Question

eBook Show Me How Calculator Transactions On April 1 of the current year, Morgan Jones established a business to manage rental property. She completed the following transactions during April: a. Opened a business bank account with a deposit of $25,000 in exchange for common stock b. Purchased office supplies on account, $2,980. C. Received cash from fees earned for managing rental property, $8,170. d. Paid rent on office and equipment for the month, $3,660. e. Pald creditors on account, $1,360. f. Billed customers for fees earned for managing rental property, $6,780. g. Paid automobile expenses for month, $810, and miscellaneous expenses, $410. h. Paid office salaries, $2,580. 1. Determined that the cost of supplies on hand was $1,760; therefore, the cost of supplies used was $1,220. 1. Paid dividends, $2,440. 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 + Stockholder Item Cash Accounts Receivable + Supplies Accounts Payable + Common Stock Dividends + Fees Earned Rent Expense a. 25,000 25,000 ✓ b. 2,980 → Bal. 25,000 8,1707 C. Previous Next > Check My Work All work saved Save and Exit Submit Assignment for Grading 113 w G

Answer 1

Answer

1. Effect of each transaction

	ASSETS	=	LIABILITIES	+	STOCK HOLDERS' EQUITY
Item	Cash	+	Accouns receivable	+	Supplies	=	Accounts payable	+	Common stock	-	Dividents	+	Fees earned	-	Rent expense	-	Salary expense	-	supp. expense	-	Auto expense	-	Miscellaneous expense	Item
a.	25,000	+		+		=		+	25,000	-		+		-		-		-		-		-		a
b.		+		+	2,980	=	2,980	+		-		+		-		-		-		-		-		b
Bal	25,000	+		+	2,980	=	2,980	+	25,000	-		+		-		-		-		-		-		Bal
c.	8,170	+		+		=		+		-		+	8,170	-		-		-		-		-		c
Bal	33,170	+		+	2,980	=	2,980	+	25,000	-		+	8,170	-		-		-		-		-		Bal
d.	-3,660	+		+		=		+		-		+		-	3,660	-		-		-		-		d
Bal	29,510	+		+	2,980	=	2,980	+	25,000	-		+	8,170	-	3,660	-		-		-		-		Bal
e.	-1,360	+		+		=	-1,360	+		-		+		-		-		-		-		-		e
Bal	28,150	+		+	2,980	=	1,620	+	25,000	-		+	8,170	-	3,660	-		-		-		-		Bal
f.		+	6,780	+		=		+		-		+	6,780	-		-		-		-		-		f
Bal	28,150	+	6,780	+	2,980	=	1,620	+	25,000	-		+	14,950	-		-		-		-		-		Bal
g.	-1,220	+		+		=		+		-		+		-		-		-		-	8,10	-	4,10	g
Bal	26,930	+	6,780	+	2,980	=	1,620	+	25,000	-		+	14,950	-	3,660	-		-		-	810	-	410	Bal
h.	-2580	+		+		=		+		-		+		-		-	2,580	-		-		-		h
Bal	24,350	+	6,780	+	2,980	=	1,620	+	25,000	-		+	14,950	-	3,660	-	2,580	-		-	810	-	410	Bal
i.		+		+	-1,220	=		+		-		+		-		-		-	1,220	-		-		i
Bal	24,350	+	6,780	+	1,760	=	1,620	+	25,000	-		+	14,950	-	3,660	-	2,580	-	1,220	-	810	-	410	Bal
j.	-2,440	+		+		=		+		-	2,440	+		-		-		-		-		-		j
Bal	21,910	+	6,780	+	1,760	=	1,620	+	25,000	-	2,440	+	14,950	-	3,660	-	2,580	-	1,220	-	810	-	410	Bal

For further reference,

Transaction	Account titles	Debit	Credit	Change
a	Cash	25,000		increase
	Common stock		25,000	increase
b	Supplies	2,980		increase
	Creditors(accounts payable)		2,980	increase
c	Cash	8,170		increase
	Fees earned		8,170	increase
d	Rent expense	3,660		increase
	Cash		3,660	decrease
e	Creditors(accounts payable)	1,360		decrease
	Cash		1,360	decrease
f	Accounts receivable	6,780		increase
	Fees earned		6,780	increase
g	Auto expense	810		increase
	Miscellaneous expense	410		increase
	Cash		1,220	decrease
h	Salaries expense	2,580		increase
	Cash		2,580	decrease
i	Supplies expense	1,220		increase
	Cash		1,220	decrease
j	Dividents	2,440		increase
	Cash		2,440	decrease

Answer 2: INCREASE in the first blank space & DECREASE in the second blank space

Because, issuing common stock and revenue will cause an increase in the value of stock holders' equity and expenses and payment of dividents cause a reduction in stock holders' equity.

Answer 3: net income = revenue - expenses

14950 - 3,660 - 2,580 - 1,220 - 810 - 410 = $6,270

Answer 4 = April transaction increased stock holders' equity by $ 28,830

=common stock - divident + net income = 25000-2440+28830

or,

Stock holders equity = common stock + retained earnings

Retained earnings = beginning retained earnings+net income - dividents

= 0 + 6720-2,440 =3,830

Stock holders equity = 25,000 + 3,830 = $28,330