Question

Ted Johnson started a realty business on April 1^st. The following business activities occurred during the first month of operations. Record the business transactions using the worksheet template in Part 2. If an activity is not to be recorded, indicate by stating “no entry”.

1. Opened a business account with a deposit of $75,000 in exchange for common stock.

b.   Purchased supplies on account, $11,200.

c.   Earned a commission on the sale of a house of $15,000 in cash.

d.   Paid office rent of $1,500 for the month.

e.   Paid creditor on account $6,000.

f.    A client hires Ted to sell her house for a fixed $12,500 commission.

g.   Paid office salaries of $6,000.

h.   Paid dividends of $10,000.

i.    Received telephone bill for $400 not due until next month.

j.    Sells house and earns a commission of $12,500 but agrees to be paid in 15 days.

Please answer the following questions:

1.   What was the total increase in shareholder’s equity for the period?

2.   What was the total net income for the period?

Answer 1

Income Statement
Revenue
Commission Fee		$     27,500
Expenses
Salaries and Wages Expense	$        6,000
Telephone Expenses	$           400
Rent Expense	$        1,500
Total Expenses		$       7,900
Net Income / (Loss)		$     19,600

1.
Increase in Shareholder's Equity = $75000 + 19600 - 10000 = $84,600

2.
Net Income = $19,600