Appendix B
Accounting Information Systems
Review Questions
1. What is an accounting information system (AIS)?
2. What does an effective accounting information system provide?
3. Explain the three basic components of an accounting information system.
The three basic components of an accounting information system are source documents and input
4. What is a special journal?
A special journal is an accounting journal designed to record a specific type of transaction.
5. What is the purpose of a subsidiary ledger?
A subsidiary ledger holds individual accounts that support a general ledger account. The sum of the
6. What is a control account?
B-2
7. List the four special journals often used in a manual accounting information system. What types of
transactions are recorded in each of the special journals?
The four special journals often used in a manual accounting information system are:
•
8. Explain the posting process of the sales journal.
Entries in the sales journal are posted to both the accounts receivable subsidiary ledger and the
9. Provide some examples of transactions that would be recorded in the Other Accounts CR column of
the cash receipts journal.
10. What are the columns that are typically used in the purchases journal?
11. Explain the posting process of the cash payments journal.
Entries in the cash payments journal are posted to both the accounts payable subsidiary ledger and
12. When is the general journal used in a manual accounting information system? Provide some
examples of transactions that would be recorded in the general journal
Nonroutine transactions are recorded in the general journal. Examples include sales returns and
allowances, purchase returns and allowances, adjusting entries, and closing entries.
13. Explain the two components of a computerized accounting information system.
The two components of a computerized accounting information system are hardware and software.
14. What are two common entry-level accounting software systems used by small businesses?
15. What is an enterprise resource planning (ERP) system? What are the advantages and disadvantages
of using an ERP?
An enterprise resource planning (ERP) system integrates all of a company’s functions, departments,
16. How is QuickBooks organized?
17. How would a business record a sale of services on account in QuickBooks?
18. How would a business record a bill received in QuickBooks?
To record a bill received in QuickBooks, use the vendors tab. Data is entered and QuickBooks posts
the transaction to the appropriate general ledger accounts.
Short Exercises
SB–1 Evaluating features of an effective accounting information system
Learning Objective 1
In Vogue, a T-shirt business, is growing fast and needs a better accounting information system. Consider the
features of an effective system. Which features are most important? Why? Which feature must you consider if
your financial resources are limited?
SOLUTION
An effective accounting information system includes control, compatibility, flexibility, relevance, and a
SB–2 Defining components of an accounting information system
Learning Objective 1
Match each example with a component of a computerized accounting information system. Components
may be used more than once.
Example
Component
1. Server
a. Source documents and input devices
2. Bank checks
b. Processing and storage
3. Reports
c. Outputs
4. Keyboard
5. Software
6. Financial statements
7. Bar code scanner
SOLUTION
Example
Component
1. Server
b. Processing and Storage
2. Bank checks
a. Source Documents and Input Devices
3. Reports
c. Outputs
4. Keyboard
a. Source Documents and Input Devices
5. Software
b. Processing and Storage
6. Financial statements
c. Outputs
7. Bar code scanner
a. Source Documents and Input Devices
B-5
SB–3 Identifying special journals
Learning Objective 2
Use the following abbreviations to indicate the journal in which you would record transactions a through
n.
J = General journal
S = Sales journal
CR = Cash receipts journal
P = Purchases journal
CP = Cash payments journal
Transactions:
a. Cash purchase of merchandise inventory
b. Collection of dividend revenue earned on an investment
c. Prepayment of insurance
d. Borrowing money on a long-term note payable
e. Purchase of equipment on account
f. Cost of goods sold along with a credit sale
g. Cash sale of merchandise inventory
h. Payment of rent
i. Depreciation of computer equipment
j. Purchase of merchandise inventory on account
k. Collection of accounts receivable
l. Expiration of prepaid insurance
m. Sale on account
n. Payment on account
SOLUTION
a.
CP
CR
c.
CP
CR
e.
CR
CP
CR
CP
SB–4 Recording transactions in a sales journal
Learning Objective 2
Jun. 1
Sold merchandise inventory on account to Fran Jack, $1,220. Cost of goods,
$980. Invoice no. 101.
8
Sold merchandise inventory on account to Ireland Frank, $2,025. Cost of
goods, $1,640. Invoice no. 102.
13
Sold merchandise inventory on account to Jake Thompson, $420. Cost of
goods, $210. Invoice no. 103.
28
Sold merchandise inventory on account to Gabe West, $820. Cost of goods,
$620. Invoice no. 104.
Use the following sales journal to record the preceding transactions. All credit sales are terms of n/30.
SOLUTION
Note: This journal shows totals and posting references that are required in Short Exercise SB–5.
Sales Journal
Page 1
Date
Invoice
No.
Customer
Account Debited
Post.
Ref.
Accounts Receivable
DR
Cost of Goods Sold
DR
Sales Revenue
CR
Merchandise
Inventory
CR
Note: Short Exercise SB-4 must be completed before attempting Short Exercise SB-5.
SB–5 Posting transactions from a sales journal to a subsidiary ledger and general ledger
Learning Objective 2
Review your results from Short Exercise SB-4.
Requirements
1. Total each column of the sales journal.
2. Open the following four-column accounts in the accounts receivable subsidiary ledger: Accounts
Receivable—Frank; Accounts Receivable—Jack; Accounts Receivable—Thompson; Accounts
Receivable—West. Post the transactions to the accounts receivable subsidiary ledger.
3. Open the following selected four-column accounts in the general ledger: Accounts Receivable (112);
Merchandise Inventory (118), Bal. $5,000; Sales Revenue (411); Cost of Goods Sold (511). Post the
total of each column to the general ledger.
4. Balance the total of the customer ending balances in the accounts receivable subsidiary ledger against
Accounts Receivable in the general ledger.
SOLUTION
Requirement 1
B-8
SB-5, cont.
Requirement 2
Accounts Receivable––Frank
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Accounts Receivable––Thompson
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Jun. 13
S.1
420
420
Accounts Receivable––West
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Jun. 28
S.1
820
820
Jun. 8
S.1
Accounts Receivable––Jack
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Jun. 1
S.1
SB-5, cont.
Requirement 3
Accounts Receivable
No. 112
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Jun. 30
S.1
4,485
4,485
Merchandise Inventory
No. 118
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
5,000
Sales Revenue
No. 411
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Jun. 30
S.1
4,485
4,485
Cost of Goods Sold
No. 511
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Jun. 30
S.1
3,450
3,450
Customer
Frank
$ 2,025
Jack
Thompson
West
Total
$ 4,485
The total of the customer balances in the accounts receivable subsidiary ledger agrees with the balance
in Accounts Receivable in the general ledger: $4,485.
B-10
SB–6 Recording transactions in a cash receipts journal
Learning Objective 2
Jul. 5
Sold merchandise inventory for cash, $1,700. Cost of goods, $1,400.
12
Collected interest revenue of $2,050.
18
Received cash from Heidi Next, $1,200, on account. There was no discount.
29
Received $5,300 from Mitch Dylan in full settlement of his account
receivable including sales discounts forfeited of $20.
Use the following cash receipts journal to record the preceding transactions.
B-11
SB–6, cont.
SOLUTION
Requirement 1
Note: This journal shows totals and posting references that are required in Short Exercise SB–7.
Cash Receipts Journal
Page 3
Date
Account Credited
Post.
Ref.
Cash
DR
Accounts
Receivable
CR
Sales
Revenue
CR
Sales
Discounts
Forfeited
CR
Other
Accounts
CR
Cost of
Goods Sold
DR
Merchandise
Inventory
CR
B-12
Note: Short Exercise SB-6 must be completed before attempting Short Exercise SB-7.
SB–7 Posting transactions from a cash receipts journal to a subsidiary ledger and general ledger
Learning Objective 2
Review your results from Short Exercise SB-6.
Requirements
1. Total each column of the cash receipts journal.
2. Open the following four-column accounts in the accounts receivable subsidiary ledger: Accounts
Receivable—Dylan, Bal. $5,280; Accounts Receivable—Next, Bal. $2,250. Post the transactions to
the accounts receivable subsidiary ledger.
3. Open the following selected four-column accounts in the general ledger: Cash (111), Bal. $4,550;
Accounts Receivable (112), Bal. $7,530; Merchandise Inventory (118), Bal. $3,250; Sales Revenue
(411), Bal. $25,000; Sales Discounts Forfeited (412); Interest Revenue (419); Cost of Goods Sold
(511), Bal. $14,500. Post the total of each column to the general ledger. Also, post the Other
Accounts column to the general ledger.
4. Balance the total of the customer ending balances in the accounts receivable subsidiary ledger against
Accounts Receivable in the general ledger.
SOLUTION
Requirement 1
Requirement 2
Accounts Receivable––Dylan
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Accounts Receivable––Next
Balance
Requirement 3
Cash
No. 111
Date
Post.
Ref.
Credit
Credit
Bal.
Jul. 31
CR.3
14,800
Accounts Receivable
No. 112
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
7,530
Jul. 31
CR.3
6,480
1,050
Merchandise Inventory
No. 118
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
3,250
Jul. 31
CR.3
1,400
1,850
Sales Revenue
No. 411
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
25,000
Jul. 31
CR.3
1,700
26,700
Sales Discounts Forfeited
No. 412
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Jul. 31
CR.3
Interest Revenue
No. 419
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Jul. 12
CR.3
2,050
2,050
B-14
SB–7, cont.
Requirement 3, cont.
Cost of Goods Sold
No. 511
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Requirement 4
Customer
Balance
SB–8 Recording transactions in a purchases journal
Learning Objective 3
Oct. 1
Purchased merchandise inventory on account with credit terms of 4/10, n/30
from Mayer Co., $2,200.
11
Purchased office supplies on account from Bird Co., $600. Terms were
n/EOM.
24
Purchased furniture on account with credit terms of 3/10, n/60 from Silly
Co., $900.
Use the following purchases journal to record the preceding transactions.
SOLUTION
Note: This journal shows totals and posting references that are required in Short Exercise SB–9.
Purchases Journal
Page 6
Date
Vendor
Account Credited
Terms
Post.
Ref.
Accounts
Payable
CR
Merchandise
Inventory
DR
Office
Supplies
DR
Other Accounts DR
Account
Title
Post.
Ref.
Amount
B-16
SB–9 Posting transactions from a purchases journal to a subsidiary ledger and general ledger
Learning Objective 3
Review your results from Short Exercise SB-8.
Requirements
1. Total each column of the purchases journal.
2. Open the following four-column accounts in the accounts payable subsidiary ledger: Accounts
Payable—Bird Co.; Accounts Payable—Mayer Co.; Accounts Payable—Silly Co. Post the
transactions to the accounts payable subsidiary ledger.
3. Open the following selected four-column accounts in the general ledger: Merchandise Inventory
(115); Office Supplies (116); Furniture (151); Accounts Payable (211). Post the total of each column
to the general ledger. Also, post the Other Accounts column to the general ledger.
4. Balance the total of the vendor ending balances in the accounts payable subsidiary ledger against
Accounts Payable in the general ledger.
SOLUTION
Requirement 2
Accounts Payable––Bird Co.
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Accounts Payable––Mayer Co.
Date
Ref.
Debit
Credit
Balance
Debit
Credit
Accounts Payable––Silly Co.
Date
Ref.
Debit
Credit
Balance
Debit
Credit
SB–9, cont.
Requirement 3
Merchandise Inventory
No. 115
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Oct. 31
P.6
2,200
2,200
Office Supplies
No. 116
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Oct. 31
P.6
Furniture
No. 151
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
P.6
Accounts Payable
No. 211
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Oct. 31
P.6
3,700
3,700
Requirement 4
Vendor
Balance
Bird
$ 600
Mayer
Silly
Total
$ 3,700
SB–10 Recording transactions in a cash payments journal
Learning Objective 3
Jan. 5
Issued check no. 430 to purchase equipment for cash, $1,700.
7
Purchased merchandise inventory for cash, $450, issuing check no. 431.
18
Paid Kat Co. amount owed, $775, less $100 discount. Issued check no. 432.
28
Issued check no. 433 to pay utilities, $260. The bill was just received, and
there is no liability recorded.
Use the following cash payments journal to record the preceding transactions.
SOLUTION
Note: This journal shows totals and posting references that are required in Short Exercise
SB–11.
Cash Payments Journal
Page 8
Date
Ck.
No.
Account Debited
Post.
Ref.
Other
Accounts
DR
Accounts
Payable
DR
Merchandise
Inventory
CR
Cash
CR
2018
B-19
Note: Short Exercise SB-10 must be completed before attempting Short Exercise SB-11.
SB–11 Posting transactions from a cash payments journal to a subsidiary ledger and general
ledger
Learning Objective 3
Review your results from Short Exercise SB-10.
Requirements
1. Total each column of the cash payments journal.
2. Open the following four-column accounts in the accounts payable subsidiary ledger: Accounts
Payable—Kat Co., Bal. $1,900. Post the transactions to the accounts payable subsidiary ledger.
3. Open the following selected four-column accounts in the general ledger: Cash (111), Bal. $5,000;
Merchandise Inventory (118), $2,100; Equipment (150), $9,900; Accounts Payable (211), $1,900;
Utilities Expense (541). Post the total of each column to the general ledger. Also, post the Other
Accounts column to the general ledger.
4. Balance the total of the vendor ending balances in the accounts payable subsidiary ledger against
Accounts Payable in the general ledger.
SOLUTION
Requirement 1
Requirement 2
Accounts Payable––Kat Co.
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
SB–11, cont.
Requirement 3
Cash
No. 111
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
5,000
Jan. 31
CP.8
3,085
1,915
Merchandise Inventory
No. 118
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
CP.8
2,550
Jan. 31
CP.8
2,450
Equipment
No. 150
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
9,900
CP.8
1,700
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
1,900
Jan. 31
CP.8
1,125
B-21
SB–11, cont.
Requirement 3, cont.
Utilities Expense
No. 541
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Jan. 28
CP.8
260
260
$ 1,125
$ 1,125
SB–12 Recording transactions in a general journal
Learning Objective 3
Mar. 2
Sold merchandise inventory on account, terms n/30, to B. Kelp, issuing
invoice no. 501 for $1,000 (cost, $680).
6
Issued credit memo to B. Kelp for $1,000 for merchandise returned to the
business by the customer. Also accounted for receipt of the merchandise
inventory at cost.
21
Purchased merchandise inventory on credit terms of 3/10, n/30 from Pond
Co., $600.
28
Returned damaged merchandise inventory to Pond Co., issuing a debit
memo for $600.
Journalize the above transactions that should be recorded in the general journal. If a transaction should
not be recorded in the general journal, identify the special journal that should be used. Assume the
company uses the perpetual inventory system.
SOLUTION
Date
Accounts and Explanation
Debit
Credit
Mar. 6
Refunds Payable
1,000
Accounts Receivable—B. Kelp
1,000
Merchandise Inventory
Estimated Returns Inventory
Accounts Payable—Pond Company
Merchandise Inventory
Sales journal
Purchases journal
SB–13 Understanding components of a computerized accounting information system
Learning Objective 4
Ned Timmons, engineer, is considering using a computerized accounting system for his professional
engineering business. Ned has asked that you help him understand the components of a computerized
accounting information system by answering the following questions:
Requirements
1. What are the two basic components of a computerized accounting information system?
2. Provide examples of each component.
3. If Ned were interested in an entry-level software system, what software might you recommend?
SOLUTION
Requirement 1
The two basic components of a computerized accounting information system are hardware and software.
Exercises
EB–14 Recording transactions—sales journal
Learning Objective 2
Accounts Receivable DR, Sales Revenue CR column total $1,550
Feb. 1
Sold merchandise inventory on account, terms n/30, to Cole Co., $1,050.
Cost of goods, $860. Invoice no. 401.
6
Sold merchandise inventory for cash, $950 (cost, $750).
12
Collected interest revenue of $170.
15
Received cash from Cole Co. in full settlement of its account receivable.
20
Sold merchandise inventory on account, terms n/30, to Dump Co., issuing
invoice no. 402 for $500 (cost, $325).
22
Sold merchandise inventory for cash, $600 (cost $530).
26
Sold office supplies to an employee for cash of $150.
28
Received $500 from Dump Co. in full settlement of its account receivable.
Requirements
1. Prepare headings for a sales journal. Journalize the transactions that should be recorded in the sales
journal. Assume the company uses the perpetual inventory system.
2. Total each column of the sales journal.
SOLUTION
Requirements 1 and 2
Sales Journal
Page 1
Date
Invoice
No.
Customer
Account Debited
Post.
Ref.
Accounts Receivable
DR
Cost of Goods Sold
DR
Sales Revenue
CR
Merchandise
Inventory
CR
EB–15 Recording transactions—cash receipts journal
Learning Objective 2
Accounts Receivable CR column total $1,550
Refer to information in Exercise EB-14.
Requirements
1. Prepare headings for a cash receipts journal. Journalize the transactions that should be recorded in the cash receipts journal.
2. Total each column of the cash receipts journal.
SOLUTION
Requirements 1 and 2
Cash Receipts Journal
Page 1
Date
Account Credited
Post.
Ref.
Cash
DR
Accounts
Receivable
CR
Sales
Revenue
CR
Sales
Discounts
Forfeited
CR
Other
Accounts
CR
Cost of
Goods Sold
DR
Merchandise
Inventory
CR
B-26
EB–16 Using the sales and cash receipts journals
Learning Objective 2
The sales and cash receipts journals of Caverly Office Products include the following entries:
Identify the missing information in the cash receipts journal for those transactions listed. All credit sales are terms n/30. Assume all the
accounts are paid in full. Also, total the columns in the cash receipts journal and show that total debits equal total credits.
EB–16, cont.
SOLUTION
Cash Receipts Journal
Page 5
CR
95
65
Post.
Cash
Accounts
Receivable
Sales
Revenue
Sales
Discounts
Forfeited
Other
Accounts
Cost of
Goods Sold
DR
Merchandise
Inventory
B-28
EB–17 Analyzing postings from the cash receipts journal
Learning Objective 2
The cash receipts journal of Silver Plastics follows:
Silver’s general ledger includes the following selected accounts, along with their account numbers:
Number
Account
110
Cash
115
Accounts Receivable
118
Merchandise Inventory
125
Notes Receivable
510
Sales Revenue
512
Sales Discounts Forfeited
520
Interest Revenue
611
Cost of Goods Sold
Indicate whether each posting reference (a) through (k) should be a
• Check mark (✓) for a posting to a customer account in the accounts receivable subsidiary ledger.
• Account number for a posting to an account in the general ledger. If so, give the account number.
• Letter (X) for an amount not posted.
SOLUTION
a.
110
b.
512
c.
115
d.
510
e.
X
611/118
g.
h.
125
520
k.
EB–18 Identifying transactions in the accounts receivable subsidiary ledger
Learning Objective 2
A customer account in the accounts receivable subsidiary ledger of Leger Old Company follows:
Describe the three posted transactions.
SOLUTION
Date
Description
Nov. 9
From the sales journal, Leger Old Company recorded a sale on account to Josh Willow
Josh Willow returned some goods or received an adjustment on goods purchased.
Josh Willow
B-30
EB–19 Recording transactions—purchases journal
Learning Objective 3
Accounts Payable CR column total $4,800
Apr. 2
Purchased merchandise inventory on credit terms of 3/10, n/60 from
Vanderbilt Co., $2,400.
5
Issued check no. 820 to purchase equipment for cash, $3,600.
11
Purchased merchandise inventory for cash, $750, issuing check no. 821.
12
Issued check no. 822 to pay Vanderbilt Co. net amount owed from Apr. 2.
19
Purchased office supplies on account from Downing Supplies, $500. Terms
were n/EOM.
24
Purchased merchandise inventory on credit terms of net 30 from
Wilmington Sales, $1,900.
28
Issued check no. 823 to pay for insurance coverage, debiting Prepaid
Insurance for $1,000.
29
Issued check no. 824 to pay rent for the month, $1,250.
Requirements
1. Prepare headings for a purchases journal. Journalize the transactions that should be recorded in the purchases journal. The company uses
the perpetual inventory system.
2. Total each column of the purchases journal.
EB–19, cont.
SOLUTION
Requirements 1 and 2
Purchases Journal
Page 1
Date
Vendor
Account Credited
Terms
Post.
Ref.
Accounts
Payable
CR
Merchandise
Inventory
DR
Office
Supplies
DR
Other Accounts DR
Account
Title
Post.
Ref.
Amount
EB–20 Recording transactions—cash payments journal
Learning Objective 3
Cash CR column total $8,928
Refer to information in Exercise EB-19.
Requirements
1. Prepare headings for a cash payments journal. Journalize the transactions that should be recorded in the cash payments journal.
2. Total each column of the cash payments journal.
SOLUTION
Requirement 1 and 2
Cash Payments Journal
Page 1
Date
Ck.
No.
Account Debited
Post.
Ref.
Other
Accounts
DR
Accounts
Payable
DR
Merchandise
Inventory
CR
Cash
CR
EB–21 Posting from the purchases journal; balancing the ledgers
Learning Objective 3
Merchandise Inventory DR column total $2,300
The purchases journal of Southeastern Publishing Company follows:
Requirements
1. Total each column of the purchases journal.
2. Open four-column ledger accounts for Merchandise Inventory (118), Office Supplies (120), Equipment (150), and Accounts Payable
(211). Post to these accounts from the purchases journal. Use dates and posting references in the accounts.
3. Open four-column accounts in the accounts payable subsidiary ledger for Fallon Equipment, Jell Supply, and Leap Tech. Post from the
purchases journal. Use dates and posting references in the ledger accounts.
4. Balance the Accounts Payable control account in the general ledger with the total of the ending balances in the accounts payable subsidiary
ledger.
B-34
EB–21, cont.
SOLUTION
Requirements 1, 2, and 3
Purchases Journal
Page 7
Date
Vendor
Account Credited
Terms
Post.
Ref.
Accounts
Payable
CR
Merchandise
Inventory
DR
Office
Supplies
DR
Other Accounts DR
Account
Title
Post.
Ref.
Amount
Merchandise Inventory
No. 118
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Sep. 30
P.7
2,300
2,300
Office Supplies
No. 120
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Sep. 30
P.7
2018
1,470
3,335
EB–21, cont.
Requirements 1, 2, and 3, cont.
Equipment
No. 150
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Sep. 26
P.7
880
880
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Sep. 30
P.7
Accounts Payable—Fallon Equipment
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Sep. 26
P.7
880
880
Accounts Payable—Jell Supply
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Sep. 5
P.7
155
155
B-36
EB–21, cont.
Requirements 1, 2, and 3, cont.
Requirement 4
Vendor
Balance
EB–22 Identifying transactions in the accounts payable subsidiary ledger
Learning Objective 3
A vendor account in the accounts payable subsidiary ledger of Frost Company follows.
Describe the three posted transactions.
SOLUTION
Date
Description
Dec. 12
From the general journal, Frost Company issued a debit memo to Larry Carpenter for
From the cash payments journal, Frost Company made a cash payment to Larry
From the purchases journal, Frost Company made a purchase on account from Larry
B-38
EB–23 Identifying errors in special journals
Learning Objectives 2, 3
Transaction
Recording
a. Henry Associates paid $490 on account for an earlier
purchase of merchandise inventory.
Purchases journal
b. Recorded depreciation expense for the month.
Cash payments journal
c. Collected interest revenue.
Cash receipts journal
d. Sold merchandise inventory on account.
Cash receipts journal
e. Issued check no. 535 for purchase of merchandise
inventory.
Purchases journal
f. Returned damaged inventory that was purchased on
account.
Purchases journal
g. Sold merchandise inventory for cash.
Sales journal
For each transaction listed, identify the recording error and indicate the journal that should have been
used.
SOLUTION
a.
Cash payments are recorded in the cash payments journal.
Adjusting entries are recorded in the general journal.
c.
Sales on account are recorded in the sales journal.
e.
Cash payments (by check or currency) are recorded in the cash payments journal.
Debit memos are recorded in the general journal.
Cash sales are recorded in the cash receipts journal.
Problems (Group A)
All problems can be completed manually or by using either MyAccountingLab General Ledger or
QuickBooks.
PB–24A Using the sales, cash receipts, and general journals
Learning Objectives 2, 3
Cash Receipts Journal, Accounts Receivable CR column total $11,600
Assume Sparkling Springs Glass Company uses the perpetual inventory system. The general ledger of
Sparkling Springs Glass Company includes the following selected accounts, along with their account
numbers:
Number
Account
Number
Account
11
Cash
18
Equipment
12
Accounts Receivable
19
Land
13
Notes Receivable
41
Sales Revenue
15
Merchandise Inventory
51
Cost of Goods Sold
16
Office Supplies
Sales and cash receipts transactions in July were as follows:
Jul. 2
Sold merchandise inventory on credit, terms n/30, to Intel, Inc., $1,500 (cost, $200).
3
Sold office supplies to an employee at cost, $80, receiving cash.
7
Cash sales for the week totaled $2,300 (cost, $1,500).
9
Sold merchandise inventory on account, terms n/30, to A. B. Miller, $7,700 (cost, $5,200).
10
Sold land that cost $10,000 for cash of the same amount.
11
Sold merchandise inventory on account, terms n/30, to Speedy Electric, $5,400 (cost,
$3,350).
12
Received cash from Intel in full settlement of its account receivable from July 2.
14
Cash sales for the week were $2,600 (cost, $1,700).
15
Sold merchandise inventory on credit, terms n/30, to the partnership of William & Bill,
$3,400 (cost, $2,400).
20
Sold merchandise inventory on account, terms n/30, to Speedy Electric, $500 (cost, $250).
21
Cash sales for the week were $980 (cost, $640).
22
Received $4,000 cash from A. B. Miller in partial settlement of his account receivable.
25
Received cash from William & Bill for its account receivable from July 15.
25
Sold merchandise inventory on account, terms n/30, to Oscar Co., $1,520 (cost, $1,000).
27
Collected $5,000 on a note receivable. There was no interest earned.
28
Cash sales for the week totaled $3,710 (cost, $2,450).
29
Sold merchandise inventory on account, terms n/30, to R. O. Bart, $200 (cost, $100).
31
Received $2,700 cash on account from A. B. Miller.
PB–24A, cont.
Requirements
1. Use the appropriate journal to record the preceding transactions in a sales journal (omit the Invoice
No. column) and a cash receipts journal (omit the Sales Discounts Forfeited column).
2. Total each column of the sales journal and the cash receipts journal. Show that total debits equal total
credits.
3. Show how postings would be made by writing the account numbers and check marks in the
appropriate places in the journals.
SOLUTION
Requirements 1, 2 and 3
Sales Journal
Page 1
CR
CR
Invoice
Customer
Post.
Accounts
Receivable
DR
Cost of Goods Sold
DR
Sales Revenue
Merchandise
Inventory
B-41
PB–24A, cont.
Requirements 1, 2, and 3, cont.
Cash Receipts Journal
Page 1
Date
Account
Credited
Post.
Ref.
Cash
DR
Accounts
Receivable
CR
Sales
Revenue
CR
Other
Accounts
CR
Cost of
Goods Sold
DR
Merchandise
Inventory
CR
Office Supplies
80
80
Land
Intel, Inc.
William & Bill
Receivable
A. B. Miller
Totals
(X)
PB–25A Using the purchases, cash payments, and general journals
Learning Objective 3
Purchases Journal, Accounts Payable CR column total $19,540
The general ledger of Shiny Lake Golf Shop includes the following selected accounts, along with their account numbers:
Number
Account
Number
Account
111
Cash
181
Equipment
131
Merchandise Inventory
211
Accounts Payable
161
Prepaid Insurance
564
Rent Expense
171
Office Supplies
583
Utilities Expense
Transactions in December that affected purchases and cash payments follow:
Dec. 2
Purchased merchandise inventory on credit from Tomas, $4,500. Terms were 1/10, n/30.
3
Paid monthly rent, debiting Rent Expense for $2,300.
5
Purchased office supplies on credit terms of 1/10, n/30 from Right Supply, $440.
8
Received and paid electricity utility bill, $580.
9
Purchased equipment on account from Ace Equipment, $6,600. Payment terms were n/30.
10
Returned the equipment to Ace Equipment. It was damaged.
11
Paid Tomas the amount owed on the purchase of December 2.
12
Purchased merchandise inventory on account from Callahan Golf, $4,000. Terms were
3/10, n/30.
13
Purchased merchandise inventory for cash, $600.
14
Paid a semiannual insurance premium, debiting Prepaid Insurance, $1,400.
16
Paid its account payable to Right Supply from December 5.
18
Received and paid gas and water utility bills, $200.
21
Purchased merchandise inventory on credit terms of 2/10, n/45 from Dormer, Inc., $3,400.
21
Paid its account payable to Callahan Golf from December 12.
22
Purchased office supplies on account from Office World, Inc., $600. Terms were n/30.
26
Returned to Dormer, Inc. $1,000 of the merchandise inventory purchased on December 21.
31
Paid Dormer, Inc. the net amount owed from December 21 less the return on December 26.
PB–25A, cont.
Requirements
1. Shiny Lake Golf Shop records purchase returns in the general journal. Use the appropriate journal to record the transactions in a purchases
journal, a cash payments journal (omit the Check No. column), and a general journal. The company uses the perpetual inventory system.
2. Total each column of the special journals. Show that total debits equal total credits in each special journal.
3. Show how postings would be made from the journals by writing the account numbers and check marks in the appropriate places in the
journals.
SOLUTION
Requirements 1, 2 and 3
Purchases Journal
Page 1
Date
Vendor
Account Credited
Terms
Post.
Ref.
Accounts
Payable
CR
Merchandise
Inventory
DR
Office
Supplies
DR
Other Accounts DR
Account
Title
Post.
Ref.
Amount
Tomas
1/10, n/30
Right Supply
1/10, n/30
Ace Equipment
n/30
Equipment
Callahan Golf
3/10, n/30
Dormer, Inc.
2/10, n/45
Office World, Inc.
n/30
Totals
(131)
B-44
PB–25A, cont.
Requirements 1, 2, and 3, cont.
Cash Payments Journal
Page 1
Date
Ck.
No.
Account Debited
Post.
Ref.
Other
Accounts
DR
Accounts
Payable
DR
Merchandise
Inventory
CR
Cash
CR
Dec. 3
Rent Expense
564
2,300
2,300
8
Utilities Expense
583
580
580
11
4,500
4,455
13
Merchandise Inventory
131
600
600
14
Prepaid Insurance
161
1,400
1,400
16
440
18
Utilities Expense
583
200
200
21
4,000
3,880
31
2,400
2,352
31
Totals
5,080
PB–25A, cont.
Requirements 1, 2 and 3, cont.
Date
Accounts and Explanation
Post.
Ref.
Debit
Credit
Dec. 10
Accounts Payable—Ace Equipment
211/✓
6,600
Accounts Payable—Dormer, Inc.
211/✓
1,000
B-46
PB–26A Using all journals, posting, and balancing the ledgers
Learning Objectives 2, 3
Trial balance, total debits $48,600
Tulsa Computer Security uses the perpetual inventory system and makes all credit sales on terms of
n/30. Tulsa completed the following transactions during May:
May 2
Issued invoice no. 913 for sale on account to K. D. King, $2,200 (cost, $1,500).
3
Purchased merchandise inventory on credit terms of 3/10, n/60 from Henderson Co.,
$2,900.
5
Sold merchandise inventory for cash, $1,800 (cost, $350).
5
Issued check no. 532 to purchase furniture for cash, $2,950.
8
Collected interest revenue of $1,350.
9
Issued invoice no. 914 for sale on account to Berkner Co., $5,700 (cost, $2,000).
10
Purchased merchandise inventory for cash, $1,000, issuing check no. 533.
12
Received cash from K. D. King in full settlement of her account receivable from the sale on
May 2.
13
Issued check no. 534 to pay Henderson Co. the net amount owed from May 3. Round to the
nearest dollar.
13
Purchased office supplies on account from Magyar, Inc., $500. Terms were n/EOM.
15
Sold merchandise inventory on account to M. O. Small, issuing invoice no. 915 for $850
(cost, $400).
18
Issued invoice no. 916 for credit sale to K. D. King, $300 (cost, $150).
19
Received cash from Berkner Co. in full settlement of its account receivable from May 9.
20
Purchased merchandise inventory on credit terms of n/30 from Silva Distributing, $2,100.
22
Purchased furniture on credit terms of 3/10, n/60 from Henderson Co., $500.
22
Issued check no. 535 to pay for insurance coverage, debiting Prepaid Insurance for $1,400.
24
Sold office supplies to an employee for cash of $125, which was Tulsa’s cost.
25
Received bill and issued check no. 536 to pay utilities, $550.
28
Purchased merchandise inventory on credit terms of 2/10, n/30 from Magyar, Inc., $575.
29
Returned damaged merchandise inventory to Magyar, Inc., issuing a debit memo for $575.
29
Sold merchandise inventory on account to Berkner Co., issuing invoice no. 917 for $2,400
(cost, $1,400).
30
Issued check no. 537 to pay Magyar, Inc. in full for May 13 purchase.
31
Received cash in full from K. D. King on credit sale of May 18.
31
Issued check no. 538 to pay monthly salaries of $2,250.
B-47
PB–26A, cont.
Requirements
1. Open four-column general ledger accounts using Tulsa’s account numbers and balances as of May 1,
2018, that follow. All accounts have normal balances.
Number
Account
Bal.
111
Cash
$ 15,000
112
Accounts Receivable
1,700
114
Merchandise Inventory
7,000
116
Office Supplies
600
117
Prepaid Insurance
0
151
Furniture
2,200
211
Accounts Payable
900
311
Common Stock
10,000
314
Retained Earnings
11,400
411
Sales Revenue
7,800
419
Interest Revenue
1,300
511
Cost of Goods Sold
2,800
531
Salaries Expense
1,900
541
Utilities Expense
200
2. Open four-column accounts in the subsidiary ledgers with beginning balances as of May 1, if any. Accounts
receivable subsidiary ledger—Balakrishnan Co., $1,700; Berkner Co., $0; M. O. Small, $0; and K. D. King,
$0. Accounts payable subsidiary ledger—Henderson Co., $0; Magyar, Inc., $0; Silva Distributing, $0; and
White Co., $900.
3. Enter the transactions in a sales journal (page 7), a cash receipts journal (page 5, omit Sales Discounts
Forfeited column), a purchases journal (page 10), a cash payments journal (page 8), and a general
journal (page 6), as appropriate.
4. Post daily to the accounts receivable subsidiary ledger and to the accounts payable subsidiary ledger.
5. Total each column of the special journals. Show that total debits equal total credits in each special journal. On
May 31, post to the general ledger.
6. Prepare a trial balance as of May 31, 2018, to verify the equality of the general ledger. Balance the total of the
customer account ending balances in the accounts receivable subsidiary ledger against Accounts Receivable in
the general ledger. Do the same for the accounts payable subsidiary ledger and Accounts Payable in the
general ledger.
PB–26A, cont.
SOLUTION
Requirements 1 and 5
Cash
No. 111
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
15,000
26,475
15,012
Accounts Receivable
No. 112
Date
Post.
Ref.
Debit
Credit
Debit
Credit
Bal.
B-49
PB–26A, cont.
Requirements 1 and 5, cont.
Merchandise Inventory
No. 114
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
7,000
May 10
CP.8
1,000
8,000
7,425
S.7
5,450
1,975
1,625
5,575
7,200
CP.8
7,113
Office Supplies
No. 116
Date
Post.
Ref.
Debit
Credit
Debit
Credit
Bal.
May 24
Prepaid Insurance
No. 117
Bal.
May 22
CP.8
1,400
1,400
Furniture
No. 151
Date
Post.
Ref.
Debit
Credit
Debit
Credit
Bal.
2,200
CP.8
2,950
5,150
5,650
PB–26A, cont.
Requirements 1 and 5, cont.
Accounts Payable
No. 211
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
900
575
325
Common Stock
No. 311
Date
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
Retained Earnings
No. 314
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
Sales Revenue
Date
Post.
Ref.
Debit
Bal.
7,800
B-51
PB–26A, cont.
Requirements 1 and 5, cont.
Interest Revenue
No. 419
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
1,300
May 8
CR.5
1,350
2,650
Cost of Goods Sold
No. 511
Balance
Bal.
2,800
5,450
8,250
CR.5
8,600
Salaries Expense
No. 531
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
1,900
2,250
4,150
Utilities Expense
No. 541
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
PB-26A, cont.
Requirements 2 and 4
Accounts Receivable—Balakrishnan Co.
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
1,700
Accounts Receivable—Berkner Co.
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
0
19
CR.5
5,700
0
29
S.7
2,400
2,400
Accounts Receivable—K. D. King
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
0
May 2
S.7
2,200
2,200
12
CR.5
2,200
0
18
S.7
300
300
31
CR.5
300
0
Accounts Receivable—M. O. Small
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
0
May 15
S.7
850
850
Accounts Payable—Henderson Co.
Date
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
May 3
2,900
2,900
13
2,900
22
500
500
B-53
PB–26A, cont.
Requirements 2 and 4, cont.
Accounts Payable—Magyar, Inc.
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
0
May 13
P.10
500
500
28
P.10
575
1,075
29
J.6
575
500
30
CP.8
500
0
Accounts Payable—Silva Distributing
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
0
May 20
P.10
2,100
2,100
Accounts Payable—White Co.
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
900
PB–26A, cont.
Requirements 3, 4, 5 and 6
Sales Journal
Page 7
Date
Invoice
No.
Customer
Account Debited
Post.
Ref.
Accounts Receivable
DR
Cost of Goods Sold
DR
Sales Revenue
CR
Merchandise Inventory
CR
2018
May 2
913
K. D. King
✓
2,200
1,500
914
Berkner Co.
✓
5,700
2,000
915
M. O. Small
✓
916
K. D. King
✓
917
Berkner Co.
✓
2,400
1,400
Totals
5,450
B-55
PB–26A, cont.
Requirements 3, 4, 5 and 6, cont.
Cash Receipts Journal
Page 5
Date
Account Credited
Post.
Ref.
Cash
DR
Accounts
Receivable
CR
Sales
Revenue
CR
Other
Accounts
CR
Cost of
Goods Sold
DR
Merchandise
Inventory
CR
2018
May 5
1,800
1,800
350
8
Interest Revenue
419
1,350
1,350
2,200
5,700
Office Supplies
116
K. D. King
(111)
(411)
(X)
PB–26A, cont.
Requirements 3, 4, 5 and 6, cont.
Purchases Journal
Page 10
Date
Vendor
Account Credited
Terms
Post.
Ref.
Accounts
Payable
CR
Merchandise
Inventory
DR
Office
Supplies
DR
Other Accounts DR
Account
Title
Post.
Ref.
Amount
2018
May 3
Henderson Co.
3/10, n/60
✓
2,900
2,900
13
Magyar, Inc.
n/EOM
✓
500
500
Silva Distributing
n/30
✓
2,100
2,100
Henderson Co.
3/10, n/60
✓
Furniture
Magyar, Inc.
2/10, n/30
✓
Totals
6,575
5,575
B-57
PB–26A, cont.
Requirements 3, 4, 5 and 6, cont.
Cash Payments Journal
Page 8
Date
Ck.
No.
Account Debited
Post.
Ref.
Other
Accounts
DR
Accounts
Payable
DR
Merchandise
Inventory
CR
Cash
CR
2018
PB–26A, cont.
Requirements 3, 4, 5 and 6, cont.
General Journal Page 6
Date
Accounts and Explanation
Post.
Ref.
Debit
Credit
May 29
Accounts Payable—Magyar, Inc.
211/✓
575
Requirement 6
TULSA COMPUTER SECURITY
Trial Balance
May 31, 2018
Acct. No.
Account Name
Debit
Credit
111
Cash
$ 15,012
112
Accounts Receivable
4,950
114
Merchandise Inventory
7,113
116
Office Supplies
117
Prepaid Insurance
1,400
151
Furniture
5,650
211
Accounts Payable
314
Retained Earnings
411
Sales Revenue
419
Interest Revenue
2,650
511
Cost of Goods Sold
8,600
531
Salaries Expense
4,150
541
Utilities Expense
Totals
B-59
PB–26A, cont.
Requirement 6, cont.
Accounts Receivable Subsidiary Ledger
Customer
Balance
Balakrishnan Co.
$ 1,700
Berkner Co.
K. D. King
M. O. Small
Total
$ 4,950
Balance
Henderson Co.
Magyar, Inc.
Silva Distributing
White Co.
Total
$ 3,500
Problems (Group B)
All problems can be completed manually or by using either MyAccountingLab General Ledger or QuickBooks.
PB–27B Using the sales, cash receipts, and general journals
Learning Objectives 2, 3
Cash Receipts Journal, Accounts Receivable CR column total $11,800
Assume Peaceful Spring Company uses the perpetual inventory system. The general ledger of Peaceful
Springs Company includes the following selected accounts, along with their account numbers:
Number
Account
Number
Account
11
Cash
18
Equipment
12
Accounts Receivable
19
Land
13
Notes Receivable
41
Sales Revenue
15
Merchandise Inventory
51
Cost of Goods Sold
16
Office Supplies
Sales and cash receipts transactions in November were as follows:
Nov. 2
Sold merchandise inventory on credit, terms n/30, to Intelysis, Inc., $2,200 (cost, $400).
6
Sold office supplies to an employee at cost, $85, receiving cash.
6
Cash sales for the week totaled $2,400 (cost, $1,400).
8
Sold merchandise inventory on account, terms n/30, to A. Z. Morris, $7,500 (cost, $5,000).
9
Sold land that cost $9,000 for cash of the same amount.
11
Sold merchandise inventory on account, terms n/30, to Sloan Electric, $5,000 (cost,
$3,450).
11
Received cash from Intelysis in full settlement of its account receivable from November 2.
13
Cash sales for the week were $2,200 (cost, $1,750).
15
Sold merchandise inventory on credit, terms n/30, to West and Michael, $3,000 (cost,
$2,200).
19
Sold merchandise inventory on account, terms n/30, to Sloan Electric, $700 (cost, $200).
20
Cash sales for the week were $940 (cost, $640).
21
Received $4,400 cash from A. Z. Morris in partial settlement of its account receivable.
22
Received cash from West and Michael for its account receivable from November 15.
22
Sold merchandise inventory on account, terms n/30, to Olivia Co., $1,510 (cost, $980).
25
Collected $5,800 on a note receivable. There was no interest earned.
27
Cash sales for the week totaled $3,780 (cost, $2,430).
27
Sold merchandise inventory on account, terms n/30, to R. A. Brown, $230 (cost, $110).
30
Received $2,200 cash on account from A. Z. Morris.
PB–27B, cont.
Requirements
1. Use the appropriate journal to record the preceding transactions in a sales journal (omit the Invoice
No. column) and a cash receipts journal (omit the Sales Discounts Forfeited column).
2. Total each column of the sales journal and the cash receipts journal. Determine that total debits equal
total credits.
3. Show how postings would be made from the journals by writing the account numbers and check
marks in the appropriate places in the journals.
SOLUTION
Requirements 1, 2 and 3
Sales Journal
Page 1
Date
Invoice
No.
Customer
Account Debited
Post.
Ref.
Accounts Receivable
DR
Cost of Goods Sold
DR
Sales Revenue
CR
Merchandise Inventory
CR
Nov. 2
Intelysis, Inc.
✓
2,200
400
8
A. Z. Morris
✓
7,500
5,000
Sloan Electric
✓
5,000
3,450
West and Michael
✓
3,000
2,200
Sloan Electric
✓
200
Olivia Co.
✓
1,510
980
R. A. Brown
✓
110
Totals
B-62
PB–27B, cont.
Requirements 1, 2 and 3, cont.
Cash Receipts Journal
Page 1
Date
Account Credited
Post.
Ref.
Cash
DR
Accounts
Receivable
CR
Sales
Revenue
CR
Other
Accounts
CR
Cost of
Goods Sold
DR
Merchandise
Inventory
CR
Nov. 6
Office Supplies
16
85
85
1,400
Land
19
Intelysis, Inc.
1,750
West and Michael
Notes Receivable
13
2,430
Totals
36,005
6,220
(11)
(41)
(51/15)
PB–28B Using the purchases, cash payments, and general journals
Learning Objective 3
Purchases Journal, Accounts Payable CR column total $19,470
The general ledger of Finnish Lake Golf Shop includes the following selected accounts, along with their account numbers:
Number
Account
Number
Account
111
Cash
181
Equipment
131
Merchandise Inventory
211
Accounts Payable
161
Prepaid Insurance
564
Rent Expense
171
Office Supplies
583
Utilities Expense
Transactions in December that affected purchases and cash payments were as follows:
Dec. 2
Purchased merchandise inventory on credit from Tighe, $4,100. Terms were 3/10, n/30.
3
Paid monthly rent, debiting Rent Expense for $2,200.
5
Purchased office supplies on credit terms of 3/10, n/30 from Rapid Supply, $470.
8
Received and paid electricity utility bill, $510.
9
Purchased equipment on account from A-1 Equipment, $6,900. Payment terms were net 30.
10
Returned the equipment to A-1 Equipment. It was damaged.
11
Paid Tighe the amount owed on the purchase of December 2.
12
Purchased merchandise inventory on account from Crystal Golf, $4,900. Terms were 1/10,
n/30.
13
Purchased merchandise inventory for cash, $660.
14
Paid a semiannual insurance premium, debiting Prepaid Insurance, $1,200.
16
Paid its account payable to Rapid Supply from December 5.
18
Received and paid gas and water utility bills, $500.
21
Purchased merchandise inventory on credit terms of 1/10, n/45 from Devin, Inc., $3,000.
21
Paid its account payable to Crystal Golf from December 12.
22
Purchased office supplies on account from Office Stuff, Inc., $100. Terms were n/30.
26
Returned to Devin, Inc. $1,000 of the merchandise inventory purchased on December 21.
31
Paid Devin, Inc. the net amount owed from December 21 less the return on December 26.
PB–28B, cont.
Requirements
1. Use the appropriate journal to record the preceding transactions in a purchases journal, a cash payments journal (omit the Check No. column), and a
general journal. Finnish Lake Golf Shop records purchase returns in the general journal. The company uses the perpetual inventory system.
2. Total each column of the special journals. Show that total debits equal total credits in each special journal.
3. Show how postings would be made from the journals by writing the account numbers and check marks in the appropriate places in the journals.
SOLUTION
Requirements 1, 2 and 3
Purchases Journal
Page 1
Date
Vendor
Account Credited
Terms
Post.
Ref.
Accounts
Payable
CR
Merchandise
Inventory
DR
Office
Supplies
DR
Other Accounts DR
Account
Title
Post.
Ref.
Amount
Tighe
3/10, n/30
Rapid Supply
3/10, n/30
A-1 Equpment
n/30
Equipment
Crystal Golf
1/10, n/30
Devin, Inc.
1/10, n/45
Office Stuff, Inc.
n/30
Totals
(131)
B-65
PB–28B, cont.
Requirements 1, 2 and 3, cont.
Cash Payments Journal
Page 1
Date
Ck.
No.
Account Debited
Post.
Ref.
Other
Accounts
DR
Accounts
Payable
DR
Merchandise
Inventory
CR
Cash
CR
Dec. 3
Rent Expense
564
2,200
2,200
Utilities Expense
583
4,100
3,977
Merchandise Inventory
131
Prepaid Insurance
161
1,200
1,200
583
4,900
4,851
2,000
1,980
Totals
5,070
PB–28B, cont.
Requirements 1, 2 and 3, cont.
Date
Accounts and Explanation
Post.
Ref.
Debit
Credit
Dec. 10
Accounts Payable—A-1 Equipment
211/✓
6,900
6,900
Accounts Payable—Devin, Inc.
211/✓
1,000
1,000
B-67
PB–29B Using all journals, posting, and balancing the ledgers
Learning Objectives 2, 3
Trial balance, total debits $47,950
Atlanta Computer Security uses the perpetual inventory system and makes all credit sales on terms of
n/30. During March, Atlanta completed these transactions:
Mar. 2
Issued invoice no. 191 for sale on account to L. E. Kingston, $3,000 (cost, $800).
3
Purchased merchandise inventory on credit terms of 3/10, n/60 from High, $2,500.
4
Sold merchandise inventory for cash, $1,100 (cost, $300).
5
Issued check no. 473 to purchase furniture for cash $2,450.
8
Collected interest revenue of $1,150.
9
Issued invoice no. 192 for sale on account to Common Co., $5,700 (cost, $2,200).
10
Purchased merchandise inventory for cash, $1,400, issuing check no. 474.
12
Received cash from L. E. Kingston in full settlement of her account receivable from the sale
of March 2.
13
Issued check no. 475 to pay High net amount owed from March 3. Round to the nearest
dollar.
13
Purchased office supplies on account from Mann Corp., $350. Terms were n/EOM.
15
Sold merchandise inventory on account to Suarez Co., issuing invoice no. 193 for $700
(cost, $250).
18
Issued invoice no. 194 for credit sale to L. E. Kingston, $400 (cost, $200).
19
Received cash from Common Co. in full settlement of its account receivable from March 9.
20
Purchased merchandise inventory on credit terms of n/30 from James Swenson, $2,200.
22
Purchased furniture on credit terms of 3/10, n/60 from High, $400.
22
Issued check no. 476 to pay for insurance coverage, debiting Prepaid Insurance for $1,800.
24
Sold office supplies to an employee for cash of $100, which was Atlanta’s cost.
25
Received bill and issued check no. 477 to pay utilities, $550.
28
Purchased merchandise inventory on credit terms of 2/10, n/30 from Mann Corp., $550.
29
Returned damaged merchandise inventory to Mann Corp., issuing a debit memo for $550.
29
Sold merchandise inventory on account to Common Co., issuing invoice no. 195 for $2,800
(cost, $1,400).
30
Issued check no. 478 to pay Mann Corp. in full for March 13 purchase.
31
Received cash in full from L. E. Kingston on credit sale of March 18.
31
Issued check no. 479 to pay monthly salaries of $1,550.
B-68
PB–29B, cont.
Requirements
1. Open four-column general ledger accounts using Atlanta Computer Security’s account numbers and
balances as of March 1, 2018, that follow. All accounts have normal balances.
Number
Account
Bal.
111
Cash
$ 15,800
112
Accounts Receivable
1,900
114
Merchandise Inventory
6,500
116
Office Supplies
600
117
Prepaid Insurance
0
151
Furniture
2,000
211
Accounts Payable
900
311
Common Stock
14,000
314
Retained Earnings
6,600
411
Sales Revenue
7,600
419
Interest Revenue
1,400
511
Cost of Goods Sold
2,100
531
Salaries Expense
1,300
541
Utilities Expense
300
2. Open four-column accounts in the subsidiary ledgers with beginning balances as of March 1, if any. Accounts
receivable subsidiary ledger: Arrundel Co., $1,900; Common Co., $0; L. E. Kingston, $0; and Suarez, $0.
Accounts payable subsidiary ledger: High, $0; Mann Corp, $0; James Swenson, $0; and Young Co., $900.
3. Enter the transactions in a sales journal (page 8), a cash receipts journal (page 3, omit Sales Discounts Forfeited
column), a purchases journal (page 6), a cash payments journal (page 9), and a general journal (page 4), as
appropriate.
4. Post daily to the accounts receivable subsidiary ledger and to the accounts payable subsidiary ledger.
5. Total each column of the special journals. Show that total debits equal total credits in each special journal. On
March 31, post to the general ledger.
6. Prepare a trial balance as of March 31, 2018, to verify the equality of the general ledger. Balance the total of the
customer account ending balances in the accounts receivable subsidiary ledger against Accounts Receivable in
the general ledger. Do the same for the accounts payable subsidiary ledger and Accounts Payable in the general
ledger.
PB–29B, cont.
SOLUTION
Requirements 1 and 5
Cash
No. 111
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Date
Post.
Ref.
Debit
Credit
Debit
Credit
Merchandise Inventory
No. 114
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
B-70
PB–29B, cont.
Requirements 1 and 5, cont.
Office Supplies
No. 116
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
600
Mar. 24
CR.3
100
500
31
P.6
350
850
Accounts Payable
No. 211
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
900
Mar. 29
J.4
550
350
31
P.6
6,000
6,350
31
CP.9
2,850
3,500
Common Stock
No. 311
Date
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
Prepaid Insurance
No. 117
Balance
Bal.
Mar. 22
CP.9
1,800
1,800
Furniture
No. 151
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
2,000
CP.9
2,450
4,450
22
P.6
400
4,850
PB–29B, cont.
Requirements 1 and 5, cont.
Retained Earnings
No. 314
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
6,600
Sales Revenue
Date
Post.
Ref.
Debit
Debit
Bal.
Interest Revenue
No. 419
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
1,400
1,150
2,550
B-72
PB–29B, cont.
Requirements 1 and 5, cont.
Cost of Goods Sold
No. 511
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
2,100
Mar. 31
S.8
4,850
6,950
31
CR.3
300
7,250
Salaries Expense
No. 531
Bal.
1,300
Mar. 31
1,550
2,850
Utilities Expense
No. 541
Date
Post.
Ref.
Debit
Credit
Debit
Credit
Bal.
300
550
850
PB-29B, cont.
Requirements 2 and 4
Accounts Receivable—Arrundel Co.
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
1,900
Accounts Receivable—Common Co.
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
0
19
CR.3
5,700
0
29
S.8
2,800
2,800
Accounts Receivable—L. E. Kingston
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
0
Mar. 2
S.8
3,000
3,000
12
CR.3
3,000
0
18
S.8
400
400
31
CR.3
400
0
Accounts Receivable—Suarez Co.
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
0
S.8
700
700
Accounts Payable—High
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
P.6
2,500
2,500
13
2,500
22
P.6
400
400
B-74
PB-29B, cont.
Requirements 2 and 4, cont.
Accounts Payable—Mann Corp.
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
0
Mar. 13
P.6
350
350
28
P.6
550
900
29
J.4
550
350
30
CP.9
350
0
Accounts Payable—James Swenson
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
0
Mar. 20
P.6
Accounts Payable—Young Co.
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
900
PB–29B, cont.
Requirements 3, 4, 5 and 6
Sales Journal
Page 8
Date
Invoice
No.
Customer
Account Debited
Post.
Ref.
Accounts Receivable
DR
Cost of Goods Sold
DR
Sales Revenue
CR
Merchandise Inventory
CR
2018
Mar. 2
191
L. E. Kingston
✓
3,000
800
9
192
Common Co.
✓
5,700
2,200
193
Suarez Co.
✓
250
194
L. E. Kingston
✓
200
195
Common Co.
✓
2,800
1,400
Totals
4,850
B-76
PB–29B, cont.
Requirements 3, 4, 5 and 6, cont.
Cash Receipts Journal
Page 3
Date
Account Credited
Post.
Ref.
Cash
DR
Accounts
Receivable
CR
Sales
Revenue
CR
Other
Accounts
CR
Cost of
Goods Sold
DR
Merchandise
Inventory
CR
2018
Mar. 4
1,100
1,100
300
Interest Revenue
1,150
3,000
5,700
Office Supplies
L. E. Kingston
Totals
1,100
300
(111)
(411)
PB–29B, cont.
Requirements 3, 4, 5 and 6, cont.
Purchases Journal
Page 6
Date
Vendor
Account Credited
Terms
Post.
Ref.
Accounts
Payable
CR
Merchandise
Inventory
DR
Office
Supplies
DR
Other Accounts DR
Account
Title
Post.
Ref.
Amount
2018
Mar. 3
High
3/10, n/60
✓
2,500
2,500
James Swenson
n/30
✓
2,200
2,200
High
3/10, n/60
✓
Furniture
Mann Corp.
2/10, n/30
✓
Totals
6,000
5,250
B-78
PB–29B, cont.
Requirements 3, 4, 5 and 6, cont.
Cash Payments Journal
Page 9
Date
Ck.
No.
Account Debited
Post.
Ref.
Other
Accounts
DR
Accounts
Payable
DR
Merchandise
Inventory
CR
Cash
CR
2018
Mar. 5
473
Furniture
151
2,450
2,450
474
Merchandise Inventory
114
1,400
1,400
475
2,500
75
2,425
476
Prepaid Insurance
117
1,800
1,800
477
Utilities Expense
541
478
Mann Corp.
479
Salaries Expense
531
1,550
1,550
Totals
7,750
2,850
75
PB–29B, cont.
Requirements 3, 4, 5 and 6, cont.
General Journal Page 4
Date
Accounts and Explanation
Post.
Ref.
Debit
Credit
Mar. 29
Accounts Payable—Mann Corp.
211/✓
550
Requirement 6
ATLANTA COMPUTER SECURITY
Trial Balance
March 31, 2018
Acct. No.
Account Name
Debit
Credit
111
Cash
$ 16,725
112
Accounts Receivable
114
Merchandise Inventory
116
Office Supplies
117
Prepaid Insurance
151
Furniture
211
Accounts Payable
314
Retained Earnings
411
Sales Revenue
419
Interest Revenue
511
Cost of Goods Sold
531
Salaries Expense
541
Utilities Expense
Totals
$ 47,950
B-80
PB–29B, cont.
Requirement 6, cont.
Accounts Receivable Subsidiary Ledger
Customer
Balance
Arrundel Co.
$ 1,900
Common Co.
L. E. Kingston
Suarez
Total
$ 5,400
Balance
High
Mann Corp.
James Swenson
Young Co.
Total
$ 3,500
B-81
Continuing Problem
PB–30 Using all journals
This problem continues the Canyon Canoe Company situation from Chapter 4. At the beginning of the
new year, Canyon Canoe Company decided to carry and sell T-shirts with its logo printed on them.
Canyon Canoe Company uses the perpetual inventory system to account for the inventory. During
January 2019, Canyon Canoe Company completed the following merchandising transactions:
Jan. 1
Purchased 10 T-shirts at $4 each and paid cash.
2
Sold 6 T-shirts for $10 each, total cost of $24. Received cash.
3
Purchased 50 T-shirts on account at $5 each. Terms 2/10, n/30.
7
Paid the supplier for the T-shirts purchased on January 3, less discount.
8
Realized 4 T-shirts from the January 1 order were printed wrong and returned them for a
cash refund.
10
Sold 40 T-shirts on account for $10 each, total cost of $200. Terms 3/15, n/45.
12
Received payment for the T-shirts sold on account on January 10, less discount.
14
Purchased 100 T-shirts on account at $4 each. Terms 4/15, n/30.
18
Canyon Company called the supplier from the January 14 purchase and told them that
some of the T-shirts were the wrong color. The supplier offered a $50 purchase allowance.
20
Paid the supplier for the T-shirts purchased on January 14, less the allowance and discount.
21
Sold 60 T-shirts on account for $10 each, total cost of $220. Terms 2/20, n/30.
23
Received a payment on account for the T-shirts sold on January 21, less discount.
25
Purchased 320 T-shirts on account at $5 each. Terms 2/10, n/30, FOB shipping point.
27
Paid freight associated with the January 25 purchase, $48.
29
Paid for the January 25 purchase, less discount.
30
Sold 275 T-shirts on account for $10 each, total cost of $1,300. Terms 2/10, n/30.
31
Received payment for the T-shirts sold on January 30, less discount.
Requirements
1. Enter the transactions in a sales journal (page 2), a cash receipts journal (page 5, omit Sales Discounts
Forfeited column), a purchases journal (page 7), a cash payments journal (page 6), and a general
journal (page 4), as appropriate.
2. Total each column of the special journals. Show that total debits equal total credits in each special
journal.
PB–30, cont.
SOLUTION
Requirements 1 and 2
Sales Journal
Page 2
Date
Customer
Account Debited
Post.
Ref.
Accounts Receivable
DR
Cost of Goods Sold
DR
Sales Revenue
CR
Merchandise Inventory
CR
2019
Jan. 10
Totals
B-83
PB–30, cont.
Requirements 1 and 2, cont.
Cash Receipts Journal
Page 5
Date
Account Credited
Post.
Ref.
Cash
DR
Accounts
Receivable
CR
Sales
Revenue
CR
Other
Accounts
CR
Cost of
Goods Sold
DR
Merchandise
Inventory
CR
PB–30, cont.
Requirements 1 and 2, cont.
Purchases Journal
Page 7
Date
Vendor
Account Credited
Terms
Post.
Ref.
Accounts
Payable
CR
Merchandise
Inventory
DR
Office
Supplies
DR
Other Accounts DR
Account
Title
Post.
Ref.
Amount
2019
2/10, n/30
2/10, n/30
Totals
B-85
PB–30, cont.
Requirements 1 and 2, cont.
Cash Payments Journal
Page 6
Date
Ck.
No.
Account Debited
Post.
Ref.
Other
Accounts
DR
Accounts
Payable
DR
Merchandise
Inventory
CR
Cash
CR
2019
PB–30, cont.
Requirements 1 and 2, cont.
General Journal Page 4
Date
Accounts and Explanation
Post.
Ref.
Debit
Credit
Practice Set
PB–31 Using all journals
This problem continues the Crystal Clear Cleaning practice set begun in Chapter 2 and continued
through Chapters 3 and 4.
Crystal Clear Cleaning has decided that, in addition to providing cleaning services, it will sell cleaning
products. Crystal Clear uses the perpetual inventory system. During December 2018, Crystal Clear
completed the following transactions:
Dec. 2
Purchased 1,000 units of inventory for $4,000 on account from Sparkle Company on terms,
5/10, n/20.
5
Purchased 1,200 units of inventory from Borax on account with terms 4/10, n/30. The total
invoice was for $6,000, which included a $300 freight charge.
7
Returned 300 units of inventory to Sparkle from the December 2 purchase (cost $1,200).
9
Paid Borax.
11
Sold 500 units of goods to Happy Maids for $5,500 on account with terms n/30. Crystal
Clear’s cost of the goods was $2,000.
12
Paid Sparkle.
15
Received 100 units with a retail price of $1,100 back from customer Happy Maids. The
goods cost Crystal Clear $400.
21
Received payment from Happy Maids, settling the amount due in full.
28
Sold 500 units of goods to Bridget, Inc. on account for $6,500 (cost $2,022). Terms 1/15,
n/30.
29
Paid cash for utilities of $550.
30
Paid cash for Sales Commission Expense of $214.
31
Received payment from Bridget, Inc., less discount.
Requirements
1. Use the appropriate journal to record the preceding transactions in a sales journal (omit the Invoice
No. column), a cash receipts journal (omit Sales Discounts Forfeited column), a purchases journal, a
cash payments journal (omit the Check No. column), and a general journal.
2. Total each column of the special journals. Show that total debits equal total credits in each special
journal.
B-88
PB–31, cont.
SOLUTION
Requirements 1 and 2
Sales Journal
Page 1
Date
Customer
Account Debited
Post.
Ref.
Accounts Receivable
DR
Cost of Goods Sold
DR
Sales Revenue
CR
Merchandise Inventory
CR
2018
Happy Maids
Bridget, Inc.
Totals
PB–31, cont.
Requirements 1 and 2, cont.
Cash Receipts Journal
Page 1
Date
Account Credited
Post.
Ref.
Cash
DR
Accounts
Receivable
CR
Sales
Revenue
CR
Other
Accounts
CR
Cost of
Goods Sold
DR
Merchandise
Inventory
CR
2018
Bridget Inc.
Totals
B-90
PB–31 cont.
Requirements 1 and 2, cont.
Purchases Journal
Page 1
Date
Vendor
Account Credited
Terms
Post.
Ref.
Accounts
Payable
CR
Merchandise
Inventory
DR
Office
Supplies
DR
Other Accounts DR
Account
Title
Post.
Ref.
Amount
2018
Sparkle Co.
5/10, n/20
Totals
PB–31, cont.
Requirements 1 and 2, cont.
Cash Payments Journal
Page 1
Date
Ck.
No.
Account Debited
Post.
Ref.
Other
Accounts
DR
Accounts
Payable
DR
Merchandise
Inventory
CR
Cash
CR
2018
Dec. 9
Borax1
6,000
228
5,772
Sparkle2
2,800
140
2,660
Utilities Expense
Sales Commission Expense
Totals
8,800
368
9,196
B-92
PB–31, cont.
Requirements 1 and 2, cont.
General Journal Page 1
Date
Accounts and Explanation
Post.
Ref.
Debit
Credit
Dec. 7
Accounts Payable—Sparkle Co.
1,200
Merchandise Inventory
1,200
Refunds Payable
1,100
Accounts Receivable—Happy Maids
1,100
Merchandise Inventory
B-93
Comprehensive Problem for Appendix B
Completing the Accounting Cycle for a Merchandising Entity—Using Special Journals
Amherst Networking Systems adjusts and closes its books and then prepares financial statements
monthly. Amherst uses the perpetual inventory system and all sales on credit have terms of n/30. The
company completed the following transactions during August:
Aug. 1
Issued check no. 682 for August office rent of $1,300.
2
Issued check no. 683 to pay the salaries payable of $1,300 from July 31.
2
Issued invoice no. 503 for sale on account to R. T. Loeb, $700. Amherst’s cost of this
merchandise inventory was $210.
3
Purchased merchandise inventory on credit terms of 1/15, n/60 from Goldner, Inc., $1,400.
4
Received cash on account from Friend Company, $2,400.
4
Sold merchandise inventory for cash, $370 (cost, $111).
5
Issued check no. 684 to purchase office supplies for cash, $730.
7
Issued invoice no. 504 for sale on account to K. D. Sanders, $2,100 (cost, $630).
8
Issued check no. 685 to pay Filter Company $2,500 of the amount owed at July 31. This
payment occurred after the end of the discount period.
11
Issued check no. 686 to pay Goldner, Inc. the net amount owed from August 3.
12
Received cash from R. T. Loeb in full settlement of her account receivable from August 2.
16
Issued check no. 687 to pay salaries expense of $1,290.
19
Purchased merchandise inventory for cash, $850, issuing check no. 688.
22
Purchased furniture on credit terms of 3/15, n/60 from Bradford Corporation, $510.
23
Sold merchandise inventory on account to Friend Company, issuing invoice no. 505 for
$9,000 (cost, $2,700).
24
Received half the July 31 amount receivable from K. D. Sanders.
26
Purchased office supplies on credit terms of 2/10, n/30 from Filter Company, $240.
30
Returned damaged merchandise inventory to the company from whom Amherst made the
cash purchase on August 19, receiving cash of $850.
31
Purchased merchandise inventory on credit terms of 1/10, n/30 from Seacrest Supply,
$8,000.
31
Issued check no. 689 to stockholders, for dividends, $600.
Requirements
1. Open these four-column accounts with their account numbers and July 31 balances in the various
ledgers.
General Ledger
Nbr.
Account Name
Debit
Credit
101
Cash
$ 5,020
102
Accounts Receivable
22,490
105
Merchandise Inventory
41,300
109
Office Supplies
1,680
117
Prepaid Insurance
2,600
160
Furniture
37,000
161
Accumulated Depreciation—Furniture
$ 10,000
201
Accounts Payable
12,700
204
Salaries Payable
1,300
220
Note Payable, Long-term
25,000
301
Common Stock
20,000
305
Retained Earnings
41,090
310
Dividends
400
Income Summary
401
Sales Revenue
501
Cost of Goods Sold
510
Salaries Expense
513
Rent Expense
514
Depreciation Expense—Furniture
516
Insurance Expense
519
Supplies Expense
Accounts Receivable Subsidiary Ledger: Friend Company $2,400; R. T. Loeb, $0; Parker, Inc.,
$11,300; and K. D. Sanders, $8,790.
Accounts Payable Subsidiary Ledger: Bradford Corporation, $0; Filter Company, $12,700; Goldner,
Inc., $0; and Seacrest Supply, $0.
2. Journalize the August transactions using a sales journal (page 4), a cash receipts journal (page 11,
omit Sales Discounts Forfeited column), a purchases journal (page 8), a cash payments journal (page
5), and a general journal (page 9).
3. Post daily to the accounts receivable subsidiary ledger and the accounts payable subsidiary ledger.
On August 31, post to the general ledger.
4. Prepare an unadjusted trial balance for the month ended August 31.
B-95
5. Journalize and post the following adjusting entries:
a. Office supplies on hand, $1,000.
b. Prepaid insurance expired, $350.
c. Depreciation expense on furniture, $250.
d. Accrued salaries expense, $1,060.
6. Prepare an adjusted trial balance.
7. Prepare a multistep income statement, statement of retained earnings, and classified balance sheet.
8. Journalize closing entries and post.
9. Prepare a post-closing trial balance.
SOLUTION
Requirements 1, 3, 5, and 8
Cash
No. 101
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
5,020
Aug. 31
CR.11
8,715
13,735
31
CP.5
9,956
3,779
Accounts Receivable
No. 102
Date
Post.
Ref.
Credit
Credit
Bal.
Aug. 31
11,800
31
CR.11
Merchandise Inventory
No. 105
Date
Post.
Ref.
Debit
Credit
Debit
Credit
Bal.
41,300
19
CP.5
42,150
30
CR.11
41,300
31
9,400
50,700
31
3,540
47,160
31
CR.11
47,049
31
CP.5
47,035
B-96
Furniture
No. 160
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
37,000
Aug. 22
P.8
510
37,510
Accumulated Depreciation—Furniture
No. 161
Date
Ref.
Debit
Credit
Bal.
250
Accounts Payable
No. 201
Date
Post.
Ref.
Debit
Debit
Credit
Bal.
Aug. 31
P.8
Salaries Payable
No. 204
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
Office Supplies
No. 109
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
730
P.8
240
Prepaid Insurance
No. 117
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
B-97
Retained Earnings
No. 305
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
41,090
Clo.
J.9
2,619
43,709
Clo.
J.9
600
43,109
Dividends
No. 310
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
0
Aug. 31
CP.5
600
600
Clo.
J.9
600
0
Income Summary
No. 400
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
Clo.
J.9
Clo.
J.9
9,551
2,619
Clo.
J.9
2,619
Sales Revenue
No. 401
Date
Post.
Ref.
Debit
Bal.
Aug. 31
Clo.
J.9
Notes Payable, Long-term
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Bal.
Common Stock
No. 301
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
20,000
B-98
Comprehensive Problem, cont.
Requirements 1, 3, 5, and 8, cont.
Rent Expense
No. 513
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
0
Aug. 1
CP.5
1,300
1,300
Clo.
J.9
1,300
0
Depreciation Expense—Furniture
No. 514
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
0
Adj.
J.9
Clo.
J.9
0
Cost of Goods Sold
No. 501
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
0
3,540
3,540
3,651
J.9
3,651
0
Salaries Expense
No. 510
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
0
CP.5
1,290
1,290
Adj.
1,060
2,350
Clo.
J.9
2,350
0
B-99
Comprehensive Problem, cont.
Requirements 1, 3, 5, and 8, cont.
Supplies Expense
No. 519
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
0
Adj.
J.9
1,650
1,650
Clo.
J.9
1,650
0
Subsidiary Ledgers
Accounts Receivable—Friend Co.
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
2,400
Aug. 4
CR.11
2,400
0
Aug. 23
S.4
9,000
9,000
Accounts Receivable—R.T. Loeb
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
0
S.4
0
Accounts Receivable—Parker Inc.
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
Insurance Expense
No. 516
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
0
Adj.
J.9
Clo.
J.9
0
B-100
Comprehensive Problem, cont.
Requirements 1, 3, and 5, cont.
Accounts Payable—Filter Co.
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
12,700
Aug. 8
CP.5
2,500
10,200
26
P.8
240
10,440
Accounts Payable—Goldner Inc.
Date
Ref.
Debit
Credit
Debit
Credit
Bal.
Aug. 3
P.8
1,400
1,400
11
CP.5
1,400
Accounts Payable—Seacrest Supply
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
P.8
8,000
8,000
Post.
Balance
Accounts Receivable—K.D. Sanders
Date
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
8,790
Aug. 7
S.4
2,100
10,890
24
4,395
6,495
Accounts Payable—Bradford Corp.
Date
Ref.
Debit
Credit
Balance
Debit
Credit
Bal.
P.8
510
510
B-101
Comprehensive Problem, cont.
Requirements 2 and 3
Sales Journal
Page 4
Date
Invoice
No.
Customer
Account Debited
Post.
Ref.
Accounts Receivable
DR
Cost of Goods Sold
DR
Sales Revenue
CR
Merchandise Inventory
CR
R. T. Loeb
K. D. Sanders
Friend Co.
Totals
B-102
Comprehensive Problem, cont.
Requirements 2 and 3, cont.
Cash Receipts Journal
Page 11
Date
Account Credited
Post.
Ref.
Cash
DR
Accounts
Receivable
CR
Sales
Revenue
CR
Other
Accounts
CR
Cost of
Goods Sold
DR
Merchandise
Inventory
CR
Aug. 4
Friend Co.
✓
2,400
2,400
R. T. Loeb
✓
K. D. Sanders
✓
4,395
4,395
Totals
8,715
7,495
B-103
Comprehensive Problem, cont.
Requirements 2 and 3, cont.
Purchases Journal
Page 8
Date
Vendor
Account Credited
Terms
Post.
Ref.
Accounts
Payable
CR
Merchandise
Inventory
DR
Office
Supplies
DR
Other Accounts DR
Account
Title
Post.
Ref.
Amount
Aug. 3
Goldner Inc.
1/15, n/60
✓
1,400
1,400
Bradford Corp.
3/15, n/60
✓
Furniture
Filter Co.
2/10, n/30
✓
Seacrest Supply
1/10, n/30
✓
8,000
8,000
Totals
9,400
(105)
B-104
Comprehensive Problem, cont.
Requirements 2 and 3, cont.
Cash Payments Journal
Page
5
Date
Ck.
No.
Account Debited
Post.
Ref.
Other
Accounts
DR
Accounts
Payable
DR
Merchandise
Inventory
CR
Cash
CR
Aug. 1
682
Rent Expense
513
1,300
1,300
683
Salaries Payable
204
1,300
1,300
684
Office Supplies
109
685
Filter Co.
2,500
2,500
686
Goldner Inc.
1,400
1,386
687
Salaries Expense
510
1,290
1,290
688
Merchandise Inventory
105
689
Dividends
310
Totals
6,070
3,900
9,956
(105)
(101)
B-105
Comprehensive Problem, cont.
Requirements 2 and 3, cont.
Requirement 4
AMHERST NETWORKING SYSTEMS
Unadjusted Trial Balance
August 31
Acct. No.
Account Name
Debit
Credit
101
Cash
$ 3,779
102
Accounts Receivable
26,795
105
Merchandise Inventory
47,035
109
Office Supplies
117
Prepaid Insurance
160
Furniture
37,510
161
Accumulated Depreciation—Furniture
$ 10,000
201
Accounts Payable
220
Note Payable—long-term
301
Common Stock
305
Retained Earnings
310
Dividends
401
Sales Revenue
501
Cost of Goods Sold
510
Salaries Expense
513
Rent Expense
Totals
$ 127,210
B-106
Comprehensive Problem, cont.
Requirement 4, cont.
Accounts Receivable Subsidiary Ledger
Customer
Balance
Friend Co.
$ 9,000
R. T. Loeb
Parker Inc.
K. D. Sanders
Total
Balance
Bradford Corp.
Filter Co.
10,440
Goldner Inc.
Seacrest Supply
Totals
B-107
Comprehensive Problem, cont.
Requirement 5
General Journal Page 9
Date
Accounts and Explanation
Post.
Ref.
Debit
Credit
Aug. 31(a)
Supplies Expense
519
1,650
`
Office Supplies
109
1,650
Insurance Expense
516
Prepaid Insurance
117
Depreciation Expense—Furniture
514
Salaries Expense
510
1,060
Salaries Payable
204
1,060
B-108
Comprehensive Problem, cont.
Requirement 6
AMHERST NETWORKING SYSTEMS
Adjusted Trial Balance
August 31
Account Name
Debit
Credit
Cash
$ 3,779
Accounts Receivable
26,795
Merchandise Inventory
47,035
Office Supplies
Prepaid Insurance
Furniture
37,510
Accumulated Depreciation—Furniture
Accounts Payable
Salaries Payable
Note Payable—long-term
Common Stock
Retained Earnings
Dividends
Sales Revenue
Cost of Goods Sold
Salaries Expense
Rent Expense
Depreciation Expense—Furniture
Insurance Expense
Supplies Expense
Totals
$ 128,520
B-109
Comprehensive Problem, cont.
Requirement 7
AMHERST NETWORKING SYSTEMS
Income Statement
For the Month Ended August 31
Net Sales Revenue
$ 12,170
Cost of Goods Sold
(3,651)
(5,900)
$ 41,090
B-110
Comprehensive Problem, cont.
Requirement 7, cont.
AMHERST NETWORKING SYSTEMS
Balance Sheet
August 31
Assets
Current Assets:
Cash
$ 3,779
Liabilities
Current Liabilities:
Accounts Payable
$ 18,950
Salaries Payable
1,060
Total Current Liabilities
$ 20,010
Long-term Liabilities:
Notes Payable
Total Liabilities
$ 45,010
Common Stock
Retained Earnings
Total Liabilities and Stockholders’ Equity
Accounts Receivable
1,000
2,250
Total Current Assets
Property, Plant, and Equipment:
Furniture
Less: Accumulated Depreciation
Total Property, Plant, and Equipment
Total Assets
B-111
Comprehensive Problem, cont.
Requirement 8
General Journal Page 9
Date
Accounts and Explanation
Post.
Ref.
Debit
Credit
Aug. 31
Sales Revenue
401
12,170
Income Summary
400
12,170
Income Summary
400
Cost of Goods Sold
501
Salaries Expense
510
Rent Expense
513
Insurance Expense
516
Supplies Expense
519
Income Summary
400
Retained Earnings
305
Retained Earnings
305
Dividends
310
Comprehensive Problem, cont.
Requirement 9
AMHERST NETWORKING SYSTEMS
Post-Closing Trial Balance
August 31
Account Name
Debit
Credit
Cash
$ 3,779
Accounts Receivable
26,795
Merchandise Inventory
47,035
Office Supplies
Prepaid Insurance
Furniture
37,510
Accumulated Depreciation—Furniture
Accounts Payable
Salaries Payable
Note Payable—long-term
Common Stock
Retained Earnings
Totals
$ 118,369
B-113
Critical Thinking
Tying It All Together Case B-1
McCormick & Company Incorporated, is a global leader in flavor that manufactures, markets, and
distributes spices, seasoning mixes, condiments, and other flavorful products. The company’s brands
include McCormick, Lawry’s, and Club House. In addition, the company also markets authentic ethnic
brands such as Zatarain’s, Thai Kitchen, and Simply Asia.
Requirements
1. Review Item 1A (Risk Factors) of the Notes to the Financial Statements. How does McCormick &
Company, Incorporated minimize the risks associated with data breaches or cyber attacks?
2. Perform a web search on ways businesses can prevent security breaches. What are some security
solutions that McCormick & Company might use?
SOLUTION
Requirement 1
Requirement 2
B-114
Decision Case B–1
A fire destroyed certain accounting records of Green Books. The controller, Marilyn Green, asks your help in
reconstructing the records. All of the sales are on account, with credit terms of n/30. The only accounting record
preserved from the fire is the accounts receivable subsidiary ledger, which follows.
Requirements
1. Determine the beginning and ending balances of Accounts Receivable.
2. Determine the sales on account in the month of April.
3. Determine total cash receipts on account from customers during April.
B-115
SOLUTION
Requirement 1
Accounts Receivable Subsidiary Ledger
April 1
Accounts Receivable Subsidiary Ledger
April 30
B-116
Requirement 2
Sales on Account
Date
Customer
Amount
Apr. 8
Jacques LeHavre
$ 2,400
Requirement 3
Invoice
Cash
Date
Customer
Amount
Receipts
Apr. 3
Garcia Sales
$ 450
$ 450
5
Sally Jones
1,100
1,100
Jacques LeHavre
2,400
2,400
Sally Jones
Jacques LeHavre
Leewright, Inc.
1,500
1,500
Total
$ 6,550
$ 6,550
Sally Jones
Leewright, Inc.
2,600
Jacques LeHavre
Sally Jones
2,000
Garcia Sales
3,600
Garcia Sales
1,100
Total
Fraud Case B–1
Didrikson Rubin, the auditor of Red Barn Farm Equipment, was verifying cash payments to vendors for
the past several months. She noticed that several checks had been paid to a specific vendor, but she
couldn’t find a record of the transactions in the computerized system. Didrikson suspects that an
employee is issuing checks to a fictitious “vendor” and then deleting the transactions from the
computerized system. How might Didrikson investigate the suspected fraud?
SOLUTION
Team Project B–1
Ace Moving is considering investing in an entry-level computerized accounting information system.
Ace needs a system that can record customer invoices and cash receipts. In addition, it would like to
track all of its bills and cash payments. As a team, investigate the two common entry-level accounting
software products: QuickBooks and Sage 50 Accounting. Prepare a PowerPoint presentation that
summarizes the similarities and differences between the two software systems.
SOLUTION
Communication Activity B–1
In 150 words or fewer, explain what an accounting information system is and describe an effective
system.
SOLUTION
An accounting information system (AIS) collects, records, stores, and processes accounting data to