On October 1, 2014, Kevin Bosley established Sunrise Realty. Kevin completed the following transactions

On October 1, 2014, Kevin Bosley established Sunrise Realty. Kevin completed the following transactions during the month of October:

a. Opened a business bank account with a deposit of $18,000 from personal funds.

b. Purchased office supplies on account, $3,200.

c. Paid creditor on account, $1,800.

d. Earned sales commissions, receiving cash, $36,750.

e. Paid rent on office and equipment for the month, $4,000.

f. Withdrew cash for personal use, $3,000.

g. Paid automobile expenses (including rental charge) for month, $2,500, and miscellaneous expenses, $1,200.

h. Paid office salaries, $3,750.

i. Determined that the cost of supplies on hand was $1,550; therefore, the cost of supplies
used was $1,650.

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 +
Kevin
Bosley,
Capital –
Kevin
Bosley,
Drawing +
Sales
Commissions –
Rent
Expense –
Salaries
Expense –
Auto
Expense –
Supplies
Expense –
Misc.
Expense


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


Answer:

1. Assets = Liabilities +
Kevin Kevin
Owner’s Equity
Cash + Supplies =
Accts.
Payable +
Bosley,
Capital
Bosley,
– Drawing +
Sales
Comm. –
Rent
Exp.
Salaries
– Exp. –
Auto
Exp.
Supplies
– Exp. –
Misc.
Exp.
(a) + 18,000 + 18,000
(b) + 3,200 + 3,200
Bal. 18,000 3,200 3,200 18,000
(c) – 1,800 – 1,800
Bal. 16,200 3,200 1,400 18,000
(d) + 36,750 + 36,750
Bal. 52,950 3,200 1,400 18,000 36,750
(e) – 4,000 – 4,000
Bal. 48,950 3,200 1,400 18,000 36,750 – 4,000
(f) – 3,000 – 3,000
Bal. 45,950 3,200 1,400 18,000 – 3,000 36,750 – 4,000
(g) – 3,700 – 2,500 – 1,200
Bal. 42,250 3,200 1,400 18,000 – 3,000 36,750 – 4,000 – 2,500 – 1,200
(h) – 3,750 – 3,750
Bal. 38,500 3,200 1,400 18,000 – 3,000 36,750 – 4,000 – 3,750 – 2,500 – 1,200
(i) – 1,650 – 1,650
Bal. 38,500 1,550 1,400 18,000 – 3,000 36,750 – 4,000 – 3,750 – 2,500 – 1,650 – 1,200



2. SUNRISE REALTY
Income Statement
For the Month Ended October 31, 2014
Sales commissions $36,750
Expenses:
Rent expense $4,000
Salaries expense 3,750
Automobile expense 2,500
Supplies expense 1,650
Miscellaneous expense 1,200
Total expenses 13,100
Net income $23,650
SUNRISE REALTY
Statement of Owner’s Equity
For the Month Ended October 31, 2014
Kevin Bosley, capital, October 1, 2014 $ 0
Investment on October 1, 2014 $18,000
Net income for October 23,650
$41,650
Less withdrawals 3,000
Increase in owner’s equity 38,650
Kevin Bosley, capital, October 31, 2014 $38,650
SUNRISE REALTY
Balance Sheet
October 31, 2014
Assets Liabilities
Cash $38,500 Accounts payable $ 1,400
Supplies 1,550
Owner’s Equity
Kevin Bosley, capital 38,650
Total liabilities and
Total assets $40,050 owner’s equity $40,050