On October 1, 2018, Jay Crowley established Affordable Realty, which completed t
ID: 2331475 • Letter: O
Question
On October 1, 2018, 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, $32,500.
2 Paid rent on office and equipment for the month, $2,350.
3 Purchased supplies on account, $2,250.
4 Paid creditor on account, $900.
5 Earned sales commissions, receiving cash, $16,360.
6 Paid automobile expenses (including rental charge) for month, $1,690, and miscellaneous expenses, $620.
7 Paid office salaries, $3,000.
8 Determined that the cost of supplies used was $1,100.
9 Paid dividends, $3,000.
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, 2018.
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.
CHART OF ACCOUNTS
Affordable Realty
General Ledger
ASSETS
11 Cash
12 Supplies
LIABILITIES
21 Accounts Payable
EQUITY
31 Common Stock
33 Dividends
REVENUE
41 Sales Commissions
EXPENSES
51 Rent Expense
52 Office Salaries Expense
53 Automobile Expense
54 Supplies Expense
55 Miscellaneous Expense
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, 2018.
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.
$
Explanation / Answer
Solution:
Solution:
Part 1 – Journal Entry
Date
General Journal
Debit
Credit
Oct.1
Cash
$32,500
Common Stock
$32,500
Oct.2
Rent Expense
$2,350
Cash
$2,350
Oct.3
Supplies
$2,250
Accounts Payable
$2,250
Oct.4
Accounts Payable
$900
Cash
$900
Oct.5
Cash
$16,360
Sales Commissions
$16,360
Oct.6
Automobile Expense
$1,690
Miscellaneous Expense
$620
Cash
$2,310
Oct.7
Office Salaries Expense
$3,000
Cash
$3,000
Oct.8
Supplies Expense
$1,100
Supplies
$1,100
Oct.9
Dividend
$3,000
Cash
$3,000
Part 2 – Posting of Journal Entries to T-Account
Cash
Oct.1
$32,500
Oct.2
$2,350
Oct.5
$16,360
Oct.4
$900
Oct.6
$2,310
Oct.7
$3,000
Oct.9
$3,000
Bal. Ending
$37,300
Supplies
Oct.3
$2,250
Oct.8
$1,100
Bal.
$1,150
Accounts Payable
Oct.4
$900
Oct.3
$2,250
Bal.
$1,350
Common Stock
Oct.1
$32,500
Dividends
Oct.9
$3,000
Sales Commissions
Oct.5
$16,360
Rent Expense
Oct.2
$2,350
Office Salaries Expense
Oct.7
$3,000
Automobile Expense
Oct.6
$1,690
Supplies Expense
Oct.8
$1,108
Miscellaneous Expense
Oct.6
$620
Part 3 – Unadjusted Trial Balance
Affordable Reality
UNADJUSTED TRIAL BALANCE
October.31, 2018
Account Title
Debit
Credit
1
Cash
$37,300
2
Supplies
$1,150
3
Accounts Payable
$1,350
4
Common Stock
$32,500
5
Dividends
$3,000
6
Sales Commissions
$16,360
7
Rent Expense
$2,350
8
Office Salaries Expense
$3,000
9
Automobile Expense
$1,690
10
Supplies Expense
$1,100
11
Miscellaneous Expense
$620
12
Totals
$50,210
$50,210
Part 4(a) – Amount of total revenue recorded in the Ledger = $16,360
4(b) – Total Expenses recorded in the ledger = $8,760
Rent Expense
$2,350
Office Salaries Expense
$3,000
Automobile Expense
$1,690
Supplies Expense
$1,100
Miscellaneous Expense
$620
Totals
$8,760
4( C) – Net Income for October = Total Revenue $16,360 – Total Expense $8,760 = $7,600
Part 5 – Increase or Decrease in Retained Earnings
$$
Net Income
$7,600
Less: Dividends
($3,000)
Increase in Retained Earnings
$4,600
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Date
General Journal
Debit
Credit
Oct.1
Cash
$32,500
Common Stock
$32,500
Oct.2
Rent Expense
$2,350
Cash
$2,350
Oct.3
Supplies
$2,250
Accounts Payable
$2,250
Oct.4
Accounts Payable
$900
Cash
$900
Oct.5
Cash
$16,360
Sales Commissions
$16,360
Oct.6
Automobile Expense
$1,690
Miscellaneous Expense
$620
Cash
$2,310
Oct.7
Office Salaries Expense
$3,000
Cash
$3,000
Oct.8
Supplies Expense
$1,100
Supplies
$1,100
Oct.9
Dividend
$3,000
Cash
$3,000
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