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Transactions; financial statements On August 1, 2018, Brooke Kline established Western Realty. Brooke completed the following transactions during the month of August: A. Opened a business bank account with a deposit of $35,000 in exchange for common stock. B. Purchased supplies on account, $2,750. C. Paid creditor on account, $1,800. D. Earned sales commissions, receiving cash, $52,800. E. Paid rent on office and equipment for the month, $4,500. F. Paid dividends, $3,000. G. Paid automobile expenses for month, $1,100, and miscellaneous expenses, $1,200. H. Paid office salaries, $5,250. I. Determined that the cost of supplies on hand was $1,750; therefore, the cost of supplies used was $1,000. Instructions 1. Indicate the effect of each transaction and the balances after each transaction, using the following tabular headings:
Financial & Managerial Accounting
Solutions
Financial & Managerial Accounting
Transactions; financial statements
On August 1, 2018, Brooke Kline established Western Realty. Brooke completed the following transactions during the month of August:
- A. Opened a business bank account with a deposit of $35,000 in exchange for common stock.
- B. Purchased supplies on account, $2,750.
- C. Paid creditor on account, $1,800.
- D. Earned sales commissions, receiving cash, $52,800.
- E. Paid rent on office and equipment for the month, $4,500.
- F. Paid dividends, $3,000.
- G. Paid automobile expenses for month, $1,100, and miscellaneous expenses, $1,200.
- H. Paid office salaries, $5,250.
- I. Determined that the cost of supplies on hand was $1,750; therefore, the cost of supplies used was $1,000.
Instructions
1. Indicate the effect of each transaction and the balances after each transaction, using the following tabular headings:
a)
Accounting equation: Accounting equation is an accounting tool expressed in the form of equation, by creating a relationship between the resources or assets of a company, and claims on the resources by the creditors and the owners. Accounting equation is expressed as shown below:
Assets = Liabilities + Shareholders Equity
Business transaction: Business transaction is a record of any economic activity, resulting in the change in the value of the assets, the liabilities, and the Shareholder’s equities. Business transaction is also referred to as financial transaction.
To Indicate: The effect of each given transaction of Company WR on the accounting equation.
Explanation of Solution
Indicate the effect of the given transactions of Company WR on the accounting equation.
b)
To Prepare: The financial statements for Company WR for the month ended August 31, 2018.
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