On June 1 of the current year, Maria Edsall established a business to manage ren

Question

On June 1 of the current year, Maria Edsall established a business to manage rental property. She completed the following transactions during June a. Opened a business bank account with a deposit of $49,000 in exchange for capital stock. b. Purchased office supplies on account, $2,370 c. Received cash from fees eaned for managing rental property, $6,650 d. Paid rent on office and equipment for the month, $2,910. e. Paid creditors on account, $1,080 r. Billed customers for fees earned for managing rental property, $5,390. g. Paid automobile expenses for month, $650, and miscellaneous expenses, $320. h. Paid office salaries, $2,0S0 i. Determined that the cost of supplies on hand was $1,400; therefore, the cost of supplies used was $970 j. Paid dividends $1,940 Required: 1. Indicate the effect of each transaction and the balances after each transaction: For those boxes in which no entry is required, leave the box blank. For those boxes in which you must enter subtractive or negative numbers use a minus sign. (Example: -300)

Explanation / Answer

The three basic elements of accounting equation are-

Transactions are recorded in the basic accounting equation as shown below:

Item Cash + Account Receivable + Supplies = Accounts payable + Capital Stock - Dividend + Fees Earned - Rent Expense - Sal Exp - Supp Exp - Auto Exp - Misc Exp a 49,000 49,000 b 2,370 2,370 Bal 49,000 2,370 2,370 49,000 c 6,650 6,650 Bal 55,650 2,370 2,370 49,000 6,650 d -2,910 2,910 Bal 52,740 2,370 2,370 49,000 6,650 2,910 e -1,080 -1,080 Bal 51,660 2,370 1,290 49,000 6,650 2,910 f 5,390 5,390 Bal 51,660 5,390 2,370 1,290 49,000 12,040 2,910 g -970 650 320 Bal 50,690 5,390 2,370 1,290 49,000 12,040 2,910 650 320 h. -2,050 2,050 Bal 48,640 5,390 2,370 1,290 49,000 0 12,040 2,910 2,050 0 650 320 i. -970 970 Bal 48,640 5,390 1,400 1,290 49,000 0 12,040 2,910 2,050 970 650 320 j. -1,940 1,940 Bal. 46,700 + 5,390 + 1,400 = 1,290 + 49,000 - 1,940 + 12,040 - 2,910 - 2,050 - 970 - 650 - 320

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