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 in exchange for common stock.

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 sup- plies used was $1,300.

i.       Billed insurance companies for sales commissions earned, $12,500.

j.      Paid dividends, $3,900.

Instructions

1.     Indicate the effect of each transaction and the balances after each transaction, using the following tabular headings:

 

 

Assets	5 Liabilities 1	Â	Â	Stockholders’ Equity	Â
Accounts	Accounts	Common	Fees	Rent              Salaries	Supplies	Auto	Misc.

 

Cash + Receivable + Supplies  =

Payable   +

Stock          –    Dividends    +  Earned   –  Expense   –

Expense   –  Expense   –

Expense    –  Expense

 

 

2.     Briefly explain why issuing common stock and revenues increased stockholders’ equity, while dividends and expenses decreased stockholders’ equity.

3.     Determine the net income for March.

4.     How much did March’s transactions increase or decrease retained earnings?