Question

Transactions On September 1 of the current year, Joy Tucker established a business to manage rental property. She completed the following transactions during September: a. Opened a business bank account with a deposit of $31,000 in exchange for common stock. b. Purchased office supplies on account, $2,000. c. Received cash from fees earned for managing rental property, $5,590. d. Paid rent on office and equipment for the month, $2,450. e. Paid creditors on account, $910. f. Billed customers for fees earned for managing rental property, $4,530. 9. Paid automobile expenses for month, $540, and miscellaneous expenses, $270. 5. Paid office salaries, $1,720. 1. Determined that the cost of supplies on hand was $1,180; therefore, the cost of supplies used was $820. j. Paid dividends $1,630. Required: 1. Indicate the effect of each transaction and the balances after each transaction: For those boxes in which no entry is required, leave the box blank. For those boxes in which you must enter subtractive or negative numbers use a minus sign. (Example: -300) Assets = Liabilities + Stockholders' Equity Accounts Common Accounts Fees Rent Item Sal. Cash Dividends + + + Supplies = Receivable Payable Stock Earned Expense Expense Misc Supp. Expense Auto Expense Bal. Bal. Bal. Bal. 2. Stockholders' equity is the right of stockholders' to the assets of the business. These rights are by issuances of capital stock and revenues and by dividends and expenses. 3. Determine the net income for September 4. How much did September's transactions (a-j) increase or decrease retained earnings? by $

Answer 1

Answer 1.

Assets = + Item Liabilities Accounts Payable Accounts Receivable Cash Supplies Common Stock 31000 Dividends +1 Stockholders' Equity Rent Salaries Expense Fees Earned Supplies Expense Auto Expense Misc. Expense 31000 2000 2000 2000 2000 * Bal. 31000 + + + 590 0 2000 - 2000 + 31000 0 + 5590 - 0 Bal. | d. | Bal. 31000 5590 36590 -2450 34140 -910 33230 + + + -T2450 + + + + + 0 2000 = + 31000 0 5590 -T2450 + 2000 -910 1090 + * Bal. 2000 31000 + 2450 - + + 4530 4530 + 5590 4530 10120 - 2000 1090 31000 | + 2450 + 33230 -810 32420 -1720 30700 4530 + 2000 = 1090 + 31000 - 0 + 10120 - 2450 - Bal. g.1 Bal. | h. Bal. i Bal. Lj. Bal. + + + + 4530 + = 1090 + 31000 - 0 + 10120 - 2450 - 1720 2000 -820 1180 4530 1090 31000 - + 10120 - 2450 1720 30700 -1630 29070 + + + 1630 4530 + 1180 - 1090 + 31000 - 1630 + 10120 - 2450 | 1720 820 | -1270

Answer 2.

Stockholders’ equity is the right of stockholders’ to the assets of the business. These rights are increased by issuances of capital stock and revenues and decreased by dividends and expenses.

Answer 3.

Net Income = Fees Earned - Rent Expense - Salaries Expense - Supplies Expense - Automobile Expense - Miscellaneous Expense
Net Income = $10,120 - $2,450 - $1,720 - $820 - $540 - $270
Net Income = $4,320

Answer 4.

Increase in Retained Earnings = Net Income - Dividends
Increase in Retained Earnings = $4,320 - $1,630
Increase in Retained Earnings = $2,690

Increase by $2,690