Question

On November 1, 2019, 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, $27.700. 1 Paid rent for period of November 1 to end of month, $3,100. 6 Purchased office equipment on account, $12.760. 8 Purchased a truck for $30,700 paying $6,300 cash and giving a note payable for the remainder. 10 Purchased supplies for cash, S1,880. 12 Received cash for job completed, $9,000. 15 Paid annual premiums on property and casualty insurance, $2,500. 23 Recorded jobs completed on account and sent invoices to customers, $12.440. 24 Received an invoice for truck expenses, to be paid in November, $1,390. Enter the following transactions on Page 2 of the two-column journal: Nov. 29 Paid utilities expense, $3,660. 29 Paid miscellaneous expenses, $1,800. 30 Received cash from customers on account, $8,200. 30 Paid wages of employees, $4,600. 30 Paid creditor a portion of the amount owed for equipment purchased on November 6, $6,100. 30 Paid dividends, $2,100. Required: 1. Journalize each transaction in a two-column journal beginning on Page 1, referring to the chart of accounts in selecting the accounts to be debited and credited. (Do not insert the post reference numbers until you have posted the entry to the general ledger in part 2) Refer to the Chart of Accounts for exact wording of account titles. 2. Post (in chronological order) the journal to a ledger of four-column accounts, inserting appropriate posting references in both the journal and the ledger as each item is posted. Extend 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, 2049. 4. Determine the excess of revenues over expenses for November. 5. Can you think of any reason why the amount determined in (4) might not be the net income for November?

Answer 1

2) Ledger Cash Account Balance Post Ref./s No. Credit Credit Debit 27,700 $ $ $ $ 3,100 6,300 1,880 9,000 Date Item 1-Nov Cash transferred for business 1-Nov Rent paid 8-Nov Truck purchased 10-Nov Supplies purchased 12-Nov Fees earned 15-Nov Insurance paid 24-Nov Truck expenses paid 29-Nov Utilities expense paid 29-Nov Miscellaneous expense paid 30-Nov Cash received from client 30-Nov Wages paid 30-Nov|Accounts payable paid for truck 30-Nov Dividend paid $ $ $ $ 2,500 1,390 3,660 1,800 Debit $ 27,700 $ 24,600 $ 18,300 $ 16,420 $ 25,420 $ 22,920 $ 21,530 $ 17,870 $ 16,070 $ 24,270 $ 19,670 $ 13,570 $ 11,470 $ 8,200 $ $ $ 4,600 6,100 2,100

Common Stock Balance Post Ref./S No. Debit Credit Debit Credit Date Item Cash transferred for business in 1-Nov exchange of common stock $ 27,700 $ 27,700 Equipment Balance Post Ref./S No. 5 Credit Date Item 8-Nov Equipment purchased Credit Debit 12,760 Debit $ 12,760 $ Truck Balance Post Ref./ s t Post Ref./s No. 7 . Credit Date Item 8-Nov Truck purchased Credit Debit 30,700 Debit $ 30,700 $

Notes Payable Balance Post Ref./s No. Debit Debit Date Item 8-Nov Truck purchased Credit 24,400 Credit 24,400 9 I $ $ Supplies Balance Post Ref./s No. 10 Credit Date Item 10-Nov Supplies purchased Credit Debit 1,880 Debit $ 1,880 $ Prepaid Insurance Balance Post Ref./s No. Credit Credit Date Item 15-Nov Insurance paid Debit 2,500 14 $ Debit $ 2,500

Accounts Receivable Balance Post Ref./S No. Debit Credit Debit Credit Date Item Sent invoice to client for job 23-Nov completed 30-Nov Cash received from client 16 $ 12,440 $ 12,440 $ 4,240 $ 8,200 Accounts Payable Balance Post Ref./S No. Debit Debit Date Item 6-Nov Equipment purchased 30-Nov Credit $ 12,760 $ $ Credit 12,760 6,660 $ 6,100

3) Unadjusted Trial Balance Credit $ $ $ $ $ $ Debit 11,470 4,240 1,880 2,500 12,760 30,700 Account title Cash Accounts Receivable Supplies Prepaid Insurance Equipment Truck Notes Payable Accounts Payable Common Stock Retained Earnings Dividends Fees earned Wages expense Rent expense Utilities expense Truck expense Miscellaneous expense Total $ $ $ 24,400 6,660 27,700 $ 2,100 $ 21,440 $ $ $ $ $ $ 4,600 3,100 3,660 1,390 1,800 80,200 $ 80,200

The excess of revenue over expenses is as follows: Fees earned Wages expense Rent expense Utilities expense Truck expense Miscellaneous expense Excess of Revenue over expenses $ $ $ $ $ $ $ 21,440 (4,600) (3,100) (3,660) (1,390) (1,800) 6,890 The amount determined in 4 above may not be the Net income for November because it is unadjusted in respect of: depreciation expense insurance expense Supplies inventory