On October 1, 2019, Jay Pryor established an interior decorating business, Pioneer Designs. During the month, Jay completed the following transactions related to the business:
Oct.
1. Jay transferred cash from a personal bank account to an account to be used for the business, $18,000.
4. Paid rent for period of October 4 to end of month, $3,000.
10. Purchased a used truck for $23,750, paying $3,750 cash and giving a note payable for the remainder.
13. Purchased equipment on account, $10,500.
14. Purchased supplies for cash, $2,100.
15. Paid annual premiums on property and casualty insurance, $3,600.
15. Received cash for job completed, $8,950.
Enter the following transactions on Page 2 of the two-column journal:
21. Paid creditor a portion of the amount owed for equipment purchased on October 13, $2,000.
24. Recorded jobs completed on account and sent invoices to customers, $14,150.
26. Received an invoice for truck expenses, to be paid in November, $700.
27. Paid utilities expense, $2,240.
27. Paid miscellaneous expenses, $1,100.
Oct.
29. Received cash from customers on account, $7,600.
30. Paid wages of employees, $4,800.
31. Withdrew cash for personal use, $3,500.
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.) Journal entry explanations may be omitted.
11 Cash
31 Jay Pryor, Capital
12 Accounts Receivable
32 Jay Pryor, Drawing
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
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 Pioneer Designs as of October 31, 2019.
4. Determine the excess of revenues over expenses for October.
5. Can you think of any reason why the amount determined in (4) might not be the net income for October?
Answer:
1.
Page 1
Post.
Ref. Debit Credit
2019
Oct. 1 Cash11 18,000
Jay Pryor, Capital 31 18,000
4 Rent Expense53 3,000
Cash11 3,000
10 Truck18 23,750
Cash11 3,750
Notes Payable21 20,000
13 Equipment16 10,500
Accounts Payable 22 10,500
14 Supplies13 2,100
Cash11 2,100
15 Prepaid Insurance 14 3,600
Cash11 3,600
15 Cash11 8,950
Fees Earned 41 8,950
Page 2
Post.
Ref. Debit Credit
2019
Oct. 21 Accounts Payable 22 2,000
Cash11 2,000
24 Accounts Receivable 12 14,150
Fees Earned 41 14,150
26 Truck Expense55 700
Accounts Payable 22 700
27 Utilities Expense54 2,240
Cash11 2,240
27 Miscellaneous Expense 59 1,100
Cash11 1,100
29 Cash11 7,600
Accounts Receivable 12 7,600
30 Wages Expense51 4,800
Cash11 4,800
31 Jay Pryor, Drawing 32 3,500
Cash11 3,500
2.
Account No. 11
Post.
Item Ref. Debit Debit Credit
2019
Oct. 1 1 18,000 18,000
4 115,000
10 111,250
14 19,150
15 15,550
15 1 8,950 14,500
21 212,500
27 210,260
27 29,160
29 2 7,600 16,760
30 211,960
31 28,460
Account No. 12
Post.
Item Ref. Debit Debit Credit
2019
Oct. 24 2 14,150 14,150
29 26,550
Account No. 13
Post.
Item Ref. Debit Credit Debit Credit
2019
Oct. 14 1 2,100 2,100
Account No. 14
Post.
Item Ref. Debit Credit Debit Credit
2019
Oct. 15 1 3,600 3,600
Account No. 16
Post.
Item Ref. Debit Credit Debit Credit
2019
Oct. 13 1 10,500 10,500
Account No. 18
Post.
Item Ref. Debit Credit Debit Credit
2019
Oct. 10 1 23,750 23,750
Account No. 21
Post.
Item Ref. Debit Credit Debit Credit
2019
Oct. 10 1 20,000 20,000
Account No. 22
Post.
Item Ref. Debit Credit Debit Credit
2019
Oct. 13 1 10,500 10,500
21 2 2,0008,500
26 2 700 9,200
Account No. 31
Post.
Item Ref. Debit Credit Debit Credit
2019
Oct. 1 1 18,000 18,000
Account No. 32
Post.
Item Ref. Debit Credit Debit Credit
2019
Oct. 31 2 3,500 3,500
Account No. 41
Post.
Item Ref. Debit Credit Debit Credit
2019
Oct. 15 1 8,950 8,950
24 2 14,150 23,100
Account No. 51
Post.
Item Ref. Debit Credit Debit Credit
2019
Oct. 30 2 4,800 4,800
Account No. 53
Post.
Item Ref. Debit Credit Debit Credit
2019
Oct. 4 1 3,000 3,000
Account No. 54
Post.
Item Ref. Debit Credit Debit Credit
2019
Oct. 27 2 2,240 2,240
Account No. 55
Post.
Item Ref. Debit Credit Debit Credit
2019
Oct. 26 2 700 700
Account No. 59
Post.
Item Ref. Debit Credit Debit Credit
2019
Oct. 27 2 1,100 1,100
3.
Cash11 8,460
Accounts Receivable 12 6,550
Supplies13 2,100
Prepaid Insurance14 3,600
Equipment16 10,500
Truck18 23,750
Notes Payable21 20,000
Accounts Payable22 9,200
Jay Pryor, Capital31 18,000
Jay Pryor, Drawing 32 3,500
Fees Earned41 23,100
Wages Expense51 4,800
Rent Expense53 3,000
Utilities Expense54 2,240
Truck Expense55 700
Miscellaneous Expense 59 1,100
4. $11,260 ($23,100 – $4,800 – $3,000 – $2,240 – $700 – $1,100)
5. Some supplies may have been used during October 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 Pioneer Designs.
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