Alec Lee established an insurance agency on January 1 of

#1657
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.Instructions1. 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?View Solution:
Alec Lee established an insurance agency on January 1 of

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