Question

Exercise 3-08 This information relates to Sheffield Real Estate Agency. Oct. 1 2 3 6 10 27 30 Stockholders Invest $33,360 In exchange for common stock of the corporation. Hires an administrative assistant at an annual salary of $31,320. Buys office furniture for $3,850, on account. Sells a house and lot for E. C. Roads; commissions due from Roads, $10,620 (not paid by Roads at this time). Receives cash of $220 as commission for acting as rental agent renting an apartment. Pays $790 on account for the office furniture purchased on October 3. Pays the administrative assistant 52,610 in salary for October. Prepare the debit-credit analysis for each transaction. (If there is no transaction, then enter No Effect for the account and o for the amount.) Oct. 1 Debits Debit Credits Credit Oct. 2 Debits Debit Credits Credit

Answer 1

Answer -

Oct. 01	Debits	Increase assets
	Debit	Cash	$33860
	Credits	Increase stockholders equity
	Credit	Common stock	$33860
Oct. 02	Debits	No effect	$0
	Debit	No effect	$0
	Credits	No effect	$0
	Credit	No effect	$0
Oct. 03	Debits	Increase assets
	Debit	Equipment	$3850
	Credits	Increase liabilities
	Credit	Accounts payable	$3850
Oct. 06	Debits	Increase assets
	Debit	Accounts receivable	$10620
	Credits	Increase revenue
	Credit	Service revenue	$10620
Oct. 10	Debits	Increase assets
	Debit	Cash	$220
	Credits	Increase revenue
	Credit	Service revenue	$220
Oct. 27	Debits	Decrease liabilities
	Debit	Accounts payable	$790
	Credits	Decrease assets
	Credit	Cash	$790
Oct. 30	Debits	Increase expenses
	Debit	Salaries expense	$2610
	Credits	Decrease assets
	Credit	Cash	$2610

Explanation:

As per accounting rule, Increase in assets also increase in liabilities and stockholder’s equity. When increase in assets is debited and decrease in assets is credited. Conversely, when increase in liabilities and stockholder’s equity is credited and decrease in liabilities and stockholder’s equity is debited.

Now,

Oct. 01:

Stockholders invest $33860 in exchange for common stock of the corporation.

Here, Cash comes in business (increase in assets) and also increases common stock (stockholders equity).

Oct. 02:

Hires an administrative assistant at an annual salary of $31320

Here is no transaction. Salary neither due or nor paid.

Oct. 03:

Buys office furniture for $3850, on account

Here, Equipment comes in business i.e. increase assets value and purchase furniture on credit also increase liabilities of corporation by the same amount.

Oct. 06:

Sells a house and lot for E. C. Roads, commissions due from Roads $10620 (not paid by Roads at this time)

Here,

Commissions of $10620 earn through sell a house and lot that’s increase service revenue, but commission is due not paid therefore its increase accounts receivable by the same amount.

Oct. 10:

Receives cash of $220 as commission for acting as rental agent renting an apartment

Here,

Receiving cash increase assets value and earning commission increase service revenue by the same amount.

Oct. 27:

Pays $790 on account for the office furniture purchased on October 3

Here,

Payment $790 on account for equipment decrease the account payable (liabilities) and also decrease cash by $790 (decrease assets)

Oct. 30:

Pay the administrative assistant $2610 in salary for October.

Here,

Payment of salaries increases expense for corporation and decreases cash (assets) by the same amount.