Textbook Problem

Journal entries and trial balance

On August 1, 20Y7, Rafael Masey established Planet Realty, which completed the following transactions during the month:

a. Rafael Masey transferred cash from a personal bank account to an account to be used for the business in exchange for common stock, $17,500.

b. Purchased supplies on account, $2,300.

c. Earned sales commissions, receiving cash, $13,300.

d. Paid rent on office and equipment for the month, $3,000.

e. Paid creditor on account, $1,150.

f. Paid dividends, $1,800.

g. Paid automobile expenses (including rental charge) for month, $1,500, and miscellaneous expenses, $400.

h. Paid office salaries, $2,800.

i. Determined that the cost of supplies used was $1,050.

Instructions

1. Journalize entries for transactions (a) through (i), using the following account titles: Cash, Supplies, Accounts Payable, Common Stock, Dividends, Sales Commissions, Rent Expense, Office Salaries Expense, Automobile Expense, Supplies Expense, Miscellaneous Expense. Journal entry explanations may be omitted.

2. Prepare T accounts, using the account titles in (1). Post the journal entries to these accounts, placing the appropriate letter to the left of each amount to identify the transactions. Determine the account balances, after all posting is complete. Accounts containing only a single entry do not need a balance.

3. Prepare an unadjusted trial balance as of August 31, 20Y7.

4. Determine the following:

a. Amount of total revenue recorded in the ledger.

b. Amount of total expenses recorded in the ledger.

c. Amount of net income for August.

5. Determine the increase or decrease in retained earnings for August.