Question

In: Accounting

On November 1, 2018, Kris Lehman established an interior decorating business, Modern Designs. During the month,...

On November 1, 2018, Kris Lehman established an interior decorating business, Modern Designs. During the month, Kris completed the following transactions related to the business:

Nov. 1 Kris transferred cash from a personal bank account to an account to be used for the business in exchange for common stock, $36,000.
1 Paid rent for period of November 1 to end of month, $4,000.
6 Purchased office equipment on account, $16,000.
8 Purchased a truck for $43,000 paying $4,300 cash and giving a note payable for the remainder.
10 Purchased supplies for cash, $1,860.
12 Received cash for job completed, $8,000.
15 Paid annual premiums on property and casualty insurance, $2,400.
23 Recorded jobs completed on account and sent invoices to customers, $15,500.
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, $3,660.
29 Paid miscellaneous expenses, $1,700.
30 Received cash from customers on account, $10,500.
30 Paid wages of employees, $4,750.
30 Paid creditor a portion of the amount owed for equipment purchased on November 6, $4,000.
30 Paid dividends, $1,600.
using the
CHART OF ACCOUNTS
Modern Designs
General Ledger
ASSETS
11 Cash
12 Accounts Receivable
13 Supplies
14 Prepaid Insurance
16 Equipment
18 Truck
LIABILITIES
21 Notes Payable
22 Accounts Payable
EQUITY
31 Common Stock
32 Retained Earnings
33 Dividends
REVENUE
41 Fees Earned
EXPENSES
51 Wages Expense
53 Rent Expense
54 Utilities Expense
55 Truck Expense
59 Miscellaneous Expense

******Question

Determine the excess of revenues over expenses for November.

Solutions

Expert Solution

1)

Journal Entries:
Date Accounts Titles and Explanations Debit Credit
Nov. 1 Cash $36,000
   Common Stock $36,000
(To record the cash invested into the business to start up)
Nov. 1 Prepaid Rent $4,000
   Cash $4,000
(To record the prepayment of rent)
Nov. 6 Office Equipment $16,000
   Accounts Payable $16,000
(To record the purchase of equipment on account)
Nov. 8 Truck $43,000
    Cash $4,300
    Note Payable ($43,000 - $4,300) $38,700
(To record the purchase of Truck by cash and by credit)
Nov. 10 Supplies $1,860
    Cash $1,860
(To record the purchase of supplies for cash)
Nov. 12 Cash $8,000
    Fees Earned $8,000
(To record the receipt of cash on completion of job)
Nov. 15 Prepaid Insurance $2,400
    Cash $2,400
(To record the annual payment of insurance expense)
Nov. 23 Accounts Receivable $15,500
    Fees Earned $15,500
(To record the completion of jobs and sent invoices to customers)
Nov. 24 Truck Expense $1,250
    Accounts Payable $1,250
(To record the truck expenses on account)
Nov. 29 Utilities Expense $3,660
    Cash $3,660
(To record the payment of utilities expense)
Nov. 29 Miscellaneous Expense $1,700
    Cash $1,700
(To record the payment of miscellaneous expense)
Nov. 30 Cash $10,500
     Accounts Receivable $10,500
(To record the collection of receivables from customers)
Nov. 30 Wage Expenses $4,750
    Cash $4,750
(To record the payment of wage expenses)
Nov. 30 Accounts Payable $4,000
    Cash $4,000
(To record payment for the amount owed for equipment purchased)
Nov. 30 Dividends $1,600
    Cash $1,600
(To record the payment of dividends by cash)

2)

Ledger Accounts:

Cash Account No. 11 Balance
Date Item Post. Ref. Debit Credit Debit Credit
Nov. 1 Common Stock $36,000 $36,000
Nov. 1 Prepaid Rent $4,000 $32,000
Nov. 8 Truck $4,300 $27,700
Nov. 10 Supplies $1,860 $25,840
Nov. 12 Fees Earned $8,000 $33,840
Nov. 15 Prepaid Insurance $2,400 $31,440
Nov. 29 Utilities Expenses $3,660 $27,780
Nov. 29 Miscellaneous Expense $1,700 $26,080
Nov. 30 Accounts Receivable $10,500 $36,580
Nov. 30 Wage Expenses $4,750 $31,830
Nov. 30 Accounts Payable $4,000 $27,830
Nov. 30 Dividends $1,600 $26,230
Accounts Receivable Account No. 12 Balance
Date Item Post. Ref. Debit Credit Debit Credit
Nov. 23 Fees Earned $15,500 $15,500
Nov. 30 Cash $10,500 $5,000
Supplies Account No. 13 Balance
Date Item Post. Ref. Debit Credit Debit Credit
Nov. 10 Cash $1,860 $1,860
Prepaid Insurance Account No. 13 Balance
Date Item Post. Ref. Debit Credit Debit Credit
Nov. 15 Cash $2,400 $2,400
Fees Earned ($8,000 + $15,500) $23,500
Less: Expenses:
   Truck Expenses $1,250
   Utilities Expenses $3,660
   Miscellaneous Expense $1,700
   Wage Expenses $4,750
   Dividends $1,600
    Rent Expense $4,000
    Insurance Expense ($2,400 / 12) $200
Net Income $6,340

The excess of revenues are $6,340 over the expenses.


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