CHAPTER 7

CHAPTER 7 Accounting Information Systems ASSIGNMENT CLASSIFICATION TABLE

Study Objectives

Questions

Brief Exercises

A Problems

B Problems

1.

Identify the basic concepts of an accounting information system.

1, 2, 3, 4

1, 2, 3

2.

Describe the nature and purpose of a subsidiary ledger.

5, 6, 9, 11,16

4, 5

1, 2, 3, 4, 5, 6, 7, 9, 11, 12

1A, 2A, 3A, 4A, 5A, 6A

1B, 2B, 3B, 4B, 5B

3.

Explain how companies use special journals in journalizing.

7, 8, 10, 11, 12, 13, 14, 17

6, 7, 8, 9

6, 7, 8, 10, 12

1A, 2A, 3A, 4A, 5A, 6A

1B, 2B, 3B, 4B, 5B

4.

Indicate how companies post a multi-column journal.

12, 15

10

1, 3, 9, 11, 13, 14

1A, 2A, 3A, 4A, 5A, 6A

1B, 2B, 3B, 4B, 5B

7-1

Exercises

ASSIGNMENT CHARACTERISTICS TABLE Problem Number

Description

Difficulty Level

Time Allotted (min.)

1A

Journalize transactions in cash receipts journal; post to control account and subsidiary ledger.

Simple

30–40

2A

Journalize transactions in cash payments journal; post to control account and subsidiary ledgers.

Simple

30–40

3A

Journalize transactions in multi-column purchases journal; post to the general and subsidiary ledgers.

Moderate

40–50

4A

Journalize transactions in special journals.

Moderate

50–60

5A

Journalize in sales and cash receipts journals; post; prepare a trial balance; prove control to subsidiary; prepare adjusting entries; prepare an adjusted trial balance.

Moderate

60–70

6A

Journalize in special journals; post; prepare a trial balance.

Complex

60–70

1B

Journalize transactions in cash receipts journal; post to control account and subsidiary ledger.

Simple

30–40

2B

Journalize transactions in cash payments journal; post to the general and subsidiary ledgers.

Simple

30–40

3B

Journalize transactions in multi-column purchases journal; post to the general and subsidiary ledgers.

Moderate

40–50

4B

Journalize transactions in special journals.

Moderate

50–60

5B

Journalize in purchases and cash payments journals; post; prepare a trial balance; prove control to subsidiary; prepare adjusting entries; prepare an adjusted trial balance.

Moderate

60–70

7-2

7-3

Describe the nature and purpose of a subsidiary ledger.

Explain how companies use special journals in journalizing.

Indicate how companies post a multi-column journal.

2.

3.

4.

Broadening Your Perspective

Identify the basic concepts of an accounting information system.

1.

Study Objective

Q7-5

Knowledge

E7-1 E7-3 E7-4 E7-5 E7-6 E7-7 E7-9

P7-2A P7-3A P7-4A P7-5A P7-6A P7-1B

P7-2B P7-3B P7-4B P7-5B

Financial Reporting (Mini Practice Set)

E7-1 E7-3 E7-9 E7-13 E7-14 P7-1A

P7-6A Q7-11 P7-1B P7-2B P7-3B P7-4B P7-5B

Analysis

P7-4A P7-5BQ7-11 P7-5A P7-6A P7-1B P7-2B P7-3B P7-4B

E7-11 E7-12 P7-1A P7-2A P7-3A P7-4A P7-5A

Application

BE7-6 E7-6 BE7-7 E7-7 BE7-8 E7-10 BE7-9 E7-12 E7-8 P7-1A E7-10 P7-2A P7-3A

BE7-1 BE7-2 BE7-3

Exploring the Web

Q7-12 Q7-15 BE7-10 E7-11

Q7-7 Q7-8 Q7-10 Q7-12 Q7-13 Q7-14 Q7-17

Q7-6 Q7-9 Q7-16 BE7-4 BE7-5 E7-2 E7-11

Q7-1 Q7-2 Q7-3 Q7-4

Comprehension

Synthesis

Decision Making Across the Organization Communication Ethics Case All About You

Evaluation

Correlation Chart between Bloom’s Taxonomy, Study Objectives and End-of-Chapter Exercises and Problems

BLOOM’S TAXONOMY TABLE

ANSWERS TO QUESTIONS 1.

(a) An accounting information system collects and processes transaction data and communicates financial information to decision makers. (b) Disagree. An accounting information system applies regardless of whether manual or computerized procedures are used to process the transaction data.

2.

There are three principles for developing an accounting information system: Cost effectiveness. The system must be cost-effective; that is, the benefits obtained from the information must outweigh the cost of providing it. Useful output. To be useful, information must be understandable, relevant, reliable, timely, and accurate. Flexibility. The system should accommodate a variety of users and changing information needs.

3.

Common features of a computerizied accounting package beyond recording transactions and preparing financial statements are: easy data access and report preparation; audit trail, internal controls, customization; and network compatibility.

4.

ERP systems go far beyond the functions of an entry level general ledger package. They integrate all aspects of the organization, including accounting, sales, human resource management, and manufacturing.

5.

A subsidiary ledger is a group of accounts with a common characteristic. The accounts are assembled together to facilitate the accounting process by freeing the general ledger from details concerning individual balances. The advantages of using subsidiary ledgers are that they:

Permit transactions affecting a single customer or single creditor to be shown in a single account, thus providing necessary up-to-date information on specific account balances.

Free the general ledger of excessive details relating to accounts receivable and accounts 6.

payable. As a result, a trial balance of the general ledger does not contain potentially thousands and thousands of individual account balances. Assist in locating errors in individual accounts by reducing the number of accounts in one ledger and by using control accounts. Permit a division of labor in posting by having one employee post to the general ledger and (a) different employee(s) post to the subsidiary ledgers.

(a) (1) Transactions to individual accounts are generally posted daily to the subsidiary ledger. (2) In contrast, postings to the control accounts are usually made in total at the end of the month. (b) A control account is a general ledger account that summarizes subsidiary ledger data. Subsidiary ledger accounts keep track of specific account activity (i.e., specific debtors or creditors). A subsidiary ledger is an addition to, and an expansion of, the general ledger.

7-4

Questions Chapter 7 (Continued) 7.

Sales journal. Records entries for all sales of merchandise on account. Cash receipts journal. Records entries for all cash received by the business. Purchases journal. Records entries for all purchases of merchandise on account. Cash payments journal. Records entries for all cash paid. Some advantages of each journal are given below:

Sales journal. (1) Since the sales journal employs only one line to record a Sales transaction,

its use reduces recording time; (2) the column totals are only posted to the general ledger once an accounting period; and (3) the journal’s use separates responsibilities between employees. Cash receipts journal. (1) Its use aids in the posting process since the totals for Cash, Sales Discounts, Accounts Receivable, and Sales are all recorded in the general ledger only at the end of the month; and (2) it allows all accounts receivable credits to be posted to the appropriate subsidiary ledger accounts daily. Purchases journal. The advantages are similar to those of the sales journal except that items involved are Merchandise Inventory debits and Accounts Payable credits. Cash payments journal. Similar advantages to cash receipts journal except the columns involved are different.

In general, special journals: (1) allow greater division of labor because various individuals can record entries in different journals at the same time; and (2) reduce posting time of journals. 8.

The entry for the sales return should be recorded in the general journal. Since Thogmartin Company has a single-column sales journal, only credit sales can be recorded there. A purchase by Thogmartin Company has not taken place, so the use of the purchases journal is inappropriate. Finally, no cash is received or paid, so neither the cash receipts or cash payments journal should be used.

9.

At the end of the month, after all postings to both the general ledger and the subsidiary accounts have been made, the total of the subsidiary account balances should equal the balance of the control account in the general ledger. In this case, the control account balance will be $450 larger than the total of the subsidiary accounts.

10.

The purpose of special journals is to facilitate the recording process of the business entity. Therefore, the columns included in any special journal should correspond to the unique needs of the entity. In particular, one type of business which might not require an Accounts Receivable column would be grocery stores. These businesses rarely sell on credit to their customers. The minimum frequency of the transaction implies no need for an Accounts Receivable column in the cash receipts journal.

11.

(a) No, the customers’ ledger will not agree with the Accounts Receivable control account. The customers’ ledger will be posted correctly, but the Accounts Receivable control account will be incorrect. (b) The trial balance will balance, although Cash will be $4,000 too high and Accounts Receivable $4,000 too low.

12.

The special journal is the sales journal. The other account is Sales. (The cash receipts journal is an incorrect answer because there would be more than two month-end postings to general ledger accounts.)

7-5

Questions Chapter 7 (Continued) 13.

(a) General journal. (b) General journal. (c) Cash receipts journal.

(d) Sales journal. (e) Cash receipts journal. (f) General journal.

14.

(a) Cash receipts journal. (b) Cash receipts journal. (c) General journal.

(d) Purchases journal. (e) General journal. (f) Cash payments journal.

15.

Typically included would be credit purchases of equipment, office supplies, and store supplies. However, any other item purchased on credit could also be included in a special column or the “other” column.

16.

One such example is a purchase return. Here the Accounts Payable control and subsidiary account must be debited for the same amount. The debit/credit equality is unaffected since the balance sheet equation is computed using general ledger (control) accounts only. The subsidiary accounts should prove to the control account balance.

17.

The general journal may be used to record such transactions as the granting of credit to a customer for a sales return or allowance, the receipt of credit from a supplier for purchases returned, acceptance of a note receivable from a customer, or the purchase of a plant asset by issuing a note payable. In addition, all correcting, adjusting, and closing entries should be made in the general journal.

7-6

SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 7-1 1. 2. 3.

True. False. True.

BRIEF EXERCISE 7-2 1. 2. 3.

(e) (d) (a)

4. (b) 5. (c)

BRIEF EXERCISE 7-3 1. 2. 3. 4.

True. False. The benefits obtained from information provided by the accounting information system must outweigh the cost of providing that information. True. False. An accounting information system must be cost effective, provide useful output, and be flexible enough to accommodate changing information needs.

BRIEF EXERCISE 7-4 Accounts Receivable Subsidiary Ledger Date Jan. 7 17

Date Jan. 15 24

Date Jan. 23 29

Ref.

Ref.

Ref.

General Ledger

Agler Co. Debit Credit 10,000 7,000

Balance Date 10,000 Jan. 31 3,000 31

Barto Co. Debit Credit 6,000 4,000

Balance 6,000 2,000

Maris Co. Debit Credit 9,000 9,000

Balance 9,000 0 7-7

Accounts Receivable Ref. Debit Credit 25,000 20,000

Balance 25,000 5,000

BRIEF EXERCISE 7-5 1. 2.

General ledger Subsidiary ledger

3. General ledger 4. Subsidiary ledger

BRIEF EXERCISE 7-6 1. 2. 3.

Cash Receipts Journal Cash Payments Journal Cash Payments Journal

4. Sales Journal 5. Purchases Journal 6. Cash Receipts Journal


No Yes

3. Yes 4. No

BRIEF EXERCISE 7-8 1. 2. 3. 4.

General Journal (if a one-column Purchases Journal) Purchases Journal (if a multi-column Purchases Journal) Purchases Journal Cash Payments Journal Sales Journal

BRIEF EXERCISE 7-9 1. 2. 3. 4. 5.

Cash Receipts Journal Cash Receipts Journal Cash Receipts Journal Sales Journal and Cash Receipts Journal Purchases Journal


Both in total and daily In total

3. In total 4. Only daily

7-8

SOLUTIONS TO EXERCISES EXERCISE 7-1 (a) $350,400. Beginning balance of $320,000 plus $161,400 debit from sales journal less $131,000 credit from cash receipts journal. (b) $85,900. Beginning balance of $77,000 plus $56,400 credit from purchases journal less $47,500 debit from cash payments journal. (c) The column total of $161,400 in the sales journal would be posted to the credit side of the Sales account and the debit side of the Accounts Receivable account in the general ledger. (d) The accounts receivable column total of $131,000 in the cash receipts journal would be posted to the credit side of the Accounts Receivable account in the general ledger.

EXERCISE 7-2 To:

Andrea Barden, Chief Financial Officer

From:

Student

Subject:

Jeremy Dody account

The explanation of the three entries in the subsidiary ledger for the Jeremy Dody account is as follows: Sept. 2

This was a credit sale of merchandise to Dody. The entry was recorded on page 31 of the Sales Journal.

Sept. 9

This was a sales return or allowance granted to Dody. The entry was recorded on page 4 of the General Journal.

Sept. 27

This was a payment by Dody of the balance due. The entry was recorded on page 8 of the Cash Receipts Journal.

If I can be of further help, please let me know. 7-9

EXERCISE 7-3 (a) & (b)

General Ledger

Accounts Receivable Date Explanation Sept. 1 Balance

Ref. S CR G

Debit

Credit

4,490 7,030 220

Balance 10,960 15,450 8,420 8,200

Accounts Receivable Subsidiary Ledger Bannister Date Explanation Sept. 1 Balance

Crampton Date Explanation Sept. 1 Balance

Iman Date Sept. 1

Explanation

Kingston Date Explanation Sept. 1 Balance

Ref. S CR

Debit 1,100

1,310

Ref. S CR G

Debit

Ref.

Debit

S CR

1,330

Ref. CR

Debit

7-10

Credit

Credit

800 2,300 220

Credit

380

Credit 1,800

Balance 2,060 3,160 1,850

Balance 4,820 5,620 3,320 3,100

Balance 0 1,330 950

Balance 2,640 840

EXERCISE 7-3 (Continued) Ruiz Date Sept. 1

Explanation Balance

(c)

Ref. S CR

Debit

Credit

1,260 1,240

Balance 1,440 2,700 1,460

SEAVER COMPANY Schedule of Customers As of September 30, 2008 Bannister .................................................................................................. Crampton.................................................................................................. Iman............................................................................................................ Kingston ................................................................................................... Ruiz............................................................................................................. Total...................................................................................................

$1,850 3,100 950 840 1,460 $8,200

Accounts Receivable............................................................................

$8,200

EXERCISE 7-4 (a) (b) (c)

(d)

$4,500 [$11,000 – ($4,000 + $2,500). $13,000 [$11,000 + ($9,000 + $7,000 + $8,500) – ($8,000 + $2,500 + $9,000) – $3,000]. Smith ($4,000 + $9,000 – $8,000) $ 5,000 Green ($2,500 + $7,000 – $2,500 – $3,000) 4,000 Koyan ($4,500 + $8,500 – $9,000) 4,000 $13,000 The sales return ($3,000) would be recorded in the general journal.

EXERCISE 7-5 (a) (b) (c)

(d)

$3,375 [$8,250 – ($3,000 + $1,875). $9,750 [$8,250 + ($6,750 + $5,250 + $6,375) – ($6,000 + $1,875 + $6,750) – $2,250]. Jones ($3,000 + $6,750 – $6,000) $3,750 Brown ($1,875 + $5,250 – $1,875 – $2,250) 3,000 Aatski ($3,375 + $6,375 – $6,750) 3,000 $9,750 The purchase return ($2,250) would be recorded in the general journal. 7-11


MONTALVO COMPANY Sales Journal S1

Date

Account Debited

2008 Sept. 2 T. Hossfeld 21 P. Lowther

Invoice Accounts Receivable Dr. Cost of Goods Sold Dr. No. Ref. Sales Cr. Merchandise Inventory Cr. 101 102

720 800 1,520

420 480 900

MONTALVO COMPANY Purchases Journal

Date

Account Credited

2008 Sept. 10 25

L. Rincon W. Barone

Terms

Ref.

P1 Merchandise Inventory Dr. Accounts Payable Cr.

2/10, n/30 n/30

600 860 1,460


PHERIGO CO. Cash Receipts Journal CR1

Date

Account Credited

2008 May 1 I. Pherigo, Cap. 2 22 M. Moody

Ref.

Cash Dr. 50,000 6,300 9,000 65,300

Sales Accounts Discounts Receivable Sales Dr. Cr. Cr.

Cost of Goods Sold Other Dr. Accounts Merchandise Inventory Cr. Cr. 50,000

6,300 9,000 9,000

7-12

6,300

4,200 50,000

4,200

EXERCISE 7-7 (Continued) PHERIGO CO. Cash Payments Journal CP1 Other Accounts Ref. Dr.

Date

Ck. No.

Account Debited

2008 May 3 14

101 102

Merchandise Inventory Salary Expense

7,200 700 7,900

Accounts Payable Dr.

Cash Cr. 7,200 700 7,900

EXERCISE 7-8 (a) Journal 1. Cash Payments 2. Cash Receipts 3. Cash Payments 4. Cash Payments 5. 6. 7. 8. 9. 10.

Cash Receipts Cash Payments Cash Payments Cash Receipts Cash Payments Cash Receipts

(b) Columns in the journal Cash (Cr.), Other Accounts (Dr.). Cash (Dr.), Sales Discounts (Dr.), and Accounts Receivable (Cr.). Cash (Cr.), Other Accounts (Dr.). Cash (Cr.), Merchandise Inventory (Cr.), and Accounts Payable (Dr.). Cash (Dr.), Accounts Receivable (Cr.). Cash (Cr.), Other Accounts (Dr.). Cash (Cr.), Other Accounts (Dr.). Cash (Dr.), Other Accounts (Cr.). Cash (Cr.), Other Accounts (Dr.). Cash (Dr.), Sales (Cr.), Cost of Goods Sold (Dr.), and Merchandise Inventory (Cr.).

7-13

EXERCISE 7-9 (a) Mar. 2

5

7

(b) To:

Equipment ............................................................... Accounts Payable—Chang Company ....................................................

9,400

Accounts Payable—Lyden Company ............................................................. Merchandise Inventory...............................

9,400

410 410

Sales Returns and Allowances......................... Accounts Receivable—Higley Company ....................................................

400

Merchandise Inventory........................................ Cost of Goods Sold .....................................

260

400

260

President Velasquez

From:

Chief Accountant

Subject:

Posting of Control and Subsidiary Accounts

The posting of these accounts varies with the journals used in recording the transactions. Sales and purchases journals—the total for the month is posted to the control accounts. The individual entries are posted daily to the subsidiary accounts. Columnar cash receipts and cash payments journals—the total of the control account column for the month is posted to the control account. The individual amounts in the column are posted daily to the subsidiary accounts. General journal—the individual entries are posted daily. Each entry that pertains to a control and a subsidiary account is dual posted. That is, it is posted to both the control account and the subsidiary account. I hope this memo answers your questions about posting. 7-14

EXERCISE 7-10 1. 2. 3. 4. 5. 6. 7.

Cash Payments Journal General Journal Cash Receipts Journal Cash Receipts Journal Sales Journal Cash Receipts Journal General Journal

8. 9. 10. 11. 12. 13.

Cash Receipts Journal Cash Payments Journal General Journal General Journal Cash Payments Journal Purchases Journal

EXERCISE 7-11 (a) The debit posting reference on February 28 should be from the cash payments journal to record the payments made during the month. The general ledger debit amount should be $29,340 to balance. Tebbetts’ ending balance must be $2,600. (Accounts Payable control balance of $9,500 less Perez, $4,600, and Zerbe, $2,300.) (b) Only the general journal amounts were dual posted. Thus, the amounts were $1,400 (Dr.), $265 (Cr.), and $550 (Cr.).

EXERCISE 7-12 (a)

Purchases Journal

Date

Account Credited

July 3 12 14 17 20 21 29

Brian Co. Erik Co. Drago Co. Chacon Corp. Brian Co. Erik Co. Chacon Corp.

Ref.

7-15

P1 Merchandise Inventory Dr. Accounts Payable Cr. 2,400 500 1,100 1,400 700 600 1,600 8,300 120/201

EXERCISE 7-12 (Continued) (b)

General Journal

Date July

1

Accounts and Explanations Store Equipment ................................... Accounts Payable—Albin Equipment Co. ........................

Ref. 153/

Debit 3,900

201/

Credit

3,900

15

Merchandise Inventory ....................... 120/ 400 Accounts Payable—Heinen Inc. .............................................. 201/ 400 (This entry should have been recorded in the Purchases Journal.)

18

Accounts Payable—Chacon Corp...................................................... Merchandise Inventory.............

201/ 120/

100

Accounts Payable—Drago Co. ........ Merchandise Inventory.............

201/ 120/

200

25

100

200

EXERCISE 7-13 $925 ($200 + $240 + $145 + $190 + $150). All of the debit postings to the subsidiary ledger accounts should be from sales invoices. The total of all these debits should therefore be the total credit sales for the month, which would be the same amount as the end-of-month debit to Accounts Receivable.

EXERCISE 7-14 (a) (b) (c) (d) (e)

$14,000 + $72,000 – $46,000 = $40,000 $22,000 + $100,000 – $45,000 = $77,000 $17,000 + $61,000 – $55,000 = $23,000 $13,500 + $72,000 – $1,000 – $63,600 = $20,900 $100,000 + $6,000 = $106,000

7-16

SOLUTIONS TO PROBLEMS PROBLEM 7-1A

(a)

Cash Receipts Journal CR1

Date

Account Credited

Ref.

Apr. 1 O. Grider, 301 Capital 4 Baez 5 Eggleston Co. 8 10 Ogden 11 Merchandise 120 Inventory 23 Eggleston Co. 29 Chelsea

Cash Dr. 7,200 1,764 920 7,245 600 740 1,500 1,200 21,169 (101)

(b)

Cost of Goods Sold Sales Accounts Other Dr. Discounts Receivable Sales Accounts Merchandise Inventory Dr. Cr. Cr. Cr. Cr. 7,200 36

1,800 920 7,245

4,347

600 740

36 (414)

1,500 1,200 6,020 (112)

7,245 (401)

7,940 (X)

4,347 (505)(120)

General Ledger

Accounts Receivable Date Explanation Apr. 1 Balance 30

Ref. CR1

Debit

Credit 6,020

No. 112 Balance 7,450 1,430

Accounts Receivable Subsidiary Ledger Ogden Date Apr. 1 10

Explanation Balance

Ref. CR1

7-17

Debit

Credit 600

Balance 1,550 950

PROBLEM 7-1A (Continued) Chelsea Date Apr. 1 29

Explanation Balance

Ref. CR1

Debit

Eggleston Co. Date Explanation Apr. 1 Balance 5 23

Ref. CR1 CR1

Debit

Baez Date Apr. 1 4

Ref. CR1

Debit

Explanation Balance

1,200

Credit 920 1,500

Credit 1,800

(c) Accounts receivable balance:

$1,430

Subsidiary account balances: Ogden Eggleston Co. Total

$ 950 480 $1,430

7-18

Credit

Balance 1,200 0

Balance 2,900 1,980 480

Balance 1,800 0

PROBLEM 7-2A

(a)

Cash Payments Journal CP1

Date

Ck. No. Account Debited

Oct. 1 3 5 10 15 16 19 29

63 64 65 66 67 68 69 70

Merch. Inventory Equipment Bovary Company Merch. Inventory Pyron Co. T. Ming, Drawing Nyman Co. Sims Company

Other Accounts Merchandise Accounts Payable Inventory Ref. Dr. Dr. Cr. 120 157

300 800

120

2,250

306

400

2,700 1,800

3,750 (X)

(b)

54

1,600 2,500 8,600 (201)

32 86 (120)

Cash Cr. 300 800 2,646 2,250 1,800 400 1,568 2,500 12,264 (101)

General Ledger

Accounts Payable Date Explanation Oct. 1 Balance 31

Ref. CP1

Debit

Credit

8,600

No. 201 Balance 10,700 2,100

Accounts Payable Subsidiary Ledger Bovary Company Date Oct.

1 5

Explanation Balance

Ref. CP1

7-19

Debit 2,700

Credit

Balance 2,700 0

PROBLEM 7-2A (Continued) Nyman Co. Date Explanation Oct. 1 Balance 19

Ref. CP1

Pyron Co. Date Explanation Oct. 1 Balance 15

Ref. CP1

Sims Company Date Explanation Oct. 1 Balance 29

Ref. CP1

(c) Accounts payable balance:

Debit

Debit

Credit

Balance 1,800 0

Credit

Balance 3,700 1,200

1,800

Debit 2,500

$ 900 1,200 $2,100

7-20

Balance 2,500 900

1,600

$2,100

Subsidiary account balances: Nyman Co. Sims Company

Credit

PROBLEM 7-3A

(a)

Purchases Journal P1

Date

Account Credited (Debited)

July 1 2 5 13

Fritz Company Wayward Shipping Moon Company Cress Supply (Supplies) Fritz Company Anton Company Lynda Advertisements (Advertising Expense) Moon Company Cress Supply (Equipment) Wayward Shipping

15 15 18 24 26 28

Ref.

Accounts Merchandise Other Payable Inventory Accounts Cr. Dr. Dr.

8,000 400 3,200 720

8,000 400 3,200

3,600 3,300 600

3,600 3,300

3,000 900

3,000

380 24,100 (201)

380 21,880 (120)

126/

610/

157/

720

600

900

2,220 (X)

Sales Journal S1 Date

Account Debited

July 3 3 16 16 21 21 30

Pinick Company Wayne Bros. Sager Company Wayne Bros. Pinick Company Haddad Company Sager Company

Accounts Receivable Dr. Cost of Goods Sold Dr. Ref. Sales Cr. Merchandise Inventory Cr.

1,300 1,500 3,450 1,570 310 2,800 5,600 16,530 (112)(401)

7-21

910 1,050 2,415 1,099 217 1,960 3,920 11,571 (505)(120)

PROBLEM 7-3A (Continued) General Journal Date July

8

22

Accounts and Explanations Ref. Accounts Payable—Moon Company............................................... 201/ Merchandise Inventory............... 120/

Debit

Sales Returns and Allowances 412/ Accounts Receivable— 112/ Pinick Company .......................

40

(b) Accounts Receivable Date Explanation July 31 22

Merchandise Inventory Date Explanation July 31 8 31

Supplies Date Explanation July 13

G1 Credit

300 300

40

General Ledger Ref. S1 G1

Ref. P1 G1 S1

Ref. P1

7-22

Debit 16,530

Credit 40

Debit 21,880

Credit 300 11,571

Debit 720

Credit

No. 112 Balance 16,530 16,490

No. 120 Balance 21,880 21,580 10,009

No. 126 Balance 720

PROBLEM 7-3A (Continued) Equipment Date Explanation July 26

Accounts Payable Date Explanation July 31 8

Sales Date July 31

Explanation

Sales Returns and Allowances Date Explanation July 22

Cost of Goods Sold Date Explanation July 31

Advertising Expense Date Explanation July 18

Ref. P1

Ref. P1 G1

Ref. S1

Ref. G1

Ref. S1

Ref. P1

7-23

Debit 900

Debit

Credit

No. 157 Balance 900

Credit 24,100

No. 201 Balance 24,100 23,800

300

Debit

Debit 40

Debit 11,571

Debit 600

Credit 16,530

No. 401 Balance 16,530

Credit

No. 412 Balance 40

Credit


Credit

No. 610 Balance 600

PROBLEM 7-3A (Continued) Accounts Receivable Subsidiary Ledger Wayne Bros. Date Explanation July 3 16

Ref. S1 S1

Debit 1,500 1,570

Credit

Balance 1,500 3,070

Pinick Company Date Explanation July 3 21 22

Ref. S1 S1 G1

Debit 1,300 310

Credit

Balance 1,300 1,610 1,570

Sager Company Date Explanation July 16 30

Ref. S1 S1

Debit 3,450 5,600

Credit

Balance 3,450 9,050

Haddad Company Date Explanation July 21

Ref. S1

Debit 2,800

Credit

Balance 2,800

40

Accounts Payable Subsidiary Ledger Cress Supply Date Explanation July 13 26

Ref. P1 P1

7-24

Debit

Credit 720 900

Balance 720 1,620

PROBLEM 7-3A (Continued) Wayward Shipping Date Explanation July 2 28

Ref. P1 P1

Debit

Credit 400 380

Balance 400 780

Fritz Company Date Explanation July 1 15

Ref. P1 P1

Debit

Credit 8,000 3,600

Balance 8,000 11,600

Moon Company Date Explanation July 5 8 24

Ref. P1 G1 P1

Debit

Credit 3,200 3,000

Balance 3,200 2,900 5,900

Lynda Advertisements Date Explanation July 18

Ref. P1

Debit

Credit 600

Balance 600

Anton Company Date Explanation July 15

Ref. P1

Debit

Credit 3,300

Balance 3,300

7-25

300

PROBLEM 7-3A (Continued) (c) Accounts receivable balance ....................................... Subsidiary account balances Wayne Bros............................................................... Pinick Company....................................................... Sager Company ....................................................... Haddad Company.................................................... Total ....................................................................

$16,490

$3,070 1,570 9,050 2,800 $16,490

Accounts payable balance............................................ Subsidiary account balances Cress Supply ............................................................ Wayward Shipping.................................................. Fritz Company .......................................................... Moon Company........................................................ Lynda Advertisements .......................................... Anton Company....................................................... Total ....................................................................

7-26

$23,800

$ 1,620 780 11,600 5,900 600 3,300 $23,800

PROBLEM 7-4A (a), (b) & (c) Sales Journal S1 Account Debited

Date Jan. 4 9 17 31

Milam Connor Corp. Bullock Co. Milam

Invoice Accounts Receivable Dr. Cost of Goods Sold Dr. No. Ref. Sales Cr. Merchandise Inventory Cr. 371 372 373 374

5,250 6,400 1,200 9,330 22,180 (112)(401)

3,150 3,840 720 5,598 13,308 (505)(120)

Purchases Journal

Date

Account Credited

Jan. 3 8 11 23 24

Wortham Co. Noyes Co. Betz Co. Wortham Co. Forgetta Corp.

Ref.

P1 Merchandise Inventory Dr. Accounts Payable Cr. 10,000 4,500 3,700 7,800 5,100 31,100 (120)(201)

General Journal Date Jan. 5

19

Accounts and Explanations Ref. Accounts Payable—Wortham Co. .......... 201/ Merchandise Inventory ................ 120

Debit 300

Equipment.................................................. Accounts Payable—Murphy Corp...............................................

5,500

7-27

157/ 201/

G1 Credit 300

5,500

PROBLEM 7-4A (Continued) Cash Receipts Journal CR1

Date

Account Credited

Jan. 6 13 15 Connor Corp. 17 Milam 20 27 30 Bullock Co.

Ref.

Sales Accounts Discounts Receivable Dr. Cr.

Cash Dr. 3,150 6,260 6,336 5,250 3,200 4,230 1,200 29,626 (101)

64

64 (414)

Sales Cr.

Cost of Goods Sold Other Dr. Accounts Merchandise Inventory Cr. Cr.

3,150 6,260

1,890 3,756

3,200 4,230

1,920 2,538

6,400 5,250

1,200 12,850 (112)

16,840 (401)

0 (X)

10,104 (505)(120)


Date

Account Debited

Jan. 4 13 15 20 31

Supplies Wortham Co. Salaries Expense Noyes Co. Salaries Expense

Other Accounts Ref. Dr. 126

726

726

Accounts Merchandise Payable Inventory Dr. Cr.

80 9,700

194

4,500

90

14,200 (201)

284 (120)

14,300 13,200 27,580 (X)

7-28

Cash Cr. 80 9,506 14,300 4,410 13,200 41,496 (101)

PROBLEM 7-5A

(a), (d) & (g) Cash Date July 31 31

Explanation

Accounts Receivable Date Explanation July 31 31

Merchandise Inventory Date Explanation July 31 29 31 31 31

Store Supplies Date Explanation July 4 31 Adjusting entry

Prepaid Rent Date Explanation July 11 31 Adjusting entry

General Ledger

Ref. CR1 CP1

Ref. S1 CR1

Ref. P1 CR1 CP1 S1 CR1

Ref. CP1 G1

Ref. CP1 G1

7-29

Debit 101,035

Credit 39,066

Debit 19,700

Credit 14,700

Debit 44,020

Credit 420 234 12,805 3,900

Debit 600

Credit 460

Debit 6,000

Credit 500

No. 101 Balance 101,035 61,969

No. 112 Balance 19,700 5,000

No. 120 Balance 44,020 43,600 43,366 30,561 26,661

No. 127 Balance 600 140

No. 131 Balance 6,000 5,500

PROBLEM 7-5A (Continued) Accounts Payable Date Explanation July 31 31

Reyes, Capital Date Explanation July 1

Reyes, Drawing Date Explanation July 19

Sales Date July 31 31

Explanation

Sales Discounts Date Explanation July 31

Cost of Goods Sold Date Explanation July 31 31

Ref. P1 CP1

Ref. CR1

Ref. CP1

Ref. S1 CR1

Ref. CR1

Ref. S1 CR1

7-30

Debit

Credit 44,020

30,200

Debit

Debit 2,500

Debit

Debit 85

Debit 12,805 3,900

Credit 80,000

Credit

Credit 19,700 6,000

Credit

Credit

No. 201 Balance 44,020 13,820



No. 401 Balance 19,700 25,700

No. 414 Balance 85

No. 505 Balance 12,805 16,705

PROBLEM 7-5A (Continued) Supplies Expense Date Explanation July 31 Adjusting entry

Ref. G1

Rent Expense Date Explanation July 31 Adjusting entry

Ref. G1

(b)

Debit 460

Debit 500

Credit

No. 631 Balance 460

Credit

No. 729 Balance 500

Sales Journal S1

Date

Account Debited

July 6 8 10 21

Ewing Co. S. Beauty W. Pitts H. Prince

Ref.

Accounts Receivable Dr. Cost of Goods Sold Dr. Sales Cr. Merchandise Inventory Cr.

4,030 2,340 3,185 3,250 12,805 (505)(120)

6,200 3,600 4,900 5,000 19,700 (112)(401)


Date

Account Credited

July 1 Reyes, Capital 7 13 S. Beauty 16 W. Pitts 20 Ewing Co. 29 Merchandise Inventory

Ref. 301

120

Cash Dr. 80,000 6,000 3,564 4,851 6,200 420 101,035 (101)

Cost of Goods Sold Sales Accounts Other Dr. Discounts Receivable Sales Accounts Merchandise Inventory Dr. Cr. Cr. Cr. Cr. 80,000 6,000 36 49

3,600 4,900 6,200

85 (414)

14,700 (112)

7-31

6,000 (401)

3,900

420 80,420 (X)

3,900 (505)(120)

PROBLEM 7-5A (Continued) (c)

Accounts Receivable Subsidiary Ledger

Ewing Co. Date Explanation July 6 20

Ref. S1 CR1

Debit 6,200

H. Prince Date Explanation July 21

Ref. S1

Debit 5000

Credit

Balance 5,000

W. Pitts Date July 10 16

Ref. S1 CR1

Debit 4,900

Credit

Balance 4,900 0

Ref. S1 CR1

Debit 3,600

Explanation

S. Beauty Date Explanation July 8 13

Credit 6,200

4,900

Credit 3,600

Balance 6,200 0

Balance 3,600 0

Accounts Payable Subsidiary Ledger C. Tabor Date July 13 21

A. Ernst Date July 5 10

Explanation

Explanation

Ref. P1 CP1

Ref. P1 CP1

7-32

Debit

Credit 15,300

Balance 15,300 0

Credit 8,100

Balance 8,100 0

15,300

Debit 8,100

PROBLEM 7-5A (Continued) M. Sneezy Date Explanation July 20

Ref. P1

Debit

Credit 7,900

Balance 7,900

G. Clemens Date Explanation July 4 15

Ref. P1 CP1

Debit

Credit 6,800

Balance 6,800 0

J. Happy Date July 11

Ref. P1

Debit

Credit 5,920

Balance 5,920

(e)

Explanation

6,800

REYES CO. Trial Balance July 31, 2008

Cash ............................................................................ Accounts Receivable............................................. Merchandise Inventory ......................................... Store Supplies ......................................................... Prepaid Rent............................................................. Accounts Payable................................................... Reyes, Capital.......................................................... Reyes, Drawing ....................................................... Sales ........................................................................... Sales Discounts ...................................................... Cost of Goods Sold................................................

7-33

Debit $ 61,969 5,000 26,661 600 6,000

Credit

$ 13,820 80,000 2,500 25,700 85 16,705 $119,520

$119,520

PROBLEM 7-5A (Continued) (f)

Accounts receivable balance .........................................................

$ 5,000

Subsidiary accounts balance H. Prince.......................................................................................

$ 5,000

Accounts payable balance..............................................................

$13,820

Subsidiary accounts balance M. Sneezy..................................................................................... J. Happy........................................................................................

$ 7,900 5,920 $13,820

(g) General Journal Date July 31

31

Accounts and Explanations Supplies Expense.................................. Store Supplies..............................

Ref. 631 127

Debit 460

Rent Expense.......................................... Prepaid Rent .................................

729 131

500

7-34

G1 Credit 460

500

PROBLEM 7-5A (Continued) (h)

REYES CO. Adjusted Trial Balance July 31, 2008 Cash ........................................................................... Accounts Receivable............................................ Merchandise Inventory ........................................ Store Supplies......................................................... Prepaid Rent ............................................................ Accounts Payable.................................................. Reyes, Capital ......................................................... Reyes, Drawing....................................................... Sales........................................................................... Sales Discounts...................................................... Cost of Goods Sold............................................... Supplies Expense .................................................. Rent Expense ..........................................................

7-35

Debit $ 61,969 5,000 26,661 140 5,500

Credit

$ 13,820 80,000 2,500 25,700 85 16,705 460 500 $119,520

$119,520

PROBLEM 7-6A

(b) & (c) Cash Receipts Journal CR1

Date

Account Credited

Jan. 7 13 23 29

T. Dudley M. Rensing Notes Receivable

Ref. 115

Cash Dr. 3,500 4,900 9,100 40,000 57,500 (101)

Sales Discounts Dr.

Accounts Receivable Cr.

100

3,500 5,000

Sales Cr.

Other Accounts Cr.

Cost of Goods Sold Dr. Merchandise Inventory Cr.

9,100 0 100 (414)

8,500 (112)

9,100 (401)

5,460 40,000 40,000 (X)

5,460 (505)(120)

Cash Payments Journal CP1 Date

Account Debited

Other Accounts Merchandise Accounts Payable Inventory Ref. Dr. Dr. Cr.

Jan. 11 12 15 18 18 27

Merchandise Inventory Rent Expense K. Inwood Sales Salaries Expense Office Salaries Expense E. Vietti

120 729 726 727

300 1,000 15,000

150

950 15,950 (201)

150 (120)

2,800 2,000 6,100 (X)

Cash Cr. 300 1,000 14,850 2,800 2,000 950 21,900 (101)


Account Debited

Jan. 3 M. Rensing 24 F. Cone

Ref.

Accounts Receivable Dr. Cost of Goods Sold Dr. Sales Cr. Merchandise Inventory Cr. 5,000 7,400 12,400 (112)(401)

7-36

3,000 4,440 7,440 (505)(120)

PROBLEM 7-6A (Continued) Purchases Journal

Date

Account Credited

Jan. 5 17

E. Vietti G. Marley


Ref.

2,000 1,600 3,600 (120)(201)

General Journal Date Jan. 14

20

30

Accounts and Explanations Sales Returns and Allowances......... Accounts Receivable— J. Anders................................... Merchandise Inventory........................ ($300 X .60) Cost of Goods Sold....................

Ref. /412

Accounts Payable—D. Goodman .... Notes Payable ..............................

/201 /200

18,000

Accounts Payable—G. Marley .......... Merchandise Inventory .............

/201 120

300

/112 /120

Debit 300

G1 Credit

300 180

/505

180

18,000

300

(a) & (c) General Ledger Cash Date Jan. 1 31 31

Explanation Balance

Ref. CR1 CP1

7-37

Debit

Credit

57,500 21,900

No. 101 Balance 41,500 99,000 77,100

PROBLEM 7-6A (Continued) Accounts Receivable Date Explanation Jan. 1 Balance 14 31 31

Notes Receivable Date Explanation Jan. 1 Balance 29

Merchandise Inventory Date Explanation Jan. 1 Balance 11 14 30 31 31 31 31

Equipment Date Explanation Jan. 1 Balance

Ref. G1 CR1 S1

Ref. CR1

Ref. CP1 G1 G1 P1 CP1 CR1 S1

Ref.

Accumulated Depreciation—Equipment Date Explanation Ref. Jan. 1 Balance

7-38

Debit

Credit 300 8,500

12,400

Debit

Credit 40,000

Debit

Credit

300 180 300 3,600 150 5,460 7,440

Debit

Debit

No. 112 Balance 15,000 14,700 6,200 18,600

No. 115 Balance 45,000 5,000

No. 120 Balance 23,000 23,300 23,480 23,180 26,780 26,630 21,170 13,730

Credit


Credit


PROBLEM 7-6A (Continued) Notes Payable Date Explanation Jan. 20

Accounts Payable Date Explanation Jan. 1 Balance 20 30 31 31

B. Cortez, Capital Date Explanation Jan. 1 Balance

Sales Date Jan. 31 31

Explanation

Sales Returns and Allowances Date Explanation Jan. 14

Sales Discounts Date Explanation Jan. 31

Ref. G1

Ref. G1 G1 P1 CP1

Ref.

Ref. CR1 S1

Ref. G1

Ref. CR1

7-39

Debit

Debit

Credit 18,000

Credit

18,000 300 3,600 15,950

Debit

Debit

Debit 300

Debit 100

Credit

Credit 9,100 12,400


No. 201 Balance 43,000 25,000 24,700 28,300 12,350


No. 401 Balance 9,100 21,500

Credit

No. 412 Balance 300

Credit

No. 414 Balance 100

PROBLEM 7-6A (Continued) Cost of Goods Sold Date Explanation Jan. 31 31 14

Sales Salaries Expense Date Explanation Jan. 18

Office Salaries Expense Date Explanation Jan. 18

Rent Expense Date Explanation Jan. 12

Ref. CR1 S1 G1

Ref. CP1

Ref. CP1

Ref. CP1

Debit 5,460 7,440

Credit

180

Debit 2,800

Debit 2,000

Debit 1,000

No. 505 Balance 5,460 12,900 12,720

Credit


Credit


Credit


Accounts Receivable Subsidiary Ledger J. Anders Date Explanation Jan. 1 Balance 14

Ref. G1

Debit

F. Cone Date Jan. 1 24

Ref. S1

Debit

Explanation Balance

7-40

Credit 300

7,400

Credit

Balance 2,500 2,200

Balance 7,500 14,900

PROBLEM 7-6A (Continued) T. Dudley Date Explanation Jan. 1 Balance 7

Ref. CR1

Debit

M. Rensing Date Explanation Jan. 3 13

Ref. S1 CR1

Debit 5,000

Credit 3,500

Credit 5,000

Balance 5,000 1,500

Balance 5,000 0

Accounts Payable Subsidiary Ledger G. Marley Date Explanation Jan. 17 30

Ref. P1 G1

Debit

J. Feeney Date Explanation Jan. 1 Balance

Ref.

D. Goodman Date Explanation Jan. 1 Balance 20

Ref. G1

K. Inwood Date Explanation Jan. 1 Balance 15

Ref. CP1

7-41

Credit 1,600

Balance 1,600 1,300

Debit

Credit

Balance 10,000

Debit

Credit

Balance 18,000 0

Credit

Balance 15,000 0

300

18,000

Debit 15,000

PROBLEM 7-6A (Continued) E. Vietti Date Jan. 5 27

(d)

Explanation

Ref. P1 CP1

Debit

Credit 2,000

950

Balance 2,000 1,050

CORTEZ CO. Trial Balance January 31, 2009 Cash ............................................................................ Accounts Receivable............................................. Notes Receivable .................................................... Merchandise Inventory.......................................... Equipment ................................................................. Accumulated Depreciation—Equipment......... Notes Payable .......................................................... Accounts Payable................................................... B. Cortez, Capital .................................................... Sales............................................................................ Sales Returns and Allowances........................... Sales Discounts....................................................... Cost of Goods Sold ................................................ Sales Salaries Expense......................................... Office Salaries Expense........................................ Rent Expense ...........................................................

Debit $ 77,100 18,600 5,000 13,730 6,450 $

300 100 12,720 2,800 2,000 1,000 $139,800

(e) Accounts Receivable Subsidiary Ledger J. Anders ....................................................................................... F. Cone........................................................................................... T. Dudley .......................................................................................

Accounts Receivable Control .........................................................

7-42

Credit

1,500 18,000 12,350 86,450 21,500

$139,800

$ 2,200 14,900 1,500 $18,600 $18,600

PROBLEM 7-6A (Continued) Accounts Payable Subsidiary Ledger G. Marley........................................................................................ J. Feeney........................................................................................ E. Vietti ...........................................................................................

Accounts Payable Control................................................................

7-43

$ 1,300 10,000 1,050 $12,350 $12,350

PROBLEM 7-1B

(a)


Date

Account Credited

Sales Accounts Cash Discounts Receivable Ref. Dr. Dr. Cr.

June 1 J. Darby, 301 10,000 Capital 1,274 3 Lenninger Co. 1,862 6 Farley Co. 6,135 7 2,450 9 Deering & Son 11 Merchandise 320 120 Inventory 4,500 15 1,600 20 Grinnell Bros. 28,141 (101)

(b)

Sales Cr.

Cost of Goods Sold Other Dr. Accounts Merchandise Inventory Cr. Cr. 10,000

26 38

1,300 1,900

50

2,500

6,135

4,090

320 4,500 114 (414)

1,600 7,300 (112)

10,635 (401)

3,000 10,320 (X)

7,090 (505/120)

General Ledger

Accounts Receivable Date Explanation June 1 Balance 30

Ref. CR1

Debit

Credit 7,300

No. 112 Balance 7,300 0

Accounts Receivable Subsidiary Ledger Deering & Son Date June

1 9

Explanation Balance

Ref. CR1

7-44

Debit

Credit 2,500

Balance 2,500 0

PROBLEM 7-1B (Continued) Farley Co. Date Explanation June 1 Balance 6

Ref. CR1

Debit

Grinnell Bros. Date Explanation June 1 Balance 20

Ref. CR1

Debit

Lenninger Co. Date Explanation June 1 Balance 3

Ref. CR1

Debit

(c) Accounts receivable balance = 0. Sum of all subsidiary accounts = 0.

7-45

Credit 1,900

Credit 1,600

Credit 1,300

Balance 1,900 0

Balance 1,600 0

Balance 1,300 0

PROBLEM 7-2B

(a)


Date

Ck. No. Account Debited

Other Accounts Ref. Dr.

Nov. 1 3 5 11 15 16 19 25 30

11 12 13 14 15 16 17 18 19

120 157 120 306 130

Merch. Inventory Equipment Wex Bros. Merch. Inventory G. Ruttan B. Gonya, Drawing C. Kimberlin Prepaid Insurance A. Hess & Co.

1,140 1,700 1,500

15

1,000

30

1,150

23

2,000 500 3,000 8,340 (X)

(b)

Accounts Merchandise Payable Inventory Dr. Cr.

3,500 7,150 (201)

00 68 (120)

Cash Cr. 1,140 1,700 1,485 2,000 970 500 1,127 3,000 3,500 15,422 (101)

General Ledger

Accounts Payable Date Explanation Nov. 1 Balance 30

Ref. CP1

Debit

Credit

7,150

No. 201 Balance 9,350 2,200

Accounts Payable Subsidiary Ledger A. Hess & Co. Date Explanation Nov. 1 Balance 30

Ref. CP1

7-46

Debit 3,500

Credit

Balance 4,500 1,000

PROBLEM 7-2B (Continued) C. Kimberlin Date Explanation Nov. 1 Balance 19

Ref. CP1

G. Ruttan Date Explanation Nov. 1 Balance 15

Ref. CP1

Wex Bros. Date Explanation Nov. 1 Balance 5

Ref. CP1

(c) Accounts payable balance:

Debit

Debit

Credit

Balance 1,000 0

Credit

Balance 1,500 0

1,000

Debit 1,500

$1,000 1,200 $2,200

7-47

Balance 2,350 1,200

1,150

$2,200

Subsidiary account balances: A. Hess & Co. C. Kimberlin

Credit

PROBLEM 7-3B

(a)

Purchases Journal P1

Ref.

Accounts Merchandise Other Payable Inventory Accounts Cr. Dr. Dr.

Date

Account Credited (Debited)

May 2 3 8 8 15 16 16 18 25 28

Younger Company Ruden Freight Utley Company Zeider Company 126/ Rodriguez Supply (Supplies) Younger Company Utley Company Ruden Freight Amster Advertising (Adv. Exp.) 610/ Rodriguez Supply (Equipment) 157/ 0

7,500 360 8,000 8,700 900 4,500 7,200 500 900 500 39,060 (201)

7,500 360 8,000 8,700 900 4,500 7,200 500

36,760 (120)

900 500 2,300 (X)


Account Debited

May 5 5 5 23 23

Ellie Company DeShazer Bros. Liu Company DeShazer Bros. Liu Company

Accounts Receivable Dr. Ref. Sales Cr.

1,980 2,700 1,500 2,400 3,600 12,180 (112)(401)

7-48

Cost of Goods Sold Dr. Merchandise Inventory Cr. 1,287 1,755 975 1,560 2,340 7,917 (505)(120)

PROBLEM 7-3B (Continued) General Journal Date May 10

17

20

26

Accounts and Explanations Accounts Payable—Zeider Company ............................................. Merchandise Inventory .............

Ref.

Debit

201/ 120/

500

Accounts Payable—Rodriguez Supply .................................................. Supplies.........................................

201/ 126

100

Accounts Payable—Younger Company ............................................. Merchandise Inventory .............

201/ 120/

300

Sales Returns and Allowances......... Accounts Receivable— Liu Company ...........................

412/ 112/

200

(b) Accounts Receivable Date Explanation May 31 26

Merchandise Inventory Date Explanation May 31 10 20 31

Credit

500

100

300

200

General Ledger

Ref. S1 G1

Ref. P1 G1 G1 S1

7-49

Debit 12,180

Credit 200

Debit 36,760

Credit 500 300 7,917

No. 112 Balance 12,180 11,980

No. 120 Balance 36,760 36,260 35,960 28,043

PROBLEM 7-3B (Continued) Supplies Date Explanation May 15 17 Equipment Date Explanation May 28 Accounts Payable Date Explanation May 31 10 17 20 Sales Date May 31

Explanation

Sales Returns and Allowances Date Explanation May 26 Cost of Goods Sold Date Explanation May 31 Advertising Expense Date Explanation May 25

Ref. P1 G1

Ref. P1

Ref. P1 G1 G1 G1

Ref. S1

Ref. G1

Ref. S1

Ref. P1

7-50

Debit 900

Credit 100

Debit 500

Debit

Credit

Credit 39,060

500 100 300

Debit

Debit 200

Debit 7,917

Debit 900

Credit 12,180

No. 126 Balance 900 800 No. 157 Balance 500 No. 201 Balance 39,060 38,560 38,460 38,160 No. 401 Balance 12,180

Credit

No. 412 Balance 200

Credit


Credit

No. 610 Balance 900

PROBLEM 7-3B (Continued) Accounts Receivable Subsidiary Ledger Ellie Company Date Explanation May 5

Ref. S1

Debit 1,980

Credit

Balance 1,980

DeShazer Bros. Date Explanation May 5 23

Ref. S1 S1

Debit 2,700 2,400

Credit

Balance 2,700 5,100

Liu Company Date Explanation May 5 23 26

Ref. S1 S1 G1

Debit 1,500 3,600

Credit

200

Balance 1,500 5,100 4,900

Accounts Payable Subsidiary Ledger Ruden Freight Date Explanation May 3 18

Ref. P1 P1

Debit

Credit 360 500

Balance 360 860

Younger Company Date Explanation May 2 16 20

Ref. P1 P1 G1

Debit

Credit 7,500 4,500

Balance 7,500 12,000 11,700

7-51

300

PROBLEM 7-3B (Continued) Rodriguez Supply Date Explanation May 15 17 28

Ref. P1 G1 P1

Debit

Utley Company Date Explanation May 8 16

Ref. P1 P1

Zeider Company Date Explanation May 8 10

Amster Advertising Date Explanation May 25

Credit 900 500

Balance 900 800 1,300

Debit

Credit 8,000 7,200

Balance 8,000 15,200

Ref. P1 G1

Debit

Credit 8,700

Balance 8,700 8,200

Ref. P1

Debit

Credit 900

Balance 900

100

500

(c) Accounts receivable balance ........................................ Subsidiary account balances Ellie Company ........................................................... DeShazer Bros. ......................................................... Liu Company.............................................................. Total ..................................................................... Accounts payable balance.............................................

7-52

$11,980

$1,980 5,100 4,900 $11,980 $38,160

PROBLEM 7-3B (Continued) Subsidiary account balances Ruden Freight .......................................................... Younger Company.................................................. Rodriguez Supply ................................................... Utley Company ........................................................ Zeider Company ...................................................... Amster Advertising ................................................ Total....................................................................

7-53

$ 860 11,700 1,300 15,200 8,200 900 $38,160

PROBLEM 7-4B

(a), (b) & (c) Sales Journal S1 Date

Account Debited

Oct. 4 17 25 30

Enos Co. G. Richter & Co. Hunt Corp. G. Richter & Co.

Invoice Accounts Receivable Dr. Cost of Goods Sold Dr. No. Ref. Sales Cr. Merchandise Inventory Cr.

204 205 206 207

7,700 5,350 5,220 4,600 22,870 (112)(401)

5,390 3,745 3,654 3,220 16,009 (505)(120)

Purchases Journal

Date

Account Credited

Oct. 2 10 27 30

Camacho Company Finn Corp. Kudro Co. Camacho Company

Ref.

P1 Merchandise Inventory Dr. Accounts Payable Cr. 16,500 3,500 8,500 14,000 42,500 (120)(201)

General Journal Date Oct. 13

25

Accounts and Explanations Accounts Payable—Finn Corp. ...................................................... Merchandise Inventory.............. Supplies .................................................... Accounts Payable— Robinson Co. ..........................

7-54

Ref.

Debit

201/ 120/

210

126/ 201/

260

G1 Credit

210

260

PROBLEM 7-4B (Continued)

Cash Receipts Journal CR1 Account Credited

Date Oct. 7 12 14 16 21 25

Enos Co. Land G. Richter & Co.

Ref.

140

28

Cash Dr.


9,160 7,546 8,180 27,000 8,200

Cost of Goods Sold Other Dr. Sales Accounts Merchandise Inventory Cr. Cr. Cr. 9,160

154

6,412

7,700 8,180

5,726 27,000

8,200

5,243 107 7,540 000 72,869 261 (101) (414)

5,740

5,350 00 13,050 (112)

7,540 33,080 (401)

5,278 23,156 (505)(120)

27,000 (X)


Date

Account Debited

Ref.

Oct. 5 9 18

Supplies Camacho Co. Merchandise Inventory Finn Corp. Land Buildings Advertising Expense

126

23 26 30

Other Accounts Dr.

Merchandise Inventory Cr.

Cash Cr.

330

80 16,170

80

120

Accounts Payable Dr. 16,500

2,125

2,125 3,290

3,290

140 145

21,000 14,000

35,000

610

400 37,605 (X)

400 57,065 (101)

7-55

19,790 (201)

330 (120)

PROBLEM 7-5B

(b)

Purchases Journal

Date

Account Credited

Feb. 2 7 16 21

J. Vopat P. Kneiser J. Nunez G. Reedy


Ref.

4,600 30,000 2,400 7,800 44,800 (120)(201)

Cash Payments Journal CP1 Other Accounts Dr.

Date

Account Debited

Ref.

Feb. 9 12 15 17 20

Supplies J. Vopat Equipment P. Kneiser A. Wyrick, Drawing J. Nunez

126 157

1,250

306

1,100

28


Cash Date Feb. 28 28

Explanation

Cash Cr.

4,600

92

30,000

300

1,250 4,508 7,000 29,700

392 (120)

1,100 2,400 45,958 (101)

7,000

2,400 37,000 (201)

9,350 (X)

(a), (d) & (g)


General Ledger

Ref. CR1 CP1

7-56

Debit 48,595

Credit 45,958

No. 101 Balance 48,595 2,637

PROBLEM 7-5B (Continued) Accounts Receivable Date Explanation Feb. 28 28

Merchandise Inventory Date Explanation Feb. 28 18 28 28 28

Supplies Date Feb. 9 28

Explanation Adjusting entry

Equipment Date Explanation Feb. 15

Ref. S1 CR1

Ref. P1 CR1 CP1 S1 CR1

Ref. CP1 G1

Ref. CP1

Accumulated Depreciation—Equipment Date Explanation Ref. Feb. 28 Adjusting entry G1

Accounts Payable Date Explanation Feb. 28 28

Ref. P1 CP1

7-57

Debit 27,000

Credit 12,000

Debit 44,800

Credit 150 392 17,820 4,290

Debit 1,250

Credit 950

Debit 7,000

Debit

Debit 37,000

Credit

Credit 200

Credit 44,800

No. 112 Balance 27,000 15,000

No. 120 Balance 44,800 44,650 44,258 26,438 22,148

No. 126 Balance 1,250 300


No. 158 Balance 200

No. 201 Balance 44,800 7,800

PROBLEM 7-5B (Continued) A. Wyrick, Capital Date Explanation Feb. 1

A. Wyrick, Drawing Date Explanation Feb. 20

Sales Date Feb. 28 28

Explanation

Sales Discounts Date Explanation Feb. 28

Cost of Goods Sold Date Explanation Feb. 28 28 Supplies Expense Date Explanation Feb. 28 Adjusting entry

Depreciation Expense Date Explanation Feb. 28 Adjusting entry

Ref. CR1

Ref. CP1

Ref. S1 CR1

Ref. CR1

Ref. S1 CR1

Ref. G1

Ref. G1

7-58

Debit

Debit 1,100

Debit

Debit 55

Debit 17,820 4,290

Debit 950

Debit 200

Credit 30,000

Credit

Credit 27,000 6,500



No. 401 Balance 27,000 33,500

Credit

No. 414 Balance 55

Credit

No. 505 Balance 17,820 22,110

Credit

No. 631 Balance 950

Credit

No. 711 Balance 200

PROBLEM 7-5B (Continued) (c)

Accounts Receivable Subsidiary Ledger

S. Arndt Date Feb. 3 13

Explanation

F. Catt Date Feb. 12

C. Boyd Date Feb. 9 26

Ref. S1 CR1

Debit 5,500

Explanation

Ref. S1

Debit 8,000

Credit

Balance 8,000

Explanation

Ref. S1 CR1

Debit 6,500

Credit

Balance 6,500 0

Ref. S1

Debit 7,000

M. Didde Date Explanation Feb. 26

Credit 5,500

6,500

Credit

Balance 5,500 0

Balance 7,000

Accounts Payable Subsidiary Ledger G. Reedy Date Explanation Feb. 21

Ref. P1

Debit

Credit 7,800

Balance 7,800

J. Vopat Date Feb. 2 12

Ref. P1 CP1

Debit

Credit 4,600

Balance 4,600 0

Explanation

7-59

4,600

PROBLEM 7-5B (Continued) P. Kneiser Date Explanation Feb. 7 17

Ref. P1 CP1

J. Nunez Date Feb. 16 28

Ref. P1 CP1

(e)

Explanation

Debit

Credit 30,000

Balance 30,000 0

Credit 2,400

Balance 2,400 0

30,000

Debit 2,400

WYRICK CO. Trial Balance February 28, 2008

Cash.................................................................................. Accounts Receivable .................................................. Merchandise Inventory............................................... Supplies .......................................................................... Equipment ...................................................................... Accounts Payable ........................................................ A. Wyrick, Capital......................................................... A. Wyrick, Drawing ...................................................... Sales................................................................................. Sales Discounts............................................................ Cost of Goods Sold .....................................................

7-60

Debit $ 2,637 15,000 22,148 1,250 7,000

Credit

$ 7,800 30,000 1,100 33,500 55 22,110 $71,300

$71,300

PROBLEM 7-5B (Continued) (f)

Accounts Receivable control account.................... Accounts Receivable subsidiary accounts F. Catt........................................................................ M. Didde ...................................................................

$15,000

$8,000 7,000

$15,000

Accounts Payable control account..........................

$ 7,800

Accounts Payable subsidiary account G. Reedy...................................................................

$ 7,800

(g)

General Journal

Date Feb. 28

28

Accounts and Explanations Supplies Expense ................................. Supplies.........................................

Ref. 631 126

Debit 950

Depreciation Expense ......................... Accumulated Depreciation— Equipment................................

711

200

7-61

158

G1 Credit 950

200

PROBLEM 7-5B (Continued) (h)

WYRICK CO. Adjusted Trial Balance February 28, 2008 Cash.................................................................................. Accounts Receivable .................................................. Merchandise Inventory............................................... Supplies .......................................................................... Equipment ...................................................................... Accumulated Depreciation—Equipment .............. Accounts Payable ........................................................ A. Wyrick, Capital......................................................... A. Wyrick, Drawing ...................................................... Sales................................................................................. Sales Discounts............................................................ Cost of Goods Sold ..................................................... Supplies Expense ........................................................ Depreciation Expense ................................................

7-62

Debit $ 2,637 15,000 22,148 300 7,000

Credit

$

200 7,800 30,000

1,100 33,500 55 22,110 950 200 $71,500

$71,500

COMPREHENSIVE PROBLEM: CHAPTERS 3 TO 7

Note: If the working papers that accompany this text are not used in solving this problem, account numbers may differ from those presented in this solution. (a) Sales Journal

Date

Account Debited

Jan. 3 3 11 11 22 22 25 25

B. Remy J. Fine R. Draves S. Ingles B. Remy R. Draves B. Hachinski J. Fine

Invoice No. 510 511 512 513 514 515 516 517

Ref.

S1 Accounts Receivable Dr. Sales Cr. 3,100 1,800 1,900 900 3,700 800 3,500 6,100 21,800 (112)(401)

Purchases Journal P1 Date

Account Credited

Jan. 5 5 16 16 16 27 27 27

S. Yost D. Laux D. Moreno S. Kosko S. Yost D. Moreno D. Laux S. Yost

Terms

7-63

Ref.

Purchases Dr. Accounts Payable Cr. 3,000 2,700 15,000 13,900 1,500 12,500 1,200 2,800 52,600 (510)(201)

COMPREHENSIVE PROBLEM (Continued) Cash Receipts Journal CR1 Date Jan. 7 7 10 13 13 20 21 31

Account Credited

Ref.

S. Ingles B. Hachinski

B. Remy J. Fine

S. Ingles

Accounts Receivable Cr.

Cash Dr. 4,000 2,000 15,500 3,100 1,500 17,500 900 22,920 67,420 (101)

Sales Cr.

Other Accounts Cr.

4,000 2,000 15,500 3,100 1,500 17,500 900 11,500 (112)

22,920 55,920 (401)

Cash Payments Journal CP1 Date Jan. 8 9 9 12 15 17 23 23 28 31 31

Account Debited Freight In S. Kosko D. Moreno Rent Expense I. Packard, Drawing D. Moreno S. Kosko

Ref. 516

729 306

Other Accounts Dr.


Office Supplies Dr.

180 9,000 11,000 1,000 800 400

15,000 13,700 200

Sales Salaries Expense Office Salaries Expense

627 727

4,300 3,600 9,880 (X)

7-64

48,700 (201)

600 (125)

Cash Cr. 180 9,000 11,000 1,000 800 400 15,000 13,700 200 4,300 3,600 59,180 (101)

COMPREHENSIVE PROBLEM (Continued) (a) & (e) General Journal Date Jan.

9

18

21

Account Titles and Explanations Sales Returns and Allowances ......................................... Accounts Receivable— J. Fine......................................... (Issued credit for merchandise returned) Accounts Payable—S. Kosko ........... Purchase Returns and Allowances ............................... (Received credit for returned goods) Accounts Payable— R. Mikush............................................. Notes Payable .............................. (Issued note for balance due)

Ref. 412

Debit 300

112/

201/

300

200

512

201/ 200

G1 Credit

200

15,000 15,000

Adjusting Entries 31

31

31

31

Office Supplies Expense .................... Office Supplies ............................

728 125

900

Insurance Expense............................... (1/10 X 2,000) Prepaid Insurance ......................

722/

200

Depreciation Expense ......................... (1/12 X 1,500) Accumulated Depreciation— Equipment

711

Interest Expense.................................... Interest Payable...........................

718 230

7-65

900

200 130/ 125

158

125

30 30

COMPREHENSIVE PROBLEM (Continued) General Journal Date Jan. 31

31

31

31

Account Titles and Explanations Merchandise Inventory (Jan. 31) ...... Sales .......................................................... Purchase Returns and Allowances.......................................... Income Summary ........................

Ref. 120 401

Debit 15,000 77,720

512 350

200

Income Summary................................... Merchandise Inventory (Jan. 1)........................................ Sales Returns and Allowances................................ Purchases...................................... Freight In ........................................ Rent Expense ............................... Sales Salaries Expense............. Office Salaries Expense............ Office Supplies Expense .......... Insurance Expense ..................... Depreciation Expense................ Interest Expense..........................

350

83,235

Income Summary................................... I. Packard, Capital .......................

350 301

9,685

I. Packard, Capital.................................. I. Packard, Drawing.....................

301 306

800

(b) & (e) Cash Date Jan. 1 31 31

G1 Credit

92,920

120

20,000

412 510 516 729 627 727 728 722 711 718

300 52,600 180 1,000 4,300 3,600 900 200 125 30

9,685

800

General Ledger

Explanation Balance

Ref. CR1 CP1

7-66

Debit

Credit

67,420 59,180

No. 101 Balance 33,750 101,170 41,990

COMPREHENSIVE PROBLEM (Continued) Accounts Receivable Date Explanation Jan. 1 Balance 31 31 9

Notes Receivable Date Explanation Jan. 1 Balance

Merchandise Inventory Date Explanation Jan. 1 Balance 31 31

Office Supplies Date Explanation Jan. 1 Balance 31 31

Prepaid Insurance Date Explanation Jan. 1 Balance 31

Equipment Date Explanation Jan. 1

Ref. S1 CR1 G1

Ref.

Ref. G1 G1

Ref. CP1 G1

Ref. G1

Ref.

7-67

Debit

Credit

21,800 11,500 300

Debit

Debit

Credit

Credit

15,000 20,000

Debit

Credit

600 900

Debit

Credit 200

Debit

Credit

No. 112 Balance 13,000 34,800 23,300 23,000


No. 120 Balance 20,000 35,000 15,000

No. 125 Balance 1,000 1,600 700

No. 130 Balance 2,000 1,800


COMPREHENSIVE PROBLEM (Continued) Accumulated Depreciation—Equipment Date Explanation Ref. Jan. 1 Balance 31 G1

Notes Payable Date Explanation Jan. 21 Balance


Interest Payable Date Explanation Jan. 31

I. Packard, Capital Date Explanation Jan. 1 Balance 31 31

I. Packard, Drawing Date Explanation Jan. 15 31

Ref. G1

Ref. P1 CP1 G1 G1

Ref. G1

Ref. G1 G1

Ref. CP1 G1

7-68

Debit

Debit

Debit

125

No. 158 Balance 1,500 1,625

Credit 15,000


Credit

Credit 52,600

48,700 200 15,000

Debit

Debit

Credit 30

Credit 9,685

800

Debit 800

Credit 800

No. 201 Balance 35,000 87,600 38,900 38,700 23,700

No. 230 Balance 30

No. 301 Balance 78,700 88,385 87,585

No. 306 Balance 800 0

COMPREHENSIVE PROBLEM (Continued) Income Summary Date Explanation Jan. 31 31 31

Sales Date Jan. 31 31 31

Explanation

Sales Returns and Allowances Date Explanation Jan. 9 31

Purchases Date Explanation Jan. 31 31

Purchase Returns and Allowances Date Explanation Jan. 18 31

Freight-In Date Explanation Jan. 8 31

Ref. G1 G1 G1

Ref. S1 CR1 G1

Ref. G1 G1

Ref. P1 G1

Ref. G1 G1

Ref. CP1 G1 7-69

Debit

Credit 92,920

No. 350 Balance 92,920 9,685 0

Credit 21,800 55,920

No. 401 Balance 21,800 77,720 0

83,235 9,685

Debit

77,720

Debit 300

Credit 300

Debit 52,600

Credit 52,600

Debit

Credit 200

200

Debit 180

Credit 180


No. 510 Balance 52,600 0



COMPREHENSIVE PROBLEM (Continued) Sales Salaries Expense Date Explanation Jan. 31 31

Depreciation Expense Date Explanation Jan. 31 31

Interest Expense Date Explanation Jan. 31 31

Insurance Expense Date Explanation Jan. 31 31

Office Salaries Expense Date Explanation Jan. 31 31

Office Supplies Expense Date Explanation Jan. 31 31

Ref. CP1 G1

Ref. G1 G1

Ref. G1 G1

Ref. G1 G1

Ref. CP1 G1

Ref. G1 G1

7-70

Debit 4,300

Credit 4,300

Debit 125

Credit 125

Debit 30

Credit 30

Debit 200

Credit 200

Debit 3,600

Credit 3,600

Debit 900

Credit 900

No. 627 Balance 4,300 0




No. 727 Balance 3,600 0


COMPREHENSIVE PROBLEM (Continued) Rent Expense Date Explanation Jan. 12 31

Ref. CP1 G1

Debit 1,000

Credit 1,000

No. 729 Balance 1,000 0

Accounts Receivable Subsidiary Ledger R. Draves Date Explanation Jan. 1 Balance 11 22

Ref. S1 S1

J. Fine Date Jan. 3 9 13 25

Ref. S1 G1 CR1 S1

Debit 1,800

B. Hachinski Date Explanation Jan. 1 Balance 7 25

Ref. CR1 S1

Debit

S. Ingles Date Explanation Jan. 1 Balance 7 11 21

Ref. CR1 S1 CR1

Explanation

7-71

Debit

Credit

Balance 1,500 3,400 4,200

Credit

Balance 1,800 1,500 0 6,100

1,900 800

300 1,500 6,100

Credit 2,000

3,500

Debit

Credit 4,000

900 900

Balance 7,500 5,500 9,000

Balance 4,000 0 900 0

COMPREHENSIVE PROBLEM (Continued) B. Remy Date Explanation Jan. 3 13 22

Ref. S1 CR1 S1

Debit 3,100

Credit 3,100

3,700

Balance 3,100 0 3,700

Accounts Payable Subsidiary Ledger D. Laux Date Jan. 5 27

Explanation

Ref. P1 P1

Debit

Credit 2,700 1,200

Balance 2,700 3,900

S. Kosko Date Explanation Jan. 1 Balance 9 16 18 23

Ref. CP1 P1 G1 CP1

Debit

Credit

Balance 9,000 0 13,900 13,700 0

R. Mikush Date Explanation Jan. 1 Balance 21

Ref. G1

D. Moreno Date Explanation Jan. 1 Balance 9 16 23 27

Ref. CP1 P1 CP1 P1

7-72

9,000 13,900 200 13,700

Debit

Credit

Balance 15,000 0

Credit

Balance 11,000 0 15,000 0 12,500

15,000

Debit 11,000

15,000 15,000 12,500

COMPREHENSIVE PROBLEM (Continued) S. Yost Date Jan. 5 16 27

Explanation

Ref. P1 P1 P1

7-73

Debit

Credit 3,000 1,500 2,800

Balance 3,000 4,500 7,300

41,990 23,000 39,000 20,000 1,600 2,000 6,450

Cash Accounts Receivable Notes Receivable Merchandise Inventory Office Supplies Prepaid Insurance Equipment Accum. Depreciation—Equipment Notes Payable Accounts Payable Interest Payable I. Packard, Capital I. Packard, Drawing Sales Sales Returns and Allowances Purchases Purchase Returns and Allowances Freight In Sales Salaries Expense Office Salaries Expense Rent Expense Totals Office Supplies Expense Insurance Expense Depreciation Expense Interest Expense Totals Net Income Totals

7-74 180 4,300 3,600 1,000 196,820

300 52,600

800

Dr.

196,820

200

77,720

78,700

1,500 15,000 23,700

Cr.

(1) (2) (3) (4)

900 200 125 30 1,255

Dr.

125

30

(3)

(4)

1,255

900 200

(1) (2)

Cr.

Adjustments

900 200 125 30 196,975

180 4,300 3,600 1,000

300 52,600

800

41,990 23,000 39,000 20,000 700 1,800 6,450

Dr.

, 196,975

200

77,720

1,625 15,000 23,700 30 78,700

Cr.

Adjusted Trial Balance

PACKARD COMPANY Worksheet For the Month Ended January 31, 2008 Trial Balance

Account Titles

(c)

900 200 125 30 83,235 9,685 92,920

180 4,300 3,600 1,000

300 52,600

20,000

Dr.

128,740 128,740

92,920

800

41,990 23,000 39,000 15,000 700 1,800 6,450

Dr.

119,055 9,685 128,740

1,625 15,000 23,700 30 78,700

Cr.

Balance Sheet

92,920

200

77,720

15,000

Cr.

Income Statement

COMPREHENSIVE PROBLEM (Continued)

COMPREHENSIVE PROBLEM (Continued) (d)

PACKARD CO. Income Statement For the Month Ended January 31, 2008 Sales revenues Sales ........................................................ Less: Sales returns and allowances ........................... Net sales revenue ................................ Cost of goods sold Merchandise inventory, 1/1/08 ........ Purchases .............................................. Less: Purchase returns and allowances ........................... Net purchases....................................... Freight in ................................................ Total merchandise available for sale....................................................... Less: Merchandise inventory, 1/31/08 .............................................. Cost of goods sold....................... Gross profit on sales.......................... Operating expenses Selling expenses Sales salaries expense ............... Administrative expenses Office salaries expense .............. Rent expense ................................. Office supplies expense............. Insurance expense....................... Depreciation expense ................. Total admin. expenses......... Total oper. expenses............ Income from operations ........................... Other expenses and losses Interest expense................................... Net income ....................................................

7-75

$77,720 300 77,420 $20,000 $52,600 200 52,400 180

52,580 72,580 15,000 57,580 19,840

4,300 3,600 1,000 900 200 125 5,825 10,125 9,715 30 $ 9,685

COMPREHENSIVE PROBLEM (Continued) PACKARD CO. Statement of Owner’s Equity For the Month Ended January 31, 2008 I. Packard, Capital, January 1, 2008 .............................................. Add: Net income ............................................................................... Less: Drawing ..................................................................................... I. Packard, Capital, January 31, 2008............................................

$78,700 9,685 88,385 800 $87,585

PACKARD CO. Balance Sheet January 31, 2008 Assets Current assets Cash....................................................................... Notes receivable ................................................ Accounts receivable......................................... Merchandise inventory.................................... Office supplies ................................................... Prepaid insurance ............................................. Total current assets.................................

$41,990 39,000 23,000 15,000 700 1,800

Capital assets Equipment ........................................................... Less: Accumulated depreciation ................ Total assets ................................................

6,450 1,625

$121,490

4,825 $126,315

Liabilities and Owner’s Equity Current liabilities Notes payable..................................................... Accounts payable ............................................. Interest payable ................................................. Total liabilities ........................................... Owner’s equity I. Packard, Capital ............................................. Total liabilities and owner’s equity ....................................................... 7-76

$15,000 23,700 30 $ 38,730

87,585 $126,315

COMPREHENSIVE PROBLEM (Continued) (f)

PACKARD CO. Post-Closing Trial Balance January 31, 2008 Cash ............................................................................ Notes Receivable.................................................... Accounts Receivable............................................. Merchandise Inventory ......................................... Office Supplies ........................................................ Prepaid Insurance .................................................. Equipment................................................................. Accumulated Depreciation—Equipment ........ Notes Payable.......................................................... Accounts Payable................................................... Interest Payable ...................................................... I. Packard, Capital...................................................

Debit $ 41,990 39,000 23,000 15,000 700 1,800 6,450 $

$127,940

Accounts Receivable balance ................................... Subsidiary account balances R. Draves ................................................................. J. Fine ....................................................................... B. Hachinski............................................................ B. Remy....................................................................

Credit

1,625 15,000 23,700 30 87,585 $127,940

$23,000

$ 4,200 6,100 9,000 3,700 $23,000

Accounts Payable balance ......................................... Subsidiary account balances D. Laux...................................................................... D. Moreno ................................................................ S. Yost ......................................................................

$23,700

$ 3,900 12,500 7,300 $23,700

7-77

BYP 7-1

FINANCIAL REPORTING PROBLEM—A MINI PRACTICE SET

(a) Sales Journal S1 Date Jan. 3 3 11 11 22 22 25 25

Account Debited

Invoice Accounts Receivable Dr. Cost of Goods Sold Dr. No. Ref. Sales Cr. Merchandise Inventory Cr.

B. Richey J. Forbes R. Dvorak S. LaDew B. Richey R. Dvorak B. Garcia J. Forbes

510 511 512 513 514 515 516 517

3,100 1,800 1,600 900 2,700 1,300 3,500 6,100 21,000 (112)(401)

1,860 1,080 960 540 1,620 780 2,100 3,660 12,600 (505)(120)

Purchases Journal

Date

Account Credited

Jan. 5 5 16 16 16 27 27 27

S. Vogel D. Lynch D. Omara S. Hoyt S. Vogel D. Omara D. Lynch S. Vogel

Terms n/30 n/30 1/10, n/30 2/10, n/30 n/30 1/10, n/30 n/30 n/30

7-78

Ref.

P1 Merchandise Inventory Dr. Accounts Payable Cr. 5,000 2,200 18,000 14,200 1,500 14,500 1,200 5,400 62,000 (120)(201)

BYP 7-1 (Continued) Cash Receipts Journal CR1

Date Jan. 7 7 10 13 13 20 21 31

Account Credited

Ref.

S. LaDew B. Garcia

B. Richey J. Forbes

S. LaDew

Cash Dr. 4,000 2,000 15,500 3,038 1,470 20,100 882 21,300 68,290 (101)


Sales Cr.

Cost of Goods Sold Other Dr. Accounts Merchandise Inventory Cr. Cr.

4,000 2,000 62 30

3,100 1,500

18

900

110 (414)

11,500 (112)

15,500

9,300

20,100

12,060

21,300 56,900 (401)

12,780 34,140 (505)(120)

Cash Payments Journal CP1 Date

Account Debited

Ref.

Jan. 8 9 9 12 15 17 23 23 28 31 31

Merchandise Inventory S. Hoyt D. Omara Rent Expense M. Bluma, Drawing

120

D. Omara S. Hoyt

729 306

Other Accounts Dr.


Office Supplies Dr.


235 9,000 11,000

180 110

1,000 800 400

18,000 14,000

180 280 200

Sales Salaries Expense Office Salaries Expense

627 727

4,300 3,800 10,135 (X)

7-79

52,000 (201)

600 (125)

750 (120)

Cash Cr. 235 8,820 10,890 1,000 800 400 17,820 13,720 200 4,300 3,800 61,985 (101)

BYP 7-1 (Continued) (a) & (e) General Journal Date Jan.

9

18

21

Account Titles and Explanations Sales Returns and Allowances ......... Accounts Receivable— J. Forbes.................................... (Issued credit for merchandise returned)

Ref. 412

Debit 300

Merchandise Inventory ........................ ($300 X .60) Cost of Goods Sold ....................

120

Accounts Payable—S. Hoyt ............... Merchandise Inventory.............. (Received credit for returned goods)

201/ 120/

200

Accounts Payable—R. Moses ........... Notes Payable............................... (Payment of balance due)

201/ 200/

15,000

112/

G1 Credit

300

180

505

180

200

15,000

Adjusting Entries 31

31

31

31

31

Office Supplies Expense..................... Office Supplies.............................

728 125

700

Insurance Expense................................ Prepaid Insurance.......................

722 130

200

711

125

Depreciation Expense ($1,500 ÷ 12) ........................................... Accumulated Depreciation— Equipment.................................

700

200

158

125

Interest Expense................................... Interest Payable ...........................

718 230

50

Sales......................................................... Income Summary ........................

401 350

77,900

7-80

50

77,900

BYP 7-1 (Continued) General Journal Date Jan. 31

31

31

Account Titles and Explanations Income Summary .................................. Sales Discounts .......................... Sales Returns and Allowances ............................... Cost of Goods Sold.................... Rent Expense ............................... Sales Salaries Expense ............ Office Salaries Expense ........... Office Supplies Expense .......... Insurance Expense..................... Depreciation Expense ............... Interest Expense .........................

Ref. 350 414

Income Summary .................................. M. Bluma, Capital........................

350 301

20,755

M. Bluma, Capital .................................. M. Bluma, Drawing .....................

301 306

800

(b) & (e) Cash Date Jan. 1 31 31

Debit 57,145

G1 Credit 110

412 505 729 627 727 728 722 711 718

300 46,560 1,000 4,300 3,800 700 200 125 50

20,755

800

General Ledger

Explanation Balance

Accounts Receivable Date Explanation Jan. 1 Balance 31 31 9

Ref. CR1 CP1

Ref. S1 CR1 G1 7-81

Debit

Credit

68,290 61,985

Debit

Credit

21,000 11,500 300

No. 101 Balance 35,750 104,040 42,055

No. 112 Balance 13,000 34,000 22,500 22,200

BYP 7-1 (Continued) Notes Receivable Date Explanation Jan. 1 Balance

Merchandise Inventory Date Explanation Jan. 1 Balance 31 31 31 8 31 9 18

Office Supplies Date Explanation Jan. 1 Balance 31 31

Prepaid Insurance Date Explanation Jan. 1 Balance 31

Equipment Date Explanation Jan. 1 Balance

Ref.

Ref. P1 S1 CR1 CP1 CP1 G1 G1

Ref. CP1 G1

Ref. G1

Ref.

7-82

Debit

Debit

Credit

Credit

62,000 12,600 34,140 235 750 180 200

Debit

Credit

600 700

Debit

Credit 200

Debit

Credit


No. 120 Balance 18,000 80,000 67,400 33,260 33,495 32,745 32,925 32,725

No. 125 Balance 1,000 1,600 900

No. 130 Balance 2,000 1,800


BYP 7-1 (Continued) Accumulated Depreciation—Equipment Date Explanation Ref. Jan. 1 Balance 31 G1

Notes Payable Date Explanation Jan. 21


Interest Payable Date Explanation Jan. 31

M. Bluma, Capital Date Explanation Jan. 1 Balance 31 31

M. Bluma, Drawing Date Explanation Jan. 15 31

Ref. G1

Ref. P1 CP1 G1 G1

Ref. G1

Ref. G1 G1

Ref. CP1 G1

7-83

Debit

Debit

Debit

125

No. 158 Balance 1,500 1,625

Credit 15,000


Credit

Credit 62,000

52,000 200 15,000

Debit

Debit

Credit 50

Credit 20,755

800

Debit 800

Credit 800

No. 201 Balance 35,000 97,000 45,000 44,800 29,800

No. 230 Balance 50

No. 301 Balance 78,700 99,455 98,655


BYP 7-1 (Continued) Income Summary Date Explanation Jan. 31 31 31

Sales Date Jan. 31 31 31

Explanation

Sales Returns and Allowances Date Explanation Jan. 9 31

Sales Discounts Date Explanation Jan. 31 31

Ref. G1 G1 G1

Ref. S1 CR1 G1

Ref. G1 G1

Ref. CR1 G1

Debit

Credit 77,900

No. 350 Balance 77,900 20,755 0

Credit 21,000 56,900

No. 401 Balance 21,000 77,900 0

Credit


57,145 20,755

Debit

77,900

Debit 300

300

Debit 110

Credit 110

Cost of Goods Sold Date Jan. 31 31 9 31

Explanation

No. 414 Balance 110 0 No. 505

Ref. S1 CR1 G1 G1

7-84

Debit 12,600 34,140

Credit

180 46,560

Balance 12,600 46,740 46,560 0

BYP 7-1 (Continued) Sales Salaries Expense Date Explanation Jan. 31 31

Depreciation Expense Date Explanation Jan. 31 31

Interest Expense Date Explanation Jan. 31 31

Insurance Expense Date Explanation Jan. 31 31

Office Salaries Expense Date Explanation Jan. 31 31

Office Supplies Expense Date Explanation Jan. 31 31

Ref. CP1 G1

Ref. G1 G1

Ref. G1 G1

Ref. G1 G1

Ref. CP1 G1

Ref. G1 G1

7-85

Debit 4,300

Credit 4,300

Debit 125

Credit 125

Debit 50

Credit 50

Debit 200

Credit 200

Debit 3,800

Credit 3,800

Debit 700

Credit 700

No. 627 Balance 4,300 0




No. 727 Balance 3,800 0


BYP 7-1 (Continued) Rent Expense Date Explanation Jan. 12 31

Ref. CP1 G1

Debit 1,000

Credit 1,000

No. 729 Balance 1,000 0

Accounts Receivable Subsidiary Ledger R. Dvorak Date Explanation Jan. 1 Balance 11 22

Ref. S1 S1

J. Forbes Date Explanation Jan. 3 9 13 25

Ref. S1 G1 CR1 S1

Debit 1,800

B. Garcia Date Explanation Jan. 1 Balance 7 25

Ref. CR1 S1

Debit

S. LaDew Date Explanation Jan. 1 Balance 7 11 21

Ref. CR1 S1 CR1

7-86

Debit

Credit

Balance 1,500 3,100 4,400

Credit

Balance 1,800 1,500 0 6,100

1,600 1,300

300 1,500 6,100

Credit 2,000

3,500

Debit

Credit 4,000

900 900

Balance 7,500 5,500 9,000

Balance 4,000 0 900 0

BYP 7-1 (Continued) B. Richey Date Explanation Jan. 3 13 22

Ref. S1 CR1 S1

Debit 3,100

Credit 3,100

2,700

Balance 3,100 0 2,700

Accounts Payable Subsidiary Ledger D. Lynch Date Explanation Jan. 5 27

Ref. P1 P1

Debit

Credit 2,200 1,200

Balance 2,200 3,400

S. Hoyt Date Jan. 1 9 16 18 23

Ref. CP1 P1 G1 CP1

Debit

Credit

Balance 9,000 0 14,200 14,000 0

Explanation Balance

R. Moses Date Explanation Jan. 1 Balance 21

Ref. G1

D. Omara Date Explanation Jan. 1 Balance 9 16 23 27

Ref. CP1 P1 CP1 P1

7-87

9,000 14,200 200 14,000

Debit

Credit

Balance 15,000 0

Credit

Balance 11,000 0 18,000 0 14,500

15,000

Debit 11,000

18,000 18,000 14,500

BYP 7-1 (Continued) S. Vogel Date Jan. 5 16 27

Explanation

Ref. P1 P1 P1

7-88

Debit

Credit 5,000 1,500 5,400

Balance 5,000 6,500 11,900

42,055 22,200 39,000 32,725 1,600 2,000 6,450

Cash Accounts Receivable Notes Receivable Merchandise Inventory Office Supplies Prepaid Insurance Equipment Accum. Depreciation—Equipment Notes Payable Accounts Payable Interest Payable M. Bluma, Capital M. Bluma, Drawing Sales Sales Returns and Allowances Sales Discounts Cost of Goods Sold Sales Salaries Expense Office Salaries Expense Rent Expense Totals Office Supplies Expense Insurance Expense Depreciation Expense Interest Expense Totals Net Income Totals

7-89 300 110 46,560 4,300 3,800 1,000 202,900

800

Dr.

202,900

77,900

78,700

1,500 15,000 29,800

Cr.

(1) (2) (3) (4)

700 200 125 50 1,075

Dr.

1,075

50

125

(3)

(4)

700 200

(1) (2)

Cr.

Adjustments

700 200 125 50 203,075

300 110 46,560 4,300 3,800 1,000

800

42,055 22,200 39,000 32,725 900 1,800 6,450

Dr.

203,075

77,900

1,625 15,000 29,800 50 78,700

Cr.

Adjusted Trial Balance

BLUMA COMPANY Worksheet For the Month Ended January 31, 2008 Trial Balance

Account Titles

(c)

700 200 125 50 57,145 20,755 77,900

300 110 46,560 4,300 3,800 1,000

Dr.

145,930 145,930

77,900

800

42,055 22,200 39,000 32,725 900 1,800 6,450

Dr.

125,175 20,755 145,930

1,625 15,000 29,800 50 78,700

Cr.

Balance Sheet

77,900

77,900

Cr.

Income Statement

BYP 7-1 (Continued)

BYP 7-1 (Continued) (d)

BLUMA CO. Income Statement For the Month Ended January 31, 2008 Sales revenues Sales ........................................................ Less: Sales discounts ...................... Sales returns and allowances ........................... Net sales revenue................................ Cost of goods sold ............................. Gross profit ........................................... Operating expenses Selling expenses Sales salaries expense............. Administrative expenses Office salaries expense............ Rent expense ............................... Office supplies expense........... Insurance expense..................... Depreciation expense ............... Total administrative expenses.......................... Total operating expenses................. Income from operations.............................

$77,900 $ 110 300

410 77,490 46,560 30,930

4,300 $3,800 1,000 700 200 125 5,825 10,125 20,805

Other expenses and losses Interest expense ..................................

50

Net income......................................................

$20,755

7-90

BYP 7-1 (Continued) BLUMA CO. Owner’s Equity Statement For the Month Ended January 31, 2008 M. Bluma, Capital, January 1, 2008................................................ Add: Net income................................................................................ Less: Drawings.................................................................................... M. Bluma, Capital, January 31, 2008 .............................................

$78,700 20,755 99,455 800 $98,655

BLUMA CO. Balance Sheet January 31, 2008 Assets Current assets Cash ....................................................................... Accounts receivable ......................................... Notes receivable................................................. Merchandise inventory .................................... Office supplies.................................................... Prepaid insurance.............................................. Total current assets .................................

$42,055 22,200 39,000 32,725 900 1,800

Property, plant, and equipment Equipment ............................................................ Less: Accumulated depreciation................. Total assets.................................................

6,450 1,625

$138,680

4,825 $143,505

Liabilities and Owner’s Equity Current liabilities Notes payable ..................................................... Accounts payable .............................................. Interest payable.................................................. Total liabilities............................................ Owner’s equity M. Bluma, Capital............................................... Total liabilities and owner’s equity........................................................ 7-91

$15,000 29,800 50 $ 44,850

98,655 $143,505

BYP 7-1 (Continued) (f)

BLUMA CO. Post-Closing Trial Balance January 31, 2008 Cash ............................................................................ Notes Receivable .................................................... Accounts Receivable............................................. Merchandise Inventory.......................................... Office Supplies ........................................................ Prepaid Insurance................................................... Equipment ................................................................. Accumulated Depreciation—Equipment......... Notes Payable .......................................................... Accounts Payable................................................... Interest Payable....................................................... M. Bluma, Capital ....................................................

Debit $ 42,055 39,000 22,200 32,725 900 1,800 6,450 $

$145,130

Accounts Receivable balance.................................... Subsidiary account balances R. Dvorak.................................................................. J. Forbes .................................................................. B. Garcia................................................................... B. Richey ..................................................................

Credit

1,625 15,000 29,800 50 98,655 $145,130

$22,200

$ 4,400 6,100 9,000 2,700 $22,200

Accounts Payable balance.......................................... Subsidiary account balances D. Lynch ................................................................... D. Omara .................................................................. S. Vogel.....................................................................

$29,800

$ 3,400 14,500 11,900 $29,800

7-92

BYP 7-2

EXPLORING THE WEB

(a) Some of the key features of the general ledger module highlighted by the company are: Highly flexible account and fiscal period setup, including different

account structures for separate companies. Account numbers can be up to 20 characters long in 10 segments. Statistical accounts for tracking nonfinancial information, such as

head count and square footage. Standard, recurring, auto-reversing, clearing, and “quick-journal”

entries. Unlimited budgets, unlimited years of history.

(b) Some of the key features of the payables management module highlighted by the company are: Handles purchases on account, manual and computer check payments,

and credit memos. Vendor classes provide a fast, consistent method for entering new

records by entering common information for you. Changes to one vendor in a class can be made to all vendors in the

same class. Automatically calculates the number of days it takes to pay each

vendor. Enter recurring transactions. Put transactions on “hold” until you want to pay them. A variety of inquiry windows and reports provide multiple ways to

view vendor information. Complete vendor and transaction history.

7-93

BYP 7-3

DECISION MAKING ACROSS THE ORGANIZATION

(a) The special journals for Hughey & Payne should be: (1) sales journal, (2) purchases journal, (3) cash receipts journal, and (4) cash payments journal. (1) Sales Journal columns: Date. Account Debited. Invoice Number. Reference. Accounts Receivable, Dr. and Sales—Appliances, Cr. Cost of Goods Sold, Dr. and Merchandise Inventory—Appliances, Cr. (2) Purchases Journal columns: Date. Account Credited. Terms. Reference. Accounts Payable, Cr. Merchandise Inventory—Appliances, Dr. Merchandise Inventory—Parts, Dr. Note: Because two different types of merchandise are purchased on credit, a three-column purchases journal might be used. (3) Cash Receipts Journal columns: Date. Account Credited. Reference. Cash, Dr. Accounts Receivable, Cr. Sales—Appliances, Cr. Sales—Parts, Cr. Revenue from Repairs, Cr. Other Accounts, Cr. Cost of Goods Sold, Dr. and Merchandise Inventory— Appliances, Cr. Cost of Goods Sold, Dr. and Merchandise Inventory—Parts, Cr. Note: A Sales Discounts, Dr. column is not needed because all credit terms are net/30 days. 7-94

BYP 7-3 (Continued) (4) Cash Payments Journal columns: Date. Check Number. Account Debited. Reference. Other Accounts, Dr. Accounts Payable, Dr. Advertising Expense, Dr. Salaries Expense, Dr. Merchandise Inventory—Appliances, Cr. Merchandise Inventory—Parts, Cr. Cash, Cr. (b) Hughey & Payne should have: (1) An accounts receivable control account with individual customers’ accounts in a customers’ subsidiary ledger. (2) An accounts payable control account with individual creditors in a creditors’ subsidiary ledger. The use of control accounts and subsidiary ledgers will: (1) provide necessary up-to-date information on specific customer and creditor balances, (2) free the general ledger of excessive detail, (3) help locate errors in individual accounts, and (4) make possible a division of labor in posting.

7-95

BYP 7-4

COMMUNICATION ACTIVITY

Mr. Jim Houser 2 Main Street Central City, Michigan 48172 Dear Mr. Houser: Thank you for hiring two additional bookkeepers a month ago to help me with the accounting. Unfortunately, the inefficiencies in recording transactions have continued at an even higher rate. The reason is that there are often times when more than one person needs to use the journal. In addition, the daily posting of transactions continues to be very time consuming. I would like to suggest some changes in the accounting system. Because of the increased volume of business, I believe it is time for us to use special journals for journalizing transactions. Special journals would be in addition to the journal that we are using now. There would be four special journals: 1. 2. 3. 4.

Sales journal—for all sales of merchandise on account. Cash receipts journal—for all cash received. Purchases journal—for all purchases of merchandise on account. Cash payments journal—for all cash payments.

To use special journals, we will need columnar journal paper which can be obtained at any office supply store at very low cost. I can also quickly train the new bookkeepers in the use of special journals. Special journals will permit a division of labor so that all three of us can be recording transactions at the same time. Thus, the inefficiencies in journalizing will be eliminated. Special journals also make it possible to do some postings monthly. This will significantly reduce the time required to make daily postings. As a result, it should free up some time for us to do other things! I am confident that the use of special journals will improve the efficiency of the accounting department. If you have any questions on this recommendation, please let me know. Yours sincerely, Barb

7-96

BYP 7-5

ETHICS CASE

(a) The stakeholders in this case are: Jose Molina, manager of Roniger’s centralized computer accounting

operation. The employees of Roniger’s three divisions at Freeport, Rockport, and Bayport. (b) Jose’s instructions to assign the Bayport code to all uncoded and incorrectly coded sales documents overstates the sales of Bayport and understates the sales of Freeport and Rockport, thereby affecting the employee bonus plan. Jose’s intent and action are unethical. He is padding the sales of his wife’s, relatives’, and friends’ Bayport division sales and unfairly aiding them in the bonus competition. (c) Roniger Products Company should have a written policy covering uncoded and incorrectly coded sales documents. This would prevent the manager from arbitrarily designating the division to be credited for the uncoded sales.

7-97

BYP 7-6

ALL ABOUT YOU ACTIVITY

The process begins when journal entries are recorded for transactions in a journal. Once entries are made in the journal, they are posted to the ledger by using the Post function. After entries have been posted, you can click on Reports in the Main Menu and choose from a variety of reports. These include the following: Chart of Accounts, Trial Balance, General Ledger, Subsidiary Ledger, Journals, Balance Sheet, Income Statement, Owner’s Equity Statement.

7-98

CHAPTER 7

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