On June 1 of the current year, Doni Gilmore established a business to manage rental property. She completed the following transactions during June:
a. Opened a business bank account with a deposit of $25,000 from personal funds.
b. Purchased supplies (pens, file folders, and copy paper) on account, $1,150.
c. Received cash from fees earned for managing rental property, $4,500.
d. Paid rent on office and equipment for the month, $1,500.
e. Paid creditors on account, $600.
f. Billed customers for fees earned for managing rental property, $2,250.
g. Paid automobile expenses (including rental charges) for month, $400, and miscellaneous expenses, $180.
h. Paid office salaries, $1,200.
i. Determined that the cost of supplies on hand was $380; therefore, the cost of supplies used was $770.
j. Withdrew cash for personal use, $1,000.
Instructions
1. Indicate the effect of each transaction and the balances after each transaction, using the following tabular headings:
|
Assets |
= Liabilities + |
Owner’s Equity |
|||||||||
|
Doni |
Doni |
||||||||||
|
Accounts |
Accounts |
Gilmore, |
Gilmore, |
Fees |
Rent |
Salaries |
Supplies |
Auto |
Misc. |
||
|
Cash+ |
Receivable+ |
Supplies= |
Payable+ |
Capital |
Drawing+ |
Earned |
Expense |
Expense |
Expense |
Expense |
Expense |
2. Briefly explain why the owner’s investment and revenues increased owner’s equity, while withdrawals and expenses decreased owner’s equity.