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
BRIEF EXERCISE 7-7
1.
2.
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
BRIEF EXERCISE 7-10
1.
2.
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
EXERCISE 7-6
(a) & (b)
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
EXERCISE 7-7
(a) & (b)
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
No. 505
Balance
11,571
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)
Cash Payments Journal
CP1
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. 301
Balance
80,000
No. 306
Balance
2,500
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)
Cash Receipts Journal
CR1
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)
Sales Journal
S1
Date
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
P1
Merchandise Inventory Dr.
Accounts Payable Cr.
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
No. 157
Balance
6,450
Credit
No. 158
Balance
1,500
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. 200
Balance
18,000
No. 201
Balance
43,000
25,000
24,700
28,300
12,350
No. 301
Balance
86,450
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
No. 726
Balance
2,800
Credit
No. 727
Balance
2,000
Credit
No. 729
Balance
1,000
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)
Cash Receipts Journal
CR1
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)
Cash Payments Journal
CP1
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)
Sales Journal
S1
Date
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
No. 505
Balance
7,917
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.
Sales
Accounts
Discounts Receivable
Dr.
Cr.
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)
Cash Payments Journal
CP1
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
P1
Merchandise Inventory Dr.
Accounts Payable Cr.
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
Accounts
Payable
Dr.
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)
Merchandise
Inventory
Cr.
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. 157
Balance
7,000
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. 301
Balance
30,000
No. 306
Balance
1,100
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.
Accounts
Payable
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. 115
Balance
39,000
No. 120
Balance
20,000
35,000
15,000
No. 125
Balance
1,000
1,600
700
No. 130
Balance
2,000
1,800
No. 157
Balance
6,450
COMPREHENSIVE PROBLEM (Continued)
Accumulated Depreciation—Equipment
Date
Explanation
Ref.
Jan. 1 Balance
31
G1
Notes Payable
Date
Explanation
Jan. 21 Balance
Accounts Payable
Date
Explanation
Jan. 1 Balance
31
31
18
21
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
No. 200
Balance
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. 412
Balance
300
0
No. 510
Balance
52,600
0
No. 512
Balance
200
0
No. 516
Balance
180
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. 711
Balance
125
0
No. 718
Balance
30
0
No. 722
Balance
200
0
No. 727
Balance
3,600
0
No. 728
Balance
900
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
Accounts
Discounts Receivable
Dr.
Cr.
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.
Accounts
Payable
Dr.
Office
Supplies
Dr.
Merchandise
Inventory
Cr.
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. 115
Balance
39,000
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
No. 157
Balance
6,450
BYP 7-1 (Continued)
Accumulated Depreciation—Equipment
Date
Explanation
Ref.
Jan. 1 Balance
31
G1
Notes Payable
Date
Explanation
Jan. 21
Accounts Payable
Date
Explanation
Jan. 1 Balance
31
31
18
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
No. 200
Balance
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
No. 306
Balance
800
0
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
No. 412
Balance
300
0
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. 711
Balance
125
0
No. 718
Balance
50
0
No. 722
Balance
200
0
No. 727
Balance
3,800
0
No. 728
Balance
700
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