Ended May 31, 2019

Fees earned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $400,000 Expenses: Wages expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $    (a) Rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,000 Supplies expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,600 Utilities expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,400 Miscellaneous expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      4,800 Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288,000 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $          (b) Atlas Realty Statement of Owner’s Equity For the Month Ended May 31, 2019 LuAnn Martin, capital, May 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $        (c) Investment on May 1, 2019. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $      (d) Net income for May . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (e) Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (f ) Increase in owner’s equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(g) LuAnn Martin, capital, May 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $      (h) Atlas Realty Balance Sheet May 31, 2019 Assets Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $123,200 Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,800 Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (i) Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $          ( j) Liabilities Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $   48,000 Owner’s Equity LuAnn Martin, capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (k) Total liabilities and owner’s equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $            (l) Atlas Realty Statement of Cash Flows  For the Month Ended May 31, 2019 Cash flows from operating activities: Cash receipts from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $        (m) Cash payments for expenses and payments to creditors . . . . . . . . . . .   (252,800) Net cash flow from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . $            (n) Cash flows from investing activities: Cash payments for acquisition of land . . . . . . . . . . . . . . . . . . . . . . . . . . .(120,000) Cash flows from financing activities: Cash receipt of owner’s investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $  160,000 Cash withdrawals by owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (64,000) Net cash flow from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . .(o) Net increase (decrease) in cash and May 31, 2019, cash balance. . . . . . . $              (p)

Instructions

By analyzing the interrelationships among the four financial statements, determine the proper amounts for (a) through (p).

Answer:

a. Wages expense, $203,200 ($288,000 – $48,000 – $17,600 – $14,400 – $4,800)

b. Net income, $112,000 ($400,000 – $288,000)

c. LuAnn Martin, capital, May 1, 2019, $0; Atlas Realty was organized on May 1, 2019.

d. Investment on May 1, 2019, $160,000; from statement of cash flows

e. Net income for May, $112,000; from (b)

f. Withdrawals, $64,000; from statement of cash flows

g. Increase in owner’s equity, $208,000 ($160,000 + $112,000 – $64,000)

h. LuAnn Martin, capital, May 31, 2019, $208,000

i. Land, $120,000; from statement of cash flows

j. Total assets, $256,000 ($123,200 + $12,800 + $120,000)

k. LuAnn Martin, capital, $208,000

l. Total liabilities and owner’s equity, $256,000 ($48,000 + $208,000)

m. Cash received from customers, $400,000; this is the same as fees earned since there are no accounts receivable.

n. Net cash flow from operating activities, $147,200 ($400,000 – $252,800)

o. Net cash flow from financing activities, $96,000 ($160,000 – $64,000)

p. Net increase in cash and May 31, 2019, cash balance, $123,200 ($147,200 – $120,000 + $96,000); also, the cash balance on the balance sheet

For each of the following errors, considered individually, indicate whether the error would cause the adjusted trial balance totals to be unequal.

For each of the following errors, considered individually, indicate whether the error would cause the adjusted trial balance totals to be unequal. If the error would cause the adjusted trial balance totals to be unequal, indicate whether the debit or credit total is higher and by how much.

a. The adjustment for accrued wages of $5,200 was journalized as a debit to Wages Expense for $5,200 and a credit to Accounts Payable for $5,200.

b. The entry for $1,125 of supplies used during the period was journalized as a debit to Supplies Expense of $1,125 and a credit to Supplies of $1,152.

Answer:

a. The totals are equal even though the credit should have been to Wages Payable instead of Accounts Payable.

b. The totals are unequal. The credit total is higher by $27 ($1,152 – $1,125).

The wages payable and wages expense accounts at May 31, after adjusting entries have been posted at the end of the first month of operations, are shown in the following T accounts:

The wages payable and wages expense accounts at May 31, after adjusting entries have been posted at the end of the first month of operations, are shown in the following T accounts:

Wages Payable
 | Bal. 7,175

Wages Expense
Bal. 73,250 |

Determine the amount of wages paid during the month.


Answers:
$66,075 ($73,250 – $7,175)