PR 1-4B Transactions; financial statements

On April 1, 2016, Maria Adams established Custom Realty. Maria completed the following transactions during the month of April:

a. Opened a business bank account with a deposit of $24,000 in exchange for common stock. 

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

c. Paid automobile expenses (including rental charge) for month, $1,350, and miscellaneous expenses, $600.

d. Purchased office supplies on account, $1,200.

e. Earned sales commissions, receiving cash, $19,800.

f. Paid creditor on account, $750.

g. Paid office salaries, $2,500.

h. Paid dividends, $3,500.

i. Determined that the cost of supplies on hand was $300; 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’ Equity Accounts Payable + Common Stock – Dividends+ Sales Commissions – Rent Expense – Salaries Expense –. Auto Expense – Supplies Expense – Misc. Expense

2. Prepare an income statement for April, a retained earnings statement for April, and a balance sheet as of April 30.

Answer:

2. CUSTOM REALTY Retained Earnings Statement For the Month Ended April 30, 2016 Retained earnings, April 1, 2016 $ 0 Net income for April $10,850 Less dividends 3,500 Increase in retained earnings 7,350 Retained earnings, April 30, 2016 $7,350 CUSTOM REALTY Balance Sheet April 30, 2016 Assets Liabilities Cash $31,500 Accounts payable $ 450 Supplies 300 Stockholders’ Equity Common stock $24,000 Retained earnings 7,350 Total stockholders’ equity 31,350 Total liabilities and Total assets $31,800 stockholders’ equity $31,800