Accounting 26th Edition by Carl Warren,James Reeve,Jonathan Duchac

Exercise 5

Transactions
Amy Austin established an insurance agency on March 1 of the current year and completed the following transactions during March:
a. Opened a business bank account with a deposit of $50,000 from personal funds.
b. Purchased supplies on account, $4,000.
c. Paid creditors on account, $2,300.
d. Received cash from fees earned on insurance commissions, $13,800.
e. Paid rent on office and equipment for the month, $5,000.
f. Paid automobile expenses for month, $1,150, and miscellaneous expenses, $300.
g. Paid office salaries, $2,500.
h. Determined that the cost of supplies on hand was $2,700; therefore, the cost of supplies used was $1,300.
i. Billed insurance companies for sales commissions earned, $12,500.
j. Withdrew cash for personal use, $3,900.
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.
3. Determine the net income for March.
4. How much did March's transactions increase or decrease Amy Austin's capital