Question 1:

Journalize the following business transactions in general journal form

1. The owner, Athena Lu, invests $40,000 in cash in starting a real estate office operating as a sole
proprietorship.

2. Purchased $400 of supplies on credit.

3. Purchased equipment for $8,000, paying $2,000 in cash and signed a 30-day, $6,000, note
payable.

4. Real estate commissions billed to clients amount to $4,000.

5. Paid $700 in cash for the current month's rent.

6. Paid $200 cash on account for supplies purchased in transaction 2.

7. Received a bill for $600 for advertising for the current month.

8. Paid $2,200 cash for office salaries and wages.

9. Lu withdrew $1,500 from the business for living expenses.

10. Received a check for $3,000 from a client in payment on account for commissions billed in
transaction 4.
Answer:

1. Cash..................................................................................................... 40,000

Owner’s Capital.......................................................................... 40,000

2. Supplies............................................................................................... 400

Accounts Payable....................................................................... 400

3. Equipment........................................................................................... 8,000

Cash............................................................................................ 2,000

Notes Payable............................................................................ 6,000

4. Accounts Receivable............................................................................ 4,000

Service Revenue......................................................................... 4,000

5. Rent Expense....................................................................................... 700

Cash............................................................................................ 700

6. Accounts Payable................................................................................. 200

Cash............................................................................................ 200

7. Advertising Expense............................................................................. 600

Accounts Payable....................................................................... 600

8. Salaries and Wages Expense................................................................ 2,200

Cash............................................................................................ 2,200
9.Owner’s Drawings.......................................................................................... 1,500

Cash............................................................................................ 1,500

10. Cash..................................................................................................... 3,000

Accounts Receivable.................................................................. 3,000

Question 2:

These financial statement items are for Rugen Company at year-end, July 31, 2017.

Salaries and wages payable $ 2,980 Notes payable (long-term) $ 3,000

Salaries and wages expense 45,700 Cash 5,200

Utilities expense 21,100 Accounts receivable 9,780

Equipment 38,000 Accumulated depreciation 6,000

Accounts payable 4,100 Owner’s Drawings 4,000

Service revenue 57,200 Depreciation expense 4,000

Rent revenue 6,500 Owner’s capital (beginning 48,000

of the year)

Instructions

(a) Prepare an income statement and an owner's equity statement for the year.

(b) Prepare a classified balance sheet at July 31.

Answer:

(a) RUGEN COMPANY

Income Statement

For the Year Ended July 31, 2014

———————————————————————————————————————————
Revenues

Service revenue....................................................................................... $57,200

Rent revenue........................................................................................... 6,500

Total revenues................................................................................
$63,700Expenses

Salaries and wages expense.................................................................... 45,700

Utilities expense...................................................................................... 21,100

Depreciation expense............................................................................. 4,000

Total expense.................................................................................. 70,800

Net loss............................................................................................................. $ (7,100)

(b) RUGEN COMPANY

Balance Sheet

July 31, 2014

———————————————————————————————————————————

Assets

Current assets

Cash ......................................................................................................$5,200

Accounts receivable................................................................................ 9,780

Total current assets......................................................................... $14,980

Property, plant, and equipment

 Equipment............................................................................................... 38,000

Less: Accumulated depreciation............................................................. 6,000 32,000

Total assets...................................................................................... $46,980

Liabilities and Owner's Equity

Current liabilities

Accounts payable.................................................................................... $4,100

Salaries and wages payable..................................................................... 2,980

Total current liabilities....................................................................... $ 7,080

Long-term liabilities

Notes payable......................................................................................... 3,000

Total liabilities.................................................................................... 10,080

Owner's equity

Owner’s capital....................................................................................... 36,900

Total liabilities and owner's equity.................................................... $46,980