Question

On August 1, 2018, Brooke Kline established Western Realty. Brooke completed the following transactions during the month of August.

A.	Opened a business bank account with a deposit of $28,000 in exchange for common stock.
B.	Paid rent on office and equipment for the month, $3,600.
C.	Paid automobile expenses (including rental charge) for month, $1,300, and miscellaneous expenses, $700.
D.	Purchased office supplies on account, $1,250.
E.	Earned sales commissions, receiving cash, $18,400.
F.	Paid creditor on account, $750.
G.	Paid office salaries, $3,000.
H.	Paid dividends, $3,300.
I.	Determined that the cost of supplies on hand was $500; therefore, the cost of supplies used was $750.

Required:

1.

Indicate the effect of each transaction and the balances after each transaction, using the tabular headings in the exhibit below. In each transaction row (rows indicated by a letter), you must indicate the math sign (+ or -) in columns affected by the transaction. You will not need to enter math signs in the balance rows (rows indicated by Bal.). Entries of 0 (zero) are not required and will be cleared if entered.

Assets		= Liabilities +	Stockholders’ Equity
		Accounts	Common		Sales	Salaries	Rent	Auto	Supplies	Miscellaneous
Cash	+ Supplies	= Payable	+ Stock	- Dividends	+ Commissions	- Expense	- Expense	- Expense	- Expense	- Expense

	2. a. Prepare an income statement for August. If a net loss has been incurred, enter that amount as a negative number using a minus sign. Refer to the list of Labels, Accounts and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. You will not need to enter colons (:) on the income statement.
	2. b. Prepare a retained earnings statement for August. Refer to the list of Labels, Accounts and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. If a net loss is incurred or dividends were paid, enter that amount as a negative number using a minus sign. The word “Less” or “Add” is not needed in the Retained Earnings Statement. If an amount is zero, enter "0".
	2. c. Prepare a balance sheet as of August 31. Refer to the list of Labels, Accounts and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading.

Answer 1

Answer

• Requirement 1

			Accounts	Common		Sales	Salaries	Rent	Auto	Supplies	Miscellaneous
	Cash	Supplies	Payable	Stock	Dividends	Commission	Expenses	Expenses	Expenses	Expenses	Expenses
A	$28,000			$28,000
B	($3,600)							$3,600
C	($2,000)								$1,300		$700
D		$1,250	$1,250
E	$18,400					$18,400
D	($750)		($750)
G	($3,000)						$3,000
H	($3,300)				$3,300
I		($750)								$750
Ending Balances	$33,750	$500	$500	$28,000	$3,300	$18,400	$3,000	$3,600	$1,300	$750	$700

• Requirement 2

Income Statement
for the month ended 31 Aug 2018
Revenues:
Sales Commission		$18,400
Expenses:
Salaries expense	$3,000
Rent Expense	$3,600
Auto Expenses	$1,300
Supplies expenses	$750
Miscellaneous expenses	$700
Total expense		$9,350
Net Income		$9,050

• Requirement 3

Statement of Retained earnings
for the month ended 31 Aug 2018
Beginning balance		$0
Add: Net Income	$9,050
Less: Dividends	$3,300
		$5,750
Ending Balance - 31 Aug		$5,750

• Requirement 4

Balance Sheet
at 31 Aug 2018
ASSETS
Cash	$33,750
Supplies	$500
Total Assets		$34,250
LIABILITIES
Accounts Payable		$500
STOCKHOLDER's EQUITY
Common Stock	$28,000
Retained Earnings	$5,750
Total Stockholder' Equity		$33,750
Total Liabilities & Stockholder's Equity		$34,250