Question

On June 1, 2018. Lee established a proprietorship known as Music Depot. Using an extensive collection of music CDs Lee will serve as a disc jockey on a fee basis for weddings, college parties, and other events. During June, Lee entered into the following transactions June 1 Deposited $8,000 in a checking account in the name of Music Depot 2 Received $2.400 from a local radio station for serving as the guest disc jockey for June 2 Agreed to share office space with a local real estate agency. Upstairs Realty Music Depot will pay one-fourth of the rent. In addition, Music Depot agreed to pay a portion of the salary of the receptionist and to pay one-fourth of the utilities. Pald $750 for the rent of the office 4 Purchased supplies (blank CDs, poster board, extension cords, etc.) from City Office Supply Co. for $350. Agreed to pay $100 within 10 days and the remainder by July 5, 2018 6 Paid $600 to a local radio station to advertise the services of Music Depot twice daily for two weeks 8 Paid $500 to a local electronics store for renting digital recording equipment 12 Paid $250 (music expense) to Cool Music for the use of its current music demos to make various music sets 13 Paid City Office Supply Co $200 on account 16 Received $400 from a dentist for providing two music sets for the dentist to play for her patients 22 Served as disc jockey for a wedding party The father of the bride agreed to pay $1,350 the 1st of July 25 Received $500 from a friend for serving as the disc jockey for a cancer charity ball hosted by the local hospital 29 Paid $240 (music expense) to Galaxy Music for the use of its library of music demos 30 Received $1,000 for serving as disc jokey for a local club's monthly dance, 30 Paid Upstairs Realty $400 for Music Depot's share of the receptionist salary for June 30 Paid Upstairs Realty $300 for Music Depot's share of utilities for June 30 Paid miscellaneous expenses $150 30 Paid $800 royalties (music expense) to National Music clearing for use of various artist's music during the month 30 Withdrew $200 of cash from Music Depot for personal use Required: Indicate the effect of each transaction and the balance after each transaction using the following accounts: Cash Accounts receivable Supplies Accounts payable Lee Chang, Capital Lee Chang, Drawing Fees Earned Music Expense Office rent expense Equipment rent expense Advertising expense Wages expense Utilities expense Miscellaneous expense

Answer 1

The effect of the transaction can be captured in the table below

BALANCE SHEET INCOME STATEMENT ASSETS LIABILITIES EQUITY REVENUES EXPENSES Accounts Receivables Accounts Payable Lee Chang, Drawing Music Expense Office Rent Expense Equipment Rent Expense Advertising Expense Wages Expense Utilities Expense Misc. Expense Fees Earned Supplies Lee Chang, Capital 8,000 8,000 - 2,400 2,400 - - 8,000 - 750 750 8,000 - 2,400 - 350 350 - 350 350 - 8,000 - 2,400 750 Date Cash Jun-01 8,000 Balance 8,000 Jun-02 2,400 Balance 10,400 Jun-02 -750 Balance 9,650 Jun-04 Balance 9,650 Jun-06 -600 Balance 9,050 Jun-08 -500 Balance 8.550 Jun-12 -250 Balance 8,300 Jun-13 -200 Balance 8.100 Jun-16 400 Balance 8.500 22-Jun! I 600 600 350 350 8,000 - 2,400 750 - 500 500 I 350 350 8,000 - 2,400 750 250 - 350 8,000 I 2,400 250 750 500 350 -200 150 - 350 8,000 - 250 750 500 150 8,000 2,400 400 2,800 1350) 250 600 . . . 1350

1,350 150 8,000 250 750 4,150 500 4,650 1,350 150 8,000 750 250 240 490 1,350 150 8,000 750 4,650 1000 5,650 1,350 150 8,000 750 400 Balance 25-Jun - Balance 29-Jun · Balance 30-Jun Balance 30-Jun - Balance 30-Jun Balance 30-Jun - Balance . 30-Jun · Balance 30-Jun Balance 8,500 500 9,000 -240 8,760 1000 9,760 -4001 9,360 -300 9,060 - 150 8,910 -800 8.110 -200 7,910 1,350 150 8,000 5,650 750 400 300 1,350 150 8,000 5,650 750 300 1,350 150 150 150 8,000 5,650 750 300 800 1,550 1,350 150 8,000 5,650 400 2001 200 300 300 150 150 1,350 150 8,000 5,650 490 1.550 600 400

Notes

NET INCOME is calculated as REVENUES - EXPENSES.

The NET INCOME calculated above gets transferred to the CAPITAL ACCOUNT.

At the end of each transaction we need to ensure that the accounting equation holds true. That is ASSETS = LIABILITIES + EQUITY.

In the given question,

NET INCOME = 5650-3990 = $1660

ASSETS = 9610

LIABILITIES = 150

EQUITY = 8000-200+1660 = $8460

TOTAL LIABILITIES + EQUITY = $9610

Since the accounting equation balances, that means our recording of transactions is correct.

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you.