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CRITICAL THINKING PROBLEM 9.1 (continued)
PAGE
PURCHASED
FROM
INVOICE
NUMBER
INVOICE
DATE TERMS
POST.
REF.
2013
Sept. 6
Reed Millings
Company 827 9/3 2/10, n/30 ✔445000 445000
PURCHASES JOURNAL 12
DATE
ACCOUNTS
PAYABLE
PURCHASES
DEBIT
FREIGHT-IN
DEBIT
352 Chapter 9 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.
CRITICAL THINKING PROBLEM 9.1 (continued)
PAGE
POST.
REF.
1
2013
1
GENERAL JOURNAL 32
DATE DESCRIPTION DEBIT CREDIT
1 2013 1
2 Sept. 8 121 3 7 0 00 2
205
✔37000
4 Bought store supplies, Invoice 4204 dated 4
5 September 6, net amount due in 30 days 5
6 6
Supplies
3Accounts Payable/Rocker Company3
6
6
CRITICAL THINKING PROBLEM 9.1 (continued)
PAGE
ACCOUNT NAME
POST.
REF.
2013
Sept. 1 David Prater ✔1050 00 1050 00
5 Additional investment Sergio Cortez, Capital 301 15000 00 15000 00
6 Cash sales 3 1 2 00 390000Cash Short or Over 611 ( 2 0 00) 4192 00
12
CASH DEBITAMOUNTDATE DESCRIPTION
POST.
REF.
ACCOUNTS
RECEIVABLE
CREDIT
SALES TAX
PAYABLE
CREDIT
CASH RECEIPTS JOURNAL
SALES
CREDIT
OTHER ACCOUNTS CREDIT
CRITICAL THINKING PROBLEM 9.1 (continued)
PAGE
ACCOUNT NAME
POST.
REF.
2013
Sept. 1 1401 Sadler Floor Coverings ✔194000 194000
2 1402 Monthly rent Rent Expense 614 250000 250000
6 1403 Freight charge Freight-In 502 1 5 8 00 1 5 8 00
ACCOUNTS
PAYABLE
DEBIT
OTHER ACCOUNTS DEBIT
PURCHASES
DISCOUNT
CREDIT
12
CASH
CREDITAMOUNTDATE
CK.
NO. DESCRIPTION
POST.
REF.
CASH PAYMENTS JOURNAL
CRITICAL THINKING PROBLEM 9.1 (continued)
ACCOUNT Cash ACCOUNT NO.
2013
ACCOUNT Notes Receivable ACCOUNT NO.
2013
ACCOUNT Accounts Receivable ACCOUNT NO.
2013
Sept. 1 Balance ✔614000
DATE
BALANCE
CREDITDESCRIPTION DEBIT
CREDIT
DESCRIPTION DEBIT
DESCRIPTION
CREDIT
109
POST.
REF.
BALANCE
BALANCE
POST.
REF.
CREDIT
CREDIT
DEBIT
DEBIT CREDIT
DEBIT
111
POST.
REF.
GENERAL LEDGER
DEBIT
DATE
101
DATE
CRITICAL THINKING PROBLEM 9.1 (continued)
ACCOUNT Supplies ACCOUNT NO.
ACCOUNT Inventory ACCOUNT NO.
ACCOUNT Notes Payable ACCOUNT NO.
2013
ACCOUNT Accounts Payable ACCOUNT NO.
2013
Sept. 1 Balance ✔956000
DESCRIPTION
POST.
REF. CREDIT
CREDIT
GENERAL LEDGER
DESCRIPTION
DEBIT
BALANCE
DEBIT CREDIT
121
DEBIT
BALANCE
DATE
131
DATE
DATE DESCRIPTION
DEBIT
BALANCE
POST.
REF.
CREDIT
DEBIT
DEBIT
CREDIT
BALANCE
CREDIT
CREDIT
201
205
CREDIT
DATE DESCRIPTION
POST.
REF. DEBIT
POST.
REF. DEBIT
CRITICAL THINKING PROBLEM 9.1 (continued)
ACCOUNT Sales Tax Payable ACCOUNT NO.
2013
ACCOUNT Sergio Cortez, Capital ACCOUNT NO.
ACCOUNT Sales ACCOUNT NO.
2013
ACCOUNT Sales Returns and Allowances ACCOUNT NO.
2013
GENERAL LEDGER
CREDIT
451
DATE DESCRIPTION
POST.
REF. DEBIT CREDIT
BALANCE
DEBIT CREDIT
CREDIT
401
DATE DESCRIPTION
POST.
REF. DEBIT CREDIT
BALANCE
DEBIT
CREDIT
301
DATE DESCRIPTION
POST.
REF. DEBIT CREDIT
BALANCE
DEBIT
231
DATE DESCRIPTION
POST.
REF. DEBIT CREDIT
BALANCE
DEBIT
CRITICAL THINKING PROBLEM 9.1 (continued)
ACCOUNT Purchases ACCOUNT NO.
2013
ACCOUNT Freight-In ACCOUNT NO.
2013
ACCOUNT Purchases Returns and Allowances ACCOUNT NO.
2013
ACCOUNT Purchases Discounts ACCOUNT NO.
2013
GENERAL LEDGER
501
DATE DESCRIPTION
POST.
REF. DEBIT CREDIT
BALANCE
DEBIT CREDIT
502
DATE DESCRIPTION
POST.
REF. DEBIT CREDIT
BALANCE
DEBIT CREDIT
503
DATE DESCRIPTION
POST.
REF. DEBIT CREDIT
BALANCE
DEBIT CREDIT
504
DATE DESCRIPTION
POST.
REF. DEBIT CREDIT
BALANCE
DEBIT CREDIT
CRITICAL THINKING PROBLEM 9.1 (continued)
ACCOUNT Cash Short or Over ACCOUNT NO.
2013
ACCOUNT Rent Expense ACCOUNT NO.
2013
ACCOUNT Salaries Expense ACCOUNT NO.
2013
ACCOUNT Utilities Expense ACCOUNT NO.
2013
619
DATE DESCRIPTION
POST.
REF. DEBIT CREDIT
BALANCE
DEBIT CREDIT
CREDIT
617
DATE DESCRIPTION
POST.
REF. DEBIT CREDIT
BALANCE
DEBIT CREDIT
CREDIT
614
DATE DESCRIPTION
POST.
REF. DEBIT CREDIT
BALANCE
DEBIT
GENERAL LEDGER
611
DATE DESCRIPTION
POST.
REF. DEBIT CREDIT
BALANCE
DEBIT
CRITICAL THINKING PROBLEM 9.1 (continued)
NAME Rachel Carter TERMS n/30
DESCRIPTION
POST.
REF.
2013
NAME Mesia Davis TERMS n/30
DESCRIPTION
POST.
REF.
2013
Sept. 1 Balance ✔126000
NAME Robert Kent TERMS n/30
DESCRIPTION
POST.
REF.
NAME Pam Lawrence TERMS n/30
DESCRIPTION
POST.
REF.
CREDIT
DATE DEBIT CREDIT BALANCE
CREDIT
CREDIT
DATE BALANCEDEBIT
ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
DATE
DEBITDATE
BALANCEDEBIT
BALANCE
CRITICAL THINKING PROBLEM 9.1 (continued)
NAME David Prater TERMS n/30
DESCRIPTION
POST.
REF.
2013
NAME Henry Tolliver TERMS n/30
DESCRIPTION
POST.
REF.
NAME Jason Williams TERMS n/30
DESCRIPTION
POST.
REF.
2013
21600
DATE DEBIT CREDIT
DATE DEBIT CREDIT
Interior Designs Specialty Shop
ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
DATE DEBIT CREDIT BALANCE
BALANCE
BALANCE
Schedule of Accounts Receivable
September 30, 2013
Rachel Carter
CRITICAL THINKING PROBLEM 9.1 (continued)
NAME Booker, Inc. TERMS
DESCRIPTION
POST.
REF.
2013
NAME McKnight Corporation TERMS
DESCRIPTION
POST.
REF.
2013
NAME Nelson Craft Products TERMS
DESCRIPTION
POST.
REF.
2013
NAME Reed Millings Company TERMS
DESCRIPTION
POST.
REF.
2013
DATE DEBIT CREDIT
DEBIT CREDIT BALANCE
DATE DEBIT CREDIT BALANCE
DATE DEBIT CREDIT BALANCE
ACCOUNTS PAYABLE SUBSIDIARY LEDGER
2/10, n/30
2/10, n/30
n/45
1/10, n/30
BALANCE
DATE
CRITICAL THINKING PROBLEM 9.1 (continued)
NAME Rocker Company TERMS
DESCRIPTION
POST.
REF.
2013
NAME Sadler Floor Coverings TERMS
DESCRIPTION
POST.
REF.
2013
NAME Wells Products TERMS
DESCRIPTION
POST.
REF.
2013
n/30
n/30
ACCOUNTS PAYABLE SUBSIDIARY LEDGER
n/30
DATE
CREDIT BALANCE
DEBIT BALANCE
DEBIT CREDIT BALANCE
CREDIT
DATE DEBIT
DATE
CRITICAL THINKING PROBLEM 9.2
1658900
499200
2158100
Scavone Builders
Bank Reconciliation Statement
August 31, 2013
Balance on bank statement
Addition: Deposit in transit, August 28
Deductions for outstanding checks
SOLUTIONS TO BUSINESS CONNECTIONS
Managerial Focus:
1. a. No assurance money taken actually accounted for.
b. A gap in the control of cash exists, and unauthorized expenditures can be made.
c. Increases the opportunity for theft; no current cash position is known.
d. Increases risk of theft.
e. Weakens internal control over cash receipts.
2. To pay bills in a timely fashion, anticipate fund shortages or overages, and take advantage of
investment opportunities.
3. Errors noted by the bank may not be communicated to management.
4. a. Yes. Blank endorsements are not secure.
b. Yes. Checkbook should be kept in a locked drawer and should be available only to specified
employees.
c. Yes. To deter fraud, different tasks should be assigned to different employees.
d. Yes. Reconciliation should be done soon after receiving bank statement.
e. Yes. Financial records should be maintained for a reasonable number of years in case of a tax audit.
f. No. Most firms write several checks monthly, and the task would be impractical.
5. Essential assets should be safeguarded against loss and theft.
6. Up-to-date cash position; information for day-to-day business decisions.
7. Insures again losses.
8. Control of cash; audit trail.
Ethical Dilemma:
No, this was not an ethical action, as it was not Daniel's money.
Daniel should admit his theft and make arrangements to repay the amount stolen.
Financial Statement Analysis:
1. 10.20%
2. Increased by $902 million.
3. The balance reported for “Cash and cash equivalents” would be understated by $125,000.
Teamwork:
A Sales Invoice for each job should be given to each customer with a place to incorporate any
additions or subtractions for service. Any changes must be communicated to the home office and an
approval number will be given. The Sales Invoice, as well as each change, should be signed by the
customer. Only cash and money orders should be allowed since the families have just moved and do
not currently have a local bank.
Internet Connection:
Each bank should list the possible interest rates, both variable and fixed. Most banks will be within a
few tenths of points of each other.
366 Chapter 9 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.
SOLUTIONS TO PRACTICE TEST
Part A True-False
Part B Matching
