On November 1, 2016, Patty Cosgrove established an interior decorating business, Classic Designs. During the month, Patty completed the following transactions related to the business:

Nov. 1. Patty transferred cash from a personal bank account to an account to be used for the business in exchange for common stock, $27,750.

1. Paid rent for period of November 1 to end of month, $4,000.

6. Purchased office equipment on account, $12,880.

8. Purchased a truck for $32,500 paying $6,500 cash and giving a note payable for the remainder.

10. Purchased supplies for cash, $1,860.

12. Received cash for job completed, $7,500.

Nov. 15. Paid annual premiums on property and casualty insurance, $2,400.

23. Recorded jobs completed on account and sent invoices to customers, $12,440.

24. Received an invoice for truck expenses, to be paid in November, $1,100.

Enter the following transactions on Page 2 of the two-column journal:

29. Paid utilities expense, $3,660.

29. Paid miscellaneous expenses, $1,700.

30. Received cash from customers on account, $8,000.

30. Paid wages of employees, $4,750.

30. Paid creditor a portion of the amount owed for equipment purchased on November 6, $6,220.

30. Paid dividends, $2,000.

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

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 Classic Designs as of November 30, 2016.

4. Determine the excess of revenues over expenses for November.

5. Can you think of any reason why the amount determined in (4) might not be the net income for November?