Question: Alec Lee established an insurance agency on January 1 of

Alec Lee established an insurance agency on January 1 of the current year and completed the following transactions during January:
a. Opened a business bank account with a deposit of $75,000 from personal funds.
b. Purchased supplies on account, $3,000.
c. Paid creditors on account, $1,000.
d. Received cash from fees earned on insurance commissions, $11,800.
e. Paid rent on office and equipment for the month, $4,000.
f. Paid automobile expenses for the month, $600, and miscellaneous expenses, $200.
g. Paid office salaries, $2,500.
h. Billed insurance companies for sales commissions earned, $12,500.
i. Withdrew cash for personal use, $5,000.
1. Indicate the effect of each transaction using the following tabular headings:
2. Briefly explain why the owner’s investment and revenues increased owner’s equity, while withdrawals and expenses decreased owner’s equity.
3. Determine the net income for January.
4. How much did January’s transactions increase or decrease Alec Lee’s capital?

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  • CreatedSeptember 15, 2015
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