Question

olo On November 1, 2049, 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. Paid rent for period of November 1 to end of month, $4,000. 6. Purchased office equipment on account, $15,000. 8. Purchased a truck for $38,500 paying $5,000 cash and giving a note payable for the remainder 10. Purchased 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. R ived an invoice for truck expenses, to be paid in November, $1,250. Enter the following transactions on Page 2 of the two-column journal: 29. Paid utilities expense, $4,500. 29. Paid miscellaneous expenses, $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. Instructions • Journalize each transaction in a two-column journal beginning on Page 1. referring to the following chart of accounts in selecting the accounts to be debited and credited. (Do not insert the account numbers in the journal at this time.) Explanations may be omitted. 11 Cash 31 Common Stock 12 Accounts Receivable 33 Dividends 13 Supplies 41 Fees Earned 14 Prepaid Insurance 51 Wages Expense 16 Equipment 53 Rent Expense 18 Truck 54 Utilities Expense 21 Notes Payable 55 Truck Expense 22 Accounts Payable 59 Miscellaneous Expense • Post the journal to a ledger of four-column accounts, inserting appropriate posting references as each item is posted. Extend the balances to the appropriate balance columns after each transaction is posted. • Prepare an unadjusted trial balance for Heritage Designs as of November 30, 2049. Answer Check Figure: Total of Credit column: $111.450 • Determine the excess of revenues over expenses for November. Can you think of any reason why the amount determined in (4) might not be the net income for November?

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Answer 1

Note - As per HOMEWORKLIB POLICY we are allowed to give maximum 4 points in a single question.

1. Journal Entries -

Heritage Designs Journal Entries Date Accounts Title Debit Credit Nov 1 Cash $ 50,000 Common Stock $ 50,000 (Being Cash Invested against common stock) Nov 1 Rent Expense $ 4,000 Cash (Being Rent Expense Incurred & Paid) $ 4,000 Nov 6 Equipment $ 15,000 Accounts Payable $ 15,000 (Being Office Equipment purchased on account) Nov 8 Truck $ 38,500 Cash Notes Payable (Being Truck Purchased) $ 5,000 $ 33,500 Nov 10 Supplies $ 1,750 Cash (Being Supplies Purchased by cash) $ 1,750 Nov 12 Cash $ 11,500 Fees Earned (Being Revenue Earned) $ 11,500 Nov 15 Prepaid Insurance $ 2,400 Cash $ 2,400 (Being Insurance Expense paid for an year) Nov 23 Accounts Receivable $ 22,300 Fees Earned (Being Revenue Earned on account) $ 22,300 Nov 24 Truck Expense $ 1,250 Cash (Being Truck expense paid) $ 1,250 Nov 29 Utilities Expense $ 4,500 Cash (Being Utilities Expense Paid) $ 4,500 Nov 29 Miscellaneous Expense $ 1,000 Cash (Being Miscellaneous Expense Paid) $ 1,000 Nov 30 Cash $ 9,000 Accounts Receivable (Being amount received on account) $ 9,000 Nov 30 Wages Expense $ 6,800 Cash (Being Wages Expense Paid) $ 6,800 Nov 30 Accounts Payable $ 3,000 Cash (Being payment made on account) $ 3,000 Nov 30 Dividend $ 2,500 Cash (Being Dividend Paid) $ 2,500

2. Income over Expenses -

Heritage Designs Income over Expenses For the Month November 30, 2019 Fees Earned $ 33,800 Expenses: Rent Expense Truck Expense Utilities Expense Miscellaneous Expense Wages Expense Total Expenses $ 4,000 $ 1,250 $ 4,500 $ 1,000 $ 6,800 $ 17,550 Income over Expenses $ 16,250

3. Unadjusted Trial Balance -

Credit Heritage Designs Unadjusted Trial Balance As of November 30, 2019 Accounts Title Debit Cash $ 38,300 Supplies $ 1,750 Prepaid Insurance $ 2,400 Accounts Receivable $ 13,300 Truck $ 38,500 Equipment $ 15,000 Accounts Payable Notes Payable Common Stock Dividend $ 2,500 Income over Expenses $ 12,000 $ 33,500 $ 50,000 $ 16,250 Total $ 111,750 $ 111,750

4. Income over Expense can not be termed as Net Income as there are no adjustment items accounted and before those items the income statement can not derive net income for the business.