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Journal entries and trial balance On October 1, 20Y4, 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 in exchange for common stock, $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. Oct. 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. 29. Received cash from customers on account, $7,600. 30. Paid wages of employees, $4,800. 31. Paid dividends, $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 12 Accounts Receivable 13 Supplies 14 Prepaid Insurance 16 Equipment 18 Truck 21 Notes Payable 22 Accounts Payable 31 Common Stock 33 Dividends 41 Fees Earned 51 Wages Expense 53 Rent Expense 54 Utilities Expense 55 Truck Expense 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, 20Y4. 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?

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Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

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Chapter
Section
BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
Chapter 2, Problem 3PB
Textbook Problem
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Journal entries and trial balance

On October 1, 20Y4, 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 in exchange for common stock, $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.

Oct. 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.

29. Received cash from customers on account, $7,600.

30. Paid wages of employees, $4,800.

31. Paid dividends, $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

12 Accounts Receivable

13 Supplies

14 Prepaid Insurance

16 Equipment

18 Truck

21 Notes Payable

22 Accounts Payable

31 Common Stock

33 Dividends

41 Fees Earned

51 Wages Expense

53 Rent Expense

54 Utilities Expense

55 Truck Expense

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, 20Y4.

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?

1.

To determine

Journalize the transactions in a two column journal beginning on Page 1.

Explanation of Solution

Journal:

Journal is the book of original entry. Journal consists of the day today financial transactions in a chronological order. The journal has two aspects; they are debit aspect and the credit aspect.

Rules of debit and credit:

“An increase in an asset account, an increase in an expense account, a decrease in liability account, and a decrease in a revenue account should be debited.

Similarly, an increase in liability account, an increase in a revenue account and a decrease in an asset account, a decrease in an expenses account should be credited”.

Journalize each transaction in a two column journal beginning on Page 1.

                                                   Journal                                           Page1    
DateDescriptionPost. RefDebit ($)Credit ($)
20Y4 Cash1118,000 
October1    Common stock31 18,000
  (To record the transfer of cash from personal bank account to business account in exchange for common stock)   
 
 4Rent expense533,000 
      Cash11 3,000
  (To record the payment of rent for the month of June)   
 
 10Truck1823,750 
      Cash11 3,750
      Notes payable21 20,000
  (To record the purchase of truck by cash and on account)   
 
 13Equipment   1610,500 
      Accounts payable22 10,500
  (To record the purchase of equipment on account)   
      
 
 14Supplies132,100 
      Cash11 2,100
  (To record the purchase of supplies)   
 
 15Prepaid insurance143,600 
      Cash11 3,600
  (To record the payment made for insurance premiums)   
 
 15Cash118,950 
    &...

2.

To determine

Post the journal to a ledger of four-column accounts with appropriate post references, and the balances after each transaction is posted.

3.

To determine

Prepare an unadjusted trial balance for Company PD for the year ended October 31, 20Y4.

4.

To determine

Determine the excess of revenues over expenses for the month of October.

5.

To determine

Discuss the reason behind the amount determined in (4) might not be the net income for October.

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Chapter 2 Solutions

Financial And Managerial Accounting
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