Duane Mays established an insurance agency on July 1 of the current year and completed the following
Question:
Duane Mays established an insurance agency on July 1 of the current year and completed the following transactions during July:
a. Opened a business bank account with a deposit of $18,000 from personal funds.
b. Purchased supplies on account, $950.
c. Paid creditors on account, $575.
d. Received cash from fees earned on insurance commissions, $4,250.
e. Paid rent on office and equipment for the month, $1,200.
f. Paid automobile expenses for month, $600, and miscellaneous expenses, $375.
g. Paid office salaries, $1,500.
h. Determined that the cost of supplies on hand was $225; therefore, the cost of supplies used was $725.
i. Billed insurance companies for sales commissions earned, $6,350.
j. Withdrew cash for personal use, $2,000.
Instructions
1. Indicate the effect of each transaction and the balances after each transaction, using the following tabular headings:
2. Briefly explain why the owners investment and revenues increased owners equity, while withdrawals and expenses decreased owners equity.
Step by Step Answer:
Accounting
ISBN: 978-0324188004
21st Edition
Authors: Carl s. warren, James m. reeve, Philip e. fess