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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 $60,000 in exchange for common stock. b. Purchased office supplies on account, $1,800. c. Received cash from fees earned for managing rental property, $22,300. d. Paid rent on office and equipment for the month, $7,000. e. Paid creditors on account, $1,100. f. Billed customers for fees earned for managing rental property, $3,600. g. Paid automobile expenses for month, $750, and miscellaneous expenses, $1,000. h. Paid office salaries, $4,000. i. Determined that the cost of supplies on hand was $250; therefore, the cost of supplies used was $1,550. j. Paid dividends, $5,000. Instructions 1. Indicate the effect of each transaction and the balances after each transaction, using the following tabular headings: 2. Briefly explain why issuing common stock and revenues increased stockholders’ equity, while dividends and expenses decreased stockholders’ equity. 3. Determine the net income for April. 4. How much did April’s transactions increase or decrease stockholders’ equity?
Financial And Managerial Accounting
Solutions
Financial And Managerial Accounting
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 $60,000 in exchange for common stock.
b. Purchased office supplies on account, $1,800.
c. Received cash from fees earned for managing rental property, $22,300.
d. Paid rent on office and equipment for the month, $7,000.
e. Paid creditors on account, $1,100.
f. Billed customers for fees earned for managing rental property, $3,600.
g. Paid automobile expenses for month, $750, and miscellaneous expenses, $1,000.
h. Paid office salaries, $4,000.
i. Determined that the cost of supplies on hand was $250; therefore, the cost of supplies used was $1,550.
j. Paid dividends, $5,000.
Instructions
1. Indicate the effect of each transaction and the balances after each transaction, using the following tabular headings:
2. Briefly explain why issuing common stock and revenues increased stockholders’ equity, while dividends and expenses decreased stockholders’ equity.
3. Determine the net income for April.
4. How much did April’s transactions increase or decrease stockholders’ equity?
1.
Indicate the effect of the given transactions using the accounting equation.
Explanation of Solution
Accounting equation: Accounting equation is an accounting tool expressed in the form of equation, by creating a relation between resources or assets of a business and claims on the resources by the creditors, and the owners...
2.
Explain the reason for increase in stockholder’s equity due to stockholder’s investment and revenue, and decrease in stockholder’s equity due to withdrawals and expenses.
3.
Calculate the net income for April.
4.
Identify the increase or decrease of stockholder's equity in the month of April.
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