Question

On October 1, 20Y6, Jay Crowley established Affordable Realty, which completed the following transactions during the month: Oct 1 2 3 4 Jay Crowley transferred cash from a personal bank account to an account to be used for the business in exchange for common stock, S40,000 Paid rent on office and equipment for the month, $4,800. Purchased supplies on account, $2,150. Paid creditor on account, $1,100. Earned sales commissions, receiving cash, 518,750. Paid automobile expenses (including rental charge) for month, $1,580, and miscellaneous expenses, $800. Paid office salaries, $3,500. 5 6 7

Answer 1

Solution:

Requirement 1 Journal Entries Accounts Title Date Debit Credit $40,000 Oct-01 Cash Common Stock (To record issuance of common stock) $40,000 $4,800 Oct-02 Rent Expense Cash (To record payment of rent expense) $4,800 $2,150 Oct-03 Supplies Accounts Payable (To record purchase of supplies) $2,150 $1,100 Oct-04 Accounts Payable Cash (To record payment on accounts) $1,100 $18,750 Oct-05 Cash Sales Commissions (To record sales commission earned) $18,750 $1,580 $800 Oct-06 Automobile Expense Miscellaneous Expense Cash (To record payment of expenses) $2,380 $3,500 Oct-07 Salaries Expense Cash (To record payment salaries expense) $3,500 $1,300 Oct-08 Supplies Expense Supplies (To record supplies consumed) $1,300 $1,500 Oct-09 Dividends Cash (To record payment of dividends) $1,500

Requirement 2 T- Accounts Supplies $2,150 Oct-08 Oct-01 Oct-03 $1,300 Oct-05 Cash $40,000 Oct-02 $18,750 Oct-04 Oct-06 Oct-07 $4,800 $1,100 $2,380 $3,500 $1,500 Oct-09 End. Bal. $45,470 End. Bal. $850 Common Stock Accounts Payable $1,100 Oct-03 Oct-04 $2,150 Oct-01 $40,000 End. Bal. $1,150 End. Bal. $40,000 Dividends $1,500 Sales Commision Oct-05 Oct-09 $18,750 End. Bal. End. Bal. Rent Expense $4,800 Automobile Expense $1,580 Oct-02 Oct-06 End. Bal. End. Bal. Miscellaneous Expense $800 Salaries Expense $3,500 Oct-06 Oct-07 End. Bal. End. Bal. Supplies Expense $1,300 Oct-08 End. Bal.

Credit Debit $45,470 $850 $1,050 $40,000 Requirement 3 Unadjusted Trial Balance Name of Accounts Cash Supplies Accounts Payable Common Stock Dividends Sales Commissions Rent Expense Automobile Expense Miscellaneous Expense Salaries Expense Supplies Expense $1,500 $18,750 $4,800 $1,580 $800 $3,500 $1,300 Totals $59,800 $59,800

Requirement 4 Income Statement $18,750 $18,750 Revenue: Sales Commissions (a) Total Revenue Expenses: Rent Expense Automobile Expense Miscellaneous Expense Salaries Expense Supplies Expense (b) Total Expenses (c) Net Income $4,800 $1,580 $800 $3,500 $1,300 $11,980 $6,770 Requirement 5 Computation of Increase or (Decrease) in Owner's Equity Net Income Less: Dividends Increase in Retained Earnings $6,770 $1,500 $5,270