On April 1, 2014, Maria Adams established Custom Realty. Maria completed the following transactions

On April 1, 2014, 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 month, $1,350, and miscellaneous expenses, $600.

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

e. Earned sales commissions, 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
Cash + Supplies =
Accounts
Payable +
Maria
Adams,
Capital –
Maria
Adams,
Drawing +
Sales
Commissions –
Rent
Expense –

Salaries
Expense –
Auto
Expense –
Supplies
Expense –
Misc.
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. Assets = Liabilities +
Maria Maria
Owner’s Equity
Cash + Supplies =
Accts.
Payable +
Adams,
Capital
Adams,
– Drawing +
Sales
Comm. –
Rent
Exp.
Salaries
– Exp. –
Auto
Exp.
Supplies
– Exp. –
Misc.
Exp.
(a) + 24,000 + 24,000
(b) – 3,600 – 3,600
Bal. 20,400 24,000 – 3,600
(c) – 1,950 – 1,350 – 600
Bal. 18,450 24,000 – 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. CUSTOM REALTY
Income Statement
For the Month Ended April 30, 2014
Sales commissions $19,800
Expenses:
Rent expense $3,600
Salaries expense 2,500
Automobile expense 1,350
Supplies expense 900
Miscellaneous expense 600
Total expenses 8,950
Net income $10,850
CUSTOM REALTY
Statement of Owner’s Equity
For the Month Ended April 30, 2014
Maria Adams, capital, April 1, 2014 $ 0
Investment on April 1, 2014 $24,000
Net income for April 10,850
$34,850
Less withdrawals 3,500
Increase in owner’s equity 31,350
Maria Adams, capital, April 30, 2014 $31,350
CUSTOM REALTY
Balance Sheet
April 30, 2014
Assets Liabilities
Cash $31,500 Accounts payable $ 450
Supplies 300
Owner’s Equity
Maria Adams, capital 31,350
Total liabilities and
Total assets $31,800 owner’s equity $31,800