Question

Les Stanley established an insurance agency on July 1, 20Y5, and completed the following transactions during July: Opened a business bank account in the name of Stanley Insurance Inc., with a deposit of $50,500 in exchange for common stock. Borrowed $23,000 by issuing a note payable. Received cash from fees earned, $28,500. Paid rent on office and equipment for the month, $2,600. Paid automobile expense for the month, $2,000, and miscellaneous expense, $800. Paid office salaries, $4,200. Paid interest on the note payable, $110. Purchased land as a future building site, $59,000. Paid dividends, $3,800.

Answer 1

Answer:

A. Net Income = $22,790

B. Shareholders' equity balance is = $69,490

Explanation:

Requirement A:

Les Stanley

Income Statement

For the year ended, July 31, 2015

Revenues:

Fees Earned $28,500 (1)

Expenses:

Rent expenses $2,600 (3)

Automobile Expense $2,000 (4)

Office Salaries $4,200 (5)

Miscellaneous expense$ 800 (6)

Interest Expense $ 110 (7)

Total Expenses $5,710

Net Income $22,790

Note - 1: Fees earned = $28,500 (Journal 3)

2. Common stock = $50,500 (Journal 1)

3. Rent expense (Journal 4)

4. Automobile expense (Journal 5)

5. Office salaries (Journal 7)

6. Miscellaneous expense (Journal 6)

7. Interest on payable (Journal 8)

8. Dividends (Journal 10)

Requirement B:

Les Stanley

Statement of shareholders equity

For the year ended, July 31, 2015

Particulars Share R. E* Total

Balances, July 1, 2015 $0 0 $0

Add: Issued Capital $50,500 (2) 0 $50,500

Add: Net Income $0 $22,790 $22,790

Less: Dividends (8) $0 $(3,800) $(3,800)

Balances, July 31, 2015 $50,500 $18,990 $69,490

Therefore, shareholders' equity balance is = $69,490