On August 1, 2014, Rafael Masey established Planet Realty, which completed the following transactions during the month

On August 1, 2014, Rafael Masey established Planet Realty, which completed the following transactions during the month:

a. Rafael Masey transferred cash from a personal bank account to an account to be used for the business, $17,500.

b. Purchased supplies on account, $2,300.

c. Earned sales commissions, receiving cash, $13,300.

d. Paid rent on office and equipment for the month, $3,000.

e. Paid creditor on account, $1,150.

f. Withdrew cash for personal use, $1,800.

g. Paid automobile expenses (including rental charge) for month, $1,500, and miscellaneous expenses, $400.

h. Paid office salaries, $2,800.

i. Determined that the cost of supplies used was $1,050.


Instructions

1. Journalize entries for transactions (a) through (i), using the following account titles: Cash; Supplies; Accounts Payable; Rafael Masey, Capital; Rafael Masey, Drawing; Sales Commissions; Rent Expense; Office Salaries Expense; Automobile Expense; Supplies Expense; Miscellaneous Expense. Journal entry explanations may be omitted.

2. Prepare T accounts, using the account titles in (1). Post the journal entries to these accounts, placing the appropriate letter to the left of each amount to identify the transactions. Determine the account balances, after all posting is complete. Accounts containing only a single entry do not need a balance.

3. Prepare an unadjusted trial balance as of August 31, 2014.

4. Determine the following:

a. Amount of total revenue recorded in the ledger.

b. Amount of total expenses recorded in the ledger.

c. Amount of net income for August.

5. Determine the increase or decrease in owner’s equity for August


Answer:






Cash 17,500
Rafael Masey, Capital 17,500
Supplies 2,300
Accounts Payable 2,300
Cash 13,300
Sales Commissions 13,300
Rent Expense 3,000
Cash 3,000
Accounts Payable 1,150
Cash 1,150
Rafael Masey, Drawing 1,800
Cash 1,800
Automobile Expense 1,500
Miscellaneous Expense 400
Cash 1,900
Office Salaries Expense 2,800
Cash 2,800
Supplies Expense 1,050
Supplies 1,050
Prob. 2–2B (Continued)
2.
Cash Sales Commissions
(a) 17,500 (d) 3,000 (c) 13,300
(c) 13,300 (e) 1,150
(f) 1,800 Rent Expense
Bal. 20,150
(g) 1,900 (d) 3,000
(h) 2,800
Supplies Office Salaries Expense
(b) 2,300 (i) 1,050 (h) 2,800
Bal. 1,250
Accounts Payable
Rafael Masey, Capital
Automobile Expense
Supplies Expense
(a) 17,500 (i) 1,050
Rafael Masey, Drawing Miscellaneous Expense
(f) 1,800 (g) 400

PLANET REALTY
Unadjusted Trial Balance
August 31, 2014
Debit
Balances
Credit
Balances
Cash 20,150
Supplies 1,250
Accounts Payable 1,150
Rafael Masey, Capital 17,500
Rafael Masey, Drawing 1,800
Sales Commissions 13,300
Rent Expense 3,000
Office Salaries Expense 2,800
Automobile Expense 1,500
Supplies Expense 1,050
Miscellaneous Expense 400
31,950 31,950
Prob. 2–2B (Concluded)
3.
4. a. $13,300
b. $8,750 ($3,000 + $2,800 + $1,500 + $1,050 + $400)
c. $4,550 ($13,300 – $8,750)
5. $20,250, which is the initial investment of $17,500 plus the excess of net income of
$4,550 over the withdrawals of $1,800.