3-38 Financial Statements Refer to problem 3-37 . Prepare a balance sheet as of November 30, 20X0, and an income statement for the month of November. Prepare the retained earnings column of a statement of stockholders equity. Prepare the income statement first.

Refer to this problem 3-37

3-37 Journal, Ledger, and Trial Balance (Alternates are 3-39 through 3-44 .) The balance sheet accounts of Detroit Machinery, Inc., had the following balances on October 31, 20X0:

Cash $ 41,000

Inventory $70,000

Prepaid rent 2,000

Accounts payable $ 27,000

Paid-in capital 160,000

Paid-in capital $160,000

Retained earnings 16,000 $203,000 $203,000

Following is a summary of the transactions that occurred during November:

a. Collections of accounts receivable, $75,000.

b. Payments of accounts payable, $14,000.

c. Acquisitions of inventory on open account, $80,000.

d. Merchandise carried in inventory at a cost of $70,000 was sold on open account for $96,000.

e. Recognition of rent expense for November, $1,000.

f. Wages paid in cash for November, $8,000.

g. Cash dividends declared and disbursed to stockholders on November 29, $10,000.

Required 1. Prepare journal entries.

2. Enter beginning balances in T-accounts. Post the journal entries to T-accounts. Use the transaction letters to key your postings.

3. Prepare a trial balance for the month ending November 30, 20X0.

4. Explain why accounts payable increased by so much during November.