On November 1, 20Y9 Lexi Martin established an interior decorating business heritage designs during the month. Lexi completed the following transactions related to the business.

 

Nov

1 Lexi transferred cash from a personal bank account to an account to be used for the business in exchange for common stock, $50,000.

1 pay rent for period of November 1 to end of month $4,000

6 Purchased office equipment on account $15,000

8 a truck for $38,500 paying $5,000 cash and giving a note payable for the remainder.

10 purchase supplies for cash $1,750

12 received cash for job completed $11,500

15 paid annual premiums on property and casualty insurance $2,400

23 recorded jobs completed on account and sent invoices to customers $22,300

24 received an invoice for truck expenses to be paid in November $1,250

 

Enter the following transactions on page 2 of the two-column journal:

Nov.

29 paid utilities, expense $4,500

29 paid miscellaneous expense $1,000

30 received cash from customers on account $9,000

30 paid wages of employees $6,800

30 paid creditor a portion of the amount owed for equipment purchased on November 6, $3,000

30 paid dividends $2,500

 

Required :

1. Journalize each transaction in a two column journal, beginning on page, one, referring to the chart of accounts and selecting the accounts to be debited or credited ( do not insert the reference numbers until you have posted the entry to the journal ledger and part two.) refer to the chart of accounts for exact wording of account titles.
2. Post ( in chronological order) the journal to the ledger of four column accounts inserting appropriate posting reference in both the journal and the ledger as each item is posted the balances to the appropriate balance columns after each transaction is posted
3. Prepare an unadjusted trial, balance for heritage designs as of November 30 20Y9
4. Determine the excess of revenues over expenses for November
5. Can you think of any reason why the amount determine in (4) might not be the net income for November?

               CHARTS OF ACCOUNTS

                      Heritage designs

                         General ledger

Assets

11 cash

12 accounts receivable

13 supplies

14 prepaid insurance

16 equipment

18 truck

 

Revenue

41 fees earned

 

Expenses

51 wages expense

53 rent expense

54 utilities expense

55 truck expense

59 miscellaneous expense

 

Liabilities

21 notes payable

22 accounts payable

 

Equity

31 common stock

32 retained earnings

33 dividends

 

1. Journalize each transaction in a two column journal, beginning on page, one, referring to the chart of accounts and selecting the accounts to be debited or credited ( do not insert the reference numbers until you have posted the entry to the journal ledger and part two.) refer to the chart of accounts for exact wording of account titles.

 

JOURNAL | ACCOUNTING EQUATION page 1

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

 

JOURNAL | ACCOUNTING EQUATION page 2

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6
7
8
9
10
11
12

1. Post ( in chronological order) the journal to the ledger of four column accounts inserting appropriate posting reference in both the journal and the ledger as each item is posted the balances to the appropriate balance columns after each transaction is posted

 

LEDGER

Account: Cash Account No. 11

                                                 Balance debit/credit

	DATE	ITEM	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10
11
12

 

Account: accounts receivable Account No. 12

 

                                                  Balance debit/credit

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2

 

Account: supplies Account No. 13

 

                                                 Balance debit/credit

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1

 

Account: prepaid insurance Account No. 14

 

                                                  Balance debit/credit

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1

 

Account: equipment Account No. 16

 

                                                 Balance debit/credit

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1

 

Account: truck Account No. 18

 

                                                  Balance debit/credit

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1

 

Account: notes payable Account No. 21

 

                                                  Balance debit/credit

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1

 

Account: Account payable Account No. 22

 

                                                 Balance debit/credit

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2
3

 

Account: common stock Account No. 31

 

                                                 Balance debit/credit

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1

 

Account: dividends Account No. 33

 

                                                 Balance debit/credit

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1

 

Account: fees earned Account No. 41

 

                                                Balance debit/credit

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2

 

Account: wages expense Account No. 51

 

                                               Balance debit/credit

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1

 

Account: rent expense Account No. 53

 

                                                 Balance debit/credit

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1

 

Account: utilities expense Account No. 54

 

                                                  Balance debit/credit

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1

 

Account: truck expense Account No. 55

 

                                                  Balance debit/credit

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1

 

Account: miscellaneous expense Account No. 59

                                                 Balance debit/credit

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1

1. Prepare an unadjusted trial, balance for heritage designs as of November 30 20Y9

 

                    Heritage designs

          Unadjusted trial balance

                  November 30 20Y9

	ACCOUNT TITLE	DEBIT	CREDIT
1	Cash
2	Accounts receivable
3	Supplies
4	Prepaid insurance
5	Equipment
6	Truck
7	Notes payable
8	Accounts payable
9	Common stock
10	Retained earnings
11	Dividends
12	Fees earned
13	Wages expense
14	Rent expense
15	Utilities expense
16	Truck expense
17	Miscellaneous expense
18	Totals

 

1. Determine the excess of revenues over expenses for November.

$ ?

 

1. Can you think of any reason why the amount determined in (4) might not be the net income for November?

A. Because the dividends are declared but not paid

B. Because necessary adjustment to expenses, like depreciation has not been made

C. Because the cash balance is incorrect

D. Because the closing inventory balance is missing