Question

On October 1, 20Y6, Jay Crowley established Affordable Realty, which completed the following transactions during the month: Oct. 1 Jay Crowley transferred cash from a personal bank account to an account to be used for the business in exchange for common stock, $40,000. 2 Paid rent on office and equipment for the month, $4,800. 3 Purchased supplies on account, $2,150. 4 Paid creditor on account, $1,100. 5 Earned sales commissions, receiving cash, $18,750. 6 Paid automobile expenses (including rental charge) for month, $1,580, and miscellaneous expenses, $800. 7 Paid office salaries, $3,500. 8 Determined that the cost of supplies used was $1,300. 9 Paid dividends, $1,500. 1. Journalize entries for transactions Oct. 1 through 9. Refer to the Chart of Accounts for exact wording of account titles. 2. Post the journal entries to the T accounts, selecting the appropriate date 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 October 31, 20Y6. 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 October. 5. Determine the increase or decrease in retained earnings for October.

Answer 1

Answer and Explanation:

1. According to the scenario, the journal entries are shown below:

Journal Entry

October 1 Cash A/c Dr. $40,000

To Common stock A/c $40,000

(Being the exchange for the common stock is recorded)

October 2 Rent expenses A/c Dr. $4,800

To Cash A/c $4,800

(Being the paid rent on office and equipment is recorded)

October 3 Supplies A/c Dr. $2,150

To Accounts payable A/c $2,150

(Being the purchase of supplies is recorded)

October 4 Accounts payable A/c Dr. $1,100

To Cash A/c $1,100

(Being the cash paid is recorded)

October 5 Cash A/c Dr. $18,750

To Sales commission A/c $18,750

(Being the earned sales commission is recorded)

October 6 Automobile expense A/c Dr. $1,580

Miscellaneous expense A/c Dr. $800

To Cash A/c $2,380

(Being the automobile and miscellaneous expenses paid is recorded)

October 7 Office salaries expense A/c Dr. $3,500

To Cash A/c $3,500

(Being the office salaries paid is recorded)

October 8 Supplies expense A/c Dr. $1,300

To Supplies A/c $1,300

(Being the cost of supplies is recorded)

October 9 Dividend A/c Dr. $1,500

To Cash A/c $1,500

(Being the dividend paid is recorded)

2. Now the posting of various accounts are as follows

T Accounts

Cash A/c

Particular Amount ($) Particular Amount ($)

Common stock 40,000 Rent expenses 4,800

Sales commission 18,750 Account payable 1,100

Automobile expense 1,580

Miscellaneous expense 800

Office salaries expense 3,500

Dividend expense 1,500

Supplies Account

Particular Amount ($) Particular Amount ($)

Accounts payable 2,150 Supplies expenses 1,300

Accounts Payable

Particular Amount ($) Particular Amount ($)

Cash 1,100 Supplies 2,150

Common Stock

Particular Amount ($) Particular Amount ($)

Cash 40,000

Dividends

Particular Amount ($) Particular Amount ($)

Cash 1,500

Sales Commission

Particular Amount ($) Particular Amount ($)

Cash 18,750

Rent expense

Particular Amount ($) Particular Amount ($)

Cash 4,800

Office Salaries expense

Particular Amount ($) Particular Amount ($)

Cash 3,500

Supplies Expenses

Particular Amount ($) Particular Amount ($)

Supplies 1,300

Automobile Expense

Particular Amount ($) Particular Amount ($)

Cash 1,580

Miscellaneous expense

Particular Amount ($) Particular Amount ($)

Cash 800

3. Now unadjusted trail balance is presented below:

Unadjusted Trial Balance

Particular Debit Amount ($) Particular Credit Amount ($)

Cash 45,470 Accounts payable 1,050

Supplies 850 Common stock 40,000

Dividends 1,500 Sales Commission 18,750

Rent expense 4,800

Office salaries expense 3,500

Automobile expense 1,580

Supplies expense 1,300

Miscellaneous expense 800

Total 59,800 Total 59,800

4

a).Amount of total revenue recorded in the ledger

Sales commissions = $18,750

b). Amount of total expenses recorded in the ledger

Particular Amount ($)

Rent expense 4,800

Office salaries expense 3,500

Automobile expense 1,580

Supplies expense 1,300

Miscellaneous expense 800

Amount of total expenses

recorded in the ledger 11,980

c).Amount of Net income for October is

= Total Revenue - Total Expenses

= $18,750 - $11,980

= $6,770

d) Increase or decrease in retained earnings for October is

= Net Income - Dividends

= $6,770 - $1,500

= $5,270

All assets, expenses and dividend contains normal debit balance while the liabilities, revenues, and the stockholder equity contains normal credit balance