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.

Instructions
1. 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?

Transcribed Image Text:

Assets Accounts Liabilities+ Accounts Alec Lee, Alec Lee,ees Rent Salaries Auto Misc. Cash + Receivable + Supplies = Payable + Capital -withdrawals + Earned-Expense-Expense-Expense-Expense