1.
Prepare a single column revenue journal and cash receipt journal, and post the accounts in the accounts payable subsidiary ledger.
1.
Explanation of Solution
General Ledger: General ledger refers to the ledger that records all the transactions of the business related to the company’s assets, liabilities, owners’ equities, revenues, and expenses. Each subsidiary ledger is represented in the general ledger by summarizing the account.
Accounts payable control account and subsidiary ledger: Accounts payable account and subsidiary ledger is the ledger which is used to post the creditors transaction in one particular ledger account. It helps the business to locate the error in the creditor ledger balance. After all transactions of creditor accounts are posted, the balances in the accounts payable subsidiary ledger should be totaled, and compare with the balance in the general ledger of accounts payable. If both the balance does not agree, the error has been located and corrected.
Purchase journal: Purchase journal refers to the journal that is used to record all purchases on account. In the purchase journal, all purchase transactions are recorded only when the business purchased the goods on account. For example, the business purchased cleaning supplies on account.
Cash payments journal: Cash payments journal refers to the journal that is used to record all transaction which involves the cash payments. For example, the business paid cash to employees (salary paid to employees).
Purchase journal: Purchase journal of Company WTE in the month of October is as follows:
Purchase journal
Figure (1)
Cash payment journal: Cash payment journal of Company WTE in the month of October is as follows:
Cash payment journal
Date | Check No. | Account debited | Post Ref. | Other accounts Dr. | Accounts payable Dr. | Cash Dr. | |
Oct. | 16 | 1 | Rent expense | 71 | 7,000 | 7,000 | |
18 | 2 | Field supplies | 14 | 4,570 | 4,570 | ||
Office supplies | 15 | 650 | 650 | ||||
24 | PS Incorporation | ✓ | 32,600 | 32,600 | |||
26 | MS Company | ✓ | 9,780 | 9,780 | |||
28 | Land | 240,000 | 240,000 | ||||
30 | A Office supply Company | ✓ | 1,320 | 1,320 | |||
31 | Salary expense | 61 | 32,000 | 32,000 | |||
31 | 284,220 | 43,700 | 327,920 | ||||
✓ | (21) | (11) |
Table (1)
Accounts payable subsidiary ledger
Name: A Office supply Company | ||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) |
Balance ($) | |
Oct. | 20 | P1 | 1,320 | 1,320 | ||
28 | P1 | 3,670 | 4,990 | |||
30 | CP1 | 1,320 | 3,670 |
Table (2)
Name: MS Company | ||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) |
Balance ($) | |
Oct. | 17 | P1 | 9,780 | 9,780 | ||
26 | CP1 | 9,780 | - | |||
30 | P1 | 12,450 | 12,450 |
Table (3)
Name: PS Incorporation | ||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) |
Balance ($) | |
Oct. | 16 | P1 | 32,600 | 32,600 | ||
24 | CP1 | 32,600 | - | |||
30 | P1 | 30,800 | 30,800 |
Table (4)
2. and 3.
2. and 3.
Explanation of Solution
Prepare the general ledger for given accounts as follows:
Account: Cash Account no. 11 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
Oct. | 31 | CP1 | 327,920 | 327,920 |
Table (5)
Account: Field supplies Account no. 14 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
Oct. | 18 | CP1 | 4,570 | 4,570 | |||
31 | P1 | 47,530 | 52,100 |
Table (6)
Account: Office supplies Account no. 15 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
Oct. | 18 | CP1 | 650 | 650 | |||
31 | P1 | 4,990 | 5,460 |
Table (7)
Account: Prepaid rent Account no. 16 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
Oct. | 31 | J1 | 15,000 | 15,000 |
Table (8)
Account: Field equipment Account no. 17 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
Oct. | 16 | P1 | 32,600 | 32,600 | |||
31 | J1 | 15,000 | 17,600 |
Table (9)
Account: Office equipment Account no. 18 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
31 | P1 | 5,500 | 5,500 |
Table (10)
Account: Land Account no. 19 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
Oct. | 23 | CP1 | 240,000 | 240,000 |
Table (11)
Account: Accounts payable Account no. 21 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
Oct. | 31 | P1 | 90,620 | 90,620 | |||
31 | CP1 | 43,700 | 46,920 |
Table (12)
Account: Salary expense Account no. 61 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
Oct. | 31 | CP1 | 32,000 | 32,000 |
Table (13)
Account: Rent expense Account no. 71 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
Oct. | 16 | CP1 | 7,000 | 7,000 |
Table (14)
Journal Page 01 | |||||
Date | Description | Post. Ref | Debit ($) | Credit ($) | |
Oct. | 31 | Prepaid rent | 16 | 15,000 | |
Field equipment | 17 | 15,000 | |||
(To record leasing of field equipment) |
Table (15)
4.
Prepare accounts payable creditor balances.
4.
Explanation of Solution
Accounts payable creditor balance
Accounts payable creditor balance is as follows:
Company WTE | |
Accounts payable creditor balances | |
October 31 | |
Amount ($) | |
A Office supply Company | 3,670 |
MS Company | 12,450 |
PS Incorporation | 30,800 |
Total accounts receivable | 46,920 |
Table (16)
Accounts payable controlling account
Ending balance of accounts payable controlling account is as follows:
Company WTE | |
Accounts payable (Controlling account) | |
October 31 | |
Amount ($) | |
Opening balance | 0 |
Add: | |
Total credits (from purchase journal) | 90,620 |
90,620 | |
Less: | |
Total debits (from cash payment journal) | (43,700) |
Total accounts payable | 46,920 |
Table (17)
In this case, accounts payable subsidiary ledger is used to identify, and locate the error by way of cross-checking the creditor balance and accounts payable controlling account. From the above calculation, we can understand that both balances of accounts payable is agree, hence there is no error in the recording and posing of transactions.
5.
Discuss the reason for using subsidiary ledger for the field equipment.
5.
Explanation of Solution
A subsidiary ledger for the field equipment helps the company to track the cost of each piece of equipment, location, useful life, and other necessary data. This information is used for safeguarding the equipment and determining
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Chapter 5 Solutions
Financial Accounting
- The transactions completed by Revere Courier Company during December, the first month of the fiscal year, were as follows: Instructions 1. Enter the following account balances in the general ledger as of December 1: 2. Journalize the transactions for December, using the following journals similar to those illustrated in this chapter: cash receipts journal (p. 31), purchases journal (p. 37, with columns for Accounts Payable, Maintenance Supplies, Office Supplies, and Other Accounts), single-column revenue journal (p. 35), cash payments journal (p. 34), and two-column general journal (p. 1). Assume that the daily postings to the individual accounts in the accounts payable subsidiary ledger and the accounts receivable subsidiary ledger have been made. 3. Post the appropriate individual entries to the general ledger. 4. Total each of the columns of the special journals and post the appropriate totals to the general ledger; insert the account balances. 5. Prepare a trial balance.arrow_forwardThe transactions completed by AM Express Company during March, the first month of the fiscal year, were as follows: Instructions 1. Enter the following account balances in the general ledger as of March 1: 2. Journalize the transactions for March, using the following journals similar to those illustrated in this chapter: single-column revenue journal (p. 35), cash receipts journal (p. 31), purchases journal (p. 37, with columns for Accounts Payable, Maintenance Supplies, Office Supplies, and Other Accounts), cash payments journal (p. 34), and twocolumn general journal (p. 1). Assume that the daily postings to the individual accounts in the accounts payable subsidiary ledger and the accounts receivable subsidiary ledger have been made. 3. Post the appropriate individual entries to the general ledger. 4. Total each of the columns of the special journals and post the appropriate totals to the general ledger; insert the account balances. 5. Prepare a trial balance.arrow_forwardDuring the month of October 20--, The Pink Petal flower shop engaged in the following transactions: Selected account balances as of October 1 were as follows: The Pink Petal also had the following subsidiary ledger balances as of October 1: REQUIRED 1. Record the transactions in a sales journal (page 7), cash receipts journal (page 10), purchases journal (page 6), cash payments journal (page 11), and general journal (page 5). Total, verify, and rule the columns where appropriate at the end of the month. 2. Post from the journals to the general ledger, accounts receivable ledger, and accounts payable ledger accounts. Use account numbers as shown in the chapter.arrow_forward
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- The following transactions were completed by Yang Restaurant Equipment during January, the first month of this fiscal year. Terms of sale are 2/10, n/30. The balances of the accounts as of January 1 have been recorded in the general ledger in your Working Papers or in CengageNow. Yang Restaurant Equipment does not track cash sales by customer. If you are using the form-based approach with QuickBooks or general ledger, select Cash Sales as the customer for all cash sales transactions. Required 1. Record the transactions for January using a general journal, page 1. Assume the periodic inventory method is used. If using QuickBooks, record transactions using either the journal entry method or the forms-based approach, as directed by your instructor. The chart of accounts is as follows: 2. Post daily all entries involving customer accounts to the accounts receivable ledger. 3. Post daily all entries involving creditor accounts to the accounts payable ledger. 4. Post daily the general journal entries to the general ledger. Write the owners name in the Capital and Drawing accounts. 5. Prepare a trial balance. 6. Prepare a schedule of accounts receivable (A/R Aging Detail report in QuickBooks) and a schedule of accounts payable (A/P Aging Detail report in QuickBooks). Do the totals equal the balances of the related controlling accounts? If using QuickBooks or general ledger, ignore Steps 2, 3, and 4.arrow_forwardThe following transactions were completed by Yang Restaurant Equipment during January, the first month of this fiscal year. Terms of sale are 2/10, n/30. The balances of the accounts as of January 1 have been recorded in the general ledger in your Working Papers or in CengageNow. Yang Restaurant Equipment does not track cash sales by customer. If you are using the form-based approach with QuickBooks or general ledger, select Cash Sales as the customer for all cash sales transactions. Required 1. Record the transactions for January using a sales journal, page 91; a purchases journal, page 74; a cash receipts journal, page 56; a cash payments journal, page 63; and a general journal, page 119. Assume the periodic inventory method is used. 2. Post daily all entries involving customer accounts to the accounts receivable ledger. 3. Post daily all entries involving creditor accounts to the accounts payable ledger. 4. Post daily those entries involving the Other Accounts columns and the general journal to the general ledger. Write the owners name in the Capital and Drawing accounts. 5. Add the columns of the special journals and prove the equality of the debit and credit totals on scratch paper. 6. Post the appropriate totals of the special journals to the general ledger. 7. Prepare a trial balance. 8. Prepare a schedule of accounts receivable and a schedule of accounts payable. Do the totals equal the balances of the related controlling accounts?arrow_forwardTransactions related to revenue and cash receipts completed by Sterling Engineering Services during the period June 230 are as follows: Instructions 1. Insert the following balances in the general ledger as of June 1: 2. Insert the following balances in the accounts receivable subsidiary ledger as of June 1: 3. Prepare a single-column revenue journal (p. 40) and a cash receipts journal (p. 36). Use the following column headings for the cash receipts journal: Fees Earned Cr., Accounts Receivable Cr., and Cash Dr. The Fees Earned column is used to record cash fees. Insert a check mark () in the Post. Ref. column when recording cash fees. 4. Using the two special journals and the two-column general journal (p. 1), journalize the transactions for June. Post to the accounts receivable subsidiary ledger and insert the balances at the points indicated in the narrative of transactions. Determine the balance in the customers account before recording a cash receipt. 5. Total each of the columns of the special journals and post the individual entries and totals to the general ledger. Insert account balances after the last posting. 6. Determine that the sum of the customer accounts agrees with the accounts receivable controlling account in the general ledger. 7. Why would an automated system omit postings to a control account as performed in step 5 for Accounts Receivable?arrow_forward
- Analyzing the Accounts The controller for Summit Sales Inc. provides the following information on transactions that occurred during the year: a. Purchased supplies on credit, $18,600 b. Paid $14,800 cash toward the purchase in Transaction a c. Provided services to customers on credit1 $46,925 d. Collected $39,650 cash from accounts receivable e. Recorded depreciation expense, $8,175 f. Employee salaries accrued, $15,650 g. Paid $15,650 cash to employees for salaries earned h. Accrued interest expense on long-term debt, $1,950 i. Paid a total of $25,000 on long-term debt, which includes $1.950 interest from Transaction h j. Paid $2,220 cash for l years insurance coverage in advance k. Recognized insurance expense, $1,340, that was paid in a previous period l. Sold equipment with a book value of $7,500 for $7,500 cash m. Declared cash dividend, $12,000 n. Paid cash dividend declared in Transaction m o. Purchased new equipment for $28,300 cash. p. Issued common stock for $60,000 cash q. Used $10,700 of supplies to produce revenues Summit Sales uses the indirect method to prepare its statement of cash flows. Required: 1. Construct a table similar to the one shown at the top of the next page. Analyze each transaction and indicate its effect on the fundamental accounting equation. If the transaction increases a financial statement element, write the amount of the increase preceded by a plus sign (+) in the appropriate column. If the transaction decreases a financial statement element, write the amount of the decrease preceded by a minus sign (-) in the appropriate column. 2. Indicate whether each transaction results in a cash inflow or a cash outflow in the Effect on Cash Flows column. If the transaction has no effect on cash flow, then indicate this by placing none in the Effect on Cash Flows column. 3. For each transaction that affected cash flows, indicate whether the cash flow would be classified as a cash flow from operating activities, cash flow from investing activities, or cash flow from financing activities. If there is no effect on cash flows, indicate this as a non-cash activity.arrow_forwardPrepare journal entries to record the following transactions. Create a T-account for Cash, post any entries that affect the account, and calculate the ending balance for the account. Assume a Cash beginning balance of $37,400. A. May 12, collected balance due from customers on account, $16,000 B. June 10, purchased supplies for cash, $4,444arrow_forwardThe following transactions were completed by Hammond Auto Supply during January, which is the first month of this fiscal year. Terms of sale are 2/10, n/30. The balances of the accounts as of January 1 have been recorded in the general ledger in your Working Papers or in CengageNow. Hammond Auto Supply does not track cash sales by customer. Jan. 2Issued Ck. No. 6981 to JSS Management Company for monthly rent, 775. 2J. Hammond, the owner, invested an additional 3,500 in the business. 4Bought merchandise on account from Valencia and Company, invoice no. A691, 2,930; terms 2/10, n/30; dated January 2. 4Received check from Vega Appliance for 980 in payment of 1,000 invoice less discount. 4Sold merchandise on account to L. Paul, invoice no. 6483, 850. 6Received check from Petty, Inc., 637, in payment of 650 invoice less discount. 7Issued Ck. No. 6982, 588, to Fischer and Son, in payment of invoice no. C1272 for 600 less discount. 7Bought supplies on account from Doyle Office Supply, invoice no. 1906B, 108; terms net 30 days. 7Sold merchandise on account to Ellison and Clay, invoice no. 6484, 787. 9Issued credit memo no. 43 to L. Paul, 54, for merchandise returned. 11Cash sales for January 1 through January 10, 4,863.20. 11Issued Ck. No. 6983, 2,871.40, to Valencia and Company, in payment of 2,930 invoice less discount. 14Sold merchandise on account to Vega Appliance, invoice no. 6485, 2,050. Jan. 18Bought merchandise on account from Costa Products, invoice no. 7281D, 4,854; terms 2/10, n/60; dated January 16; FOB shipping point, freight prepaid and added to the invoice, 147 (total 5,001). 21Issued Ck. No. 6984, 194, to M. Miller for miscellaneous expenses not recorded previously. 21Cash sales for January 11 through January 20, 4,591. 23Issued Ck. No. 6985 to Forbes Freight, 96, for freight charges on merchandise purchased on January 4. 23Received credit memo no. 163, 376, from Costa Products for merchandise returned. 29Sold merchandise on account to Bruce Supply, invoice no. 6486, 1,835. 31Cash sales for January 21 through January 31, 4,428. 31Issued Ck. No. 6986, 53, to M. Miller for miscellaneous expenses not recorded previously. 31Recorded payroll entry from the payroll register: total salaries, 6,200; employees federal income tax withheld, 872; FICA Social Security tax withheld, 384.40, FICA Medicare tax withheld, 89.90. 31Recorded the payroll taxes: Social Security tax, 384.40, FICA Medicare tax, 89.90; state unemployment tax, 334.80; federal unemployment tax, 37.20. 31Issued Ck. No. 6987, 4,853.70, for salaries for the month. 31J. Hammond, the owner, withdrew 1,000 for personal use, Ck. No. 6988. Required 1. Record the transactions for January using a sales journal, page 73; a purchases journal, page 56; a cash receipts journal, page 38; a cash payments journal, page 45; and a general journal, page 100. Assume the periodic inventory method is used. 2. Post daily all entries involving customer accounts to the accounts receivable ledger. 3. Post daily all entries involving creditor accounts to the accounts payable ledger. 4. 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