PR 1-4A Transactions; financial statements

On July 1, 2016, Pat Glenn established Half Moon Realty. Pat completed the following transactions during the month of July:

a. Opened a business bank account with a deposit of $25,000 in exchange for common stock. 

b. Purchased office supplies on account, $1,850.

c. Paid creditor on account, $1,200.

d. Earned sales commissions, receiving cash, $41,500.

e. Paid rent on office and equipment for the month, $3,600.

f. Paid dividends, $4,000.

g. Paid automobile expenses (including rental charge) for month, $3,050, and miscellaneous expenses, $1,600.

h. Paid office salaries, $5,000.

i. Determined that the cost of supplies on hand was $950; therefore, the cost of supplies used was $900.

Instructions

1. Indicate the effect of each transaction and the balances after each transaction, using the following tabular headings:

Assets 5 Liabilities 1 Stockholders’ EquityCash + Supplies = Accounts Payable + Common 

2. Prepare an income statement for July, a retained earnings statement for July, and a balance sheet as of July 31.

Answer:

holders’ Equity Cash +   Supplies   = Accts. Payable   + Common Stock –Dividends + Sales Comm. Salaries – Exp. – Rent Exp. Auto – Exp. Supplies – Exp. - Misc. Exp. (a)  + 25,000 + 25,000 (b) + 1,850 + 1,850 Bal. 25,000 1,850 1,850 25,000 (c)  – 1,200 – 1,200   Bal. 23,800 1,850 650 25,000 (d)  + 41,500 + 41,500 

Bal. 65,300 1,850 650 25,000 41,500 (e)  – 3,600 – 3,600 Bal. 61,700 1,850 650 25,000 41,500 – 3,600 (f)   – 4,000 – 4,000 Bal. 57,700 1,850 650 25,000 – 4,000 41,500 – 3,600 (g)  – 4,650 – 3,050 – 1,600 Bal. 53,050 1,850 650 25,000 – 4,000 41,500 – 3,600 – 3,050 – 1,600 (h)  – 5,000 –   5,000 Bal. 48,050 1,850 650 25,000 – 4,000 41,500 –   5,000 – 3,600 – 3,050 – 1,600 (i) – 900 – 900 

Bal. 48,050 950 650 25,000 – 4,000 41,500 –   5,000 – 3,600 – 3,050 – 900 – 1,600 HALF MOON REALTY Retained Earnings Statement For the Month Ended July 31, 2016 Retained earnings, July 1, 2016 $ 0 Net income for July $27,350 Less dividends 4,000 Increase in retained earnings 23,350 Retained earnings, July 31, 2016 $23,350 HALF MOON REALTY Balance Sheet July 31, 2016 Assets Liabilities Cash $48,050 Accounts payable $ 650 Supplies 950 Stockholders’ Equity Common stock $25,000 Retained earnings 23,350 Total stockholders’ equity 48,350 Total liabilities and Total assets $49,000 stockholders’ equity $49,000