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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On August 1, 20Y9, Brooke Kline established Western Realty. Brooke completed the following transactions during the month of August:

a.	Opened a business bank account with a deposit of $28,000 in exchange for common stock.
b.	Paid rent on office and equipment for the month, $3,600.
c.	Paid automobile expenses for month, $1,300, and miscellaneous expenses, $700.
d.	Purchased office supplies on account, $1,250.
e.	Earned sales commissions, receiving cash, $18,400.
f.	Paid creditor on account, $750.
g.	Paid office salaries, $3,000.
h.	Paid dividends, $3,300.
i.	Determined that the cost of supplies on hand was $500; therefore, the cost of supplies used was $750.

	Required:
1.	Indicate the effect of each transaction and the balances after each transaction, using the tabular headings in the exhibit below. In each transaction row (rows indicated by a letter), you must indicate the math sign (+ or -) in columns affected by the transaction. You will not need to enter math signs in the balance rows (rows indicated by Bal.). Entries of 0 (zero) are not required and will be cleared if entered.

Required:

Indicate the effect of each transaction and the balances after each transaction, using the tabular headings in the exhibit below. In each transaction row (rows indicated by a letter), you must indicate the math sign (+ or -) in columns affected by the transaction. You will not need to enter math signs in the balance rows (rows indicated by Bal.). Entries of 0 (zero) are not required and will be cleared if entered.

Assets

Liabilities

Stockholders’ Equity

Accounts

Common

Sales

Salaries

Rent

Auto

Supplies

Miscellaneous

Cash

Supplies

Payable

Stock

Dividends

Commissions

Expense

2. a. Prepare an income statement for August. Refer to the list of Accounts, Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. You will not need to enter colons (:) on the income statement. If a net loss has been incurred, enter that amount as a negative number using a minus sign.

2. b. Prepare a statement of stockholders’ equity for August. Refer to the list of Accounts, Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the s

tatement heading. If a net loss is incurred or dividends were paid, enter that amount as a negative number using a minus sign. If an amount is zero, enter "0".

2. c. Prepare a balance sheet as of August 31. Refer to the list of Accounts, Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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