On June 1, 2019, Kris Storey established an interior decorating business, Eco-Centric Designs. During the month, Kris completed the following transactions related to the business:
June 1. Kris transferred cash from a personal bank account to an account to be used for the business, $35,000.
1. Paid rent for period of June 1 to end of month, $4,750.
6. Purchased office equipment on account, $14,100.
8. Purchased a van for $28,500 paying $4,500 cash and giving a note payable for the remainder.
10. Purchased supplies for cash, $2,380.
12. Received cash for job completed, $12,200.
15. Paid annual premiums on property and casualty insurance, $3,600.
23. Recorded jobs completed on account and sent invoices to customers, $11,900.
24. Received an invoice for van expenses, to be paid in June, $1,500.
Enter the following transactions on Page 2 of the two-column journal:
June 29. Paid utilities expense, $3,100.
29. Paid miscellaneous expenses, $950.
30. Received cash from customers on account, $7,330.
30. Paid wages of employees, $5,070.
30. Paid creditor a portion of the amount owed for equipment purchased on June 6, $6,825.
30. Withdrew cash for personal use, $1,600.
Instructions
1. 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 Kris Storey, Capital
12 Accounts Receivable
32 Kris Storey, Drawing
13 Supplies
41 Fees Earned
14 Prepaid Insurance
51 Wages Expense
16 Equipment
53 Rent Expense
18 Van
54 Utilities Expense
21 Notes Payable
55 Van Expense
22 Accounts Payable
59 Miscellaneous Expense
2. 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.
3. Prepare an unadjusted trial balance for Eco-Centric Designs as of June 30, 2019.
4. Determine the excess of revenues over expenses for June.
5. Can you think of any reason why the amount determined in (4) might not be the net income for June?
Answer:
1.
Page 1
Post.
Ref. Debit Credit
2019
June 1 Cash11 35,000
Kris Storey, Capital 31 35,000
1 Rent Expense53 4,750
Cash11 4,750
6 Equipment16 14,100
Accounts Payable 22 14,100
8 Van18 28,500
Cash11 4,500
Notes Payable21 24,000
10 Supplies13 2,380
Cash11 2,380
12 Cash11 12,200
Fees Earned 41 12,200
15 Prepaid Insurance 14 3,600
Cash11 3,600
23 Accounts Receivable 12 11,900
Fees Earned 41 11,900
24 Van Expense55 1,500
Accounts Payable 22 1,500
Page 2
Post.
Ref. Debit Credit
2019
June 29 Utilities Expense54 3,100
Cash11 3,100
29 Miscellaneous Expense 59 950
Cash11 950
30 Cash11 7,330
Accounts Receivable 12 7,330
30 Wages Expense51 5,070
Cash11 5,070
30 Accounts Payable22 6,825
Cash11 6,825
30 Kris Storey, Drawing 32 1,600
Cash11 1,600
2.
Account No. 11
Post.
Item Ref. Debit Debit Credit
2019
June 1 1 35,000 35,000
1 130,250
8 125,750
10 123,370
12 1 12,200 35,570
15 131,970
29 228,870
29 227,920
30 2 7,330 35,250
30 230,180
30 223,355
30 221,755
Account No. 12
Post.
Item Ref. Debit Debit Credit
2019
June 23 1 11,900 11,900
30 24,570
Account No. 13
Post.
Item Ref. Debit Credit Debit Credit
2019
June 10 1 2,380 2,380
Account No. 14
Post.
Item Ref. Debit Credit Debit Credit
2019
June 15 1 3,600 3,600
Account No. 16
Post.
Item Ref. Debit Credit Debit Credit
2019
June 6 1 14,100 14,100
Account No. 18
Post.
Item Ref. Debit Credit Debit Credit
2019
June 8 1 28,500 28,500
Account No. 21
Post.
Item Ref. Debit Credit Debit Credit
2019
June 8 1 24,000 24,000
Account No. 22
Post.
Item Ref. Debit Credit Debit Credit
2019
June 6 1 14,100 14,100
24 1 1,500 15,600
30 2 6,8258,775
Account No. 31
Post.
Item Ref. Debit Credit Debit Credit
2019
June 1 1 35,000 35,000
Account No. 32
Post.
Item Ref. Debit Credit Debit Credit
2019
June 30 2 1,600 1,600
Account No. 41
Post.
Item Ref. Debit Credit Debit Credit
2019
June 12 1 12,200 12,200
23 1 11,900 24,100
Account No. 51
Post.
Item Ref. Debit Credit Debit Credit
2019
June 30 2 5,070 5,070
Account No. 53
Post.
Item Ref. Debit Credit Debit Credit
2019
June 1 1 4,750 4,750
Account No. 54
Post.
Item Ref. Debit Credit Debit Credit
2019
June 29 2 3,100 3,100
Account No. 55
Post.
Item Ref. Debit Credit Debit Credit
2019
June 24 1 1,500 1,500
Account No. 59
Post.
Item Ref. Debit Credit Debit Credit
2019
June 29 2 950 950
3.
Cash11 21,755
Accounts Receivable 12 4,570
Supplies13 2,380
Prepaid Insurance14 3,600
Equipment15 14,100
Van18 28,500
Notes Payable21 24,000
Accounts Payable22 8,775
Kris Storey, Capital 31 35,000
Kris Storey, Drawing 32 1,600
Fees Earned41 24,100
Wages Expense51 5,070
Rent Expense53 4,750
Utilities Expense54 3,100
Van Expense55 1,500
Miscellaneous Expense 59 950
4. $8,730 ($24,100 – $5,070 – $4,750 – $3,100 – $1,500 – $950)
5. Some supplies may have been used during June but no supplies expense has
been recorded.
As will be discussed in Chapter 3, adjustments are necessary at the end of the
accounting period to bring the accounts up to date. For example, adjustments
for supplies used, insurance expired, and depreciation would probably be
required by Eco-Centric Designs.