Jean Howard established an insurance agency on July 1 of the current year and completed the following
Question:
Jean Howard 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 $50,000 from personal funds.
b. Purchased supplies on account, $1,600.
c. Paid creditors on account, $500.
d. Received cash from fees earned on insurance commissions, $9,250.
e. Paid rent on office and equipment for the month, $2,500.
f. Paid automobile expenses for month, $900, and miscellaneous expenses, $300.
g. Paid office salaries, $1,900.
h. Determined that the cost of supplies on hand was $550; therefore, the cost of supplies used was $1,050.
i. Billed insurance companies for sales commissions earned, $11,150.
j. Withdrew cash for personal use, $2,700.
Instructions
1. Indicate the effect of each transaction and the balances after 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.
Step by Step Answer:
Accounting
ISBN: 978-0324662962
23rd Edition
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren