Financial Accounting Transactions
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Financial Accounting Transactions...
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Chapter 2 and
Financial Statements Accounting Transactions
QUESTIONS EXERCISES Exercise 2-1 (10 minutes) a) $80,000 – $65,000 = $15,000 net income b) $92,000 – $149,000 = $57,000 net loss c) $10,000 + 0 – 0 + x = $86,000 x = $86,000 – $10,000 x = $76,000 net income
d) $25,000 + $40,000 – 0 + x = $52,000 x = 52,000 – 25,000 – 40,000 x = –$13,000 or a $13,000 Net loss
Exercise 2-2 (15 minutes) (a) Answers
(b)
(c)
(d)
(e)
$ (24,750) $36,000 $12,000 $21,500 $92,000
Proofs: Owner’s equity, January 1................. $
0
$
0 $
0
$
0 $92,000
Owner’s investments during the year ..................................60,000
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36,000
31,500
37,000 150,000
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Net income (loss) for the 15,750 year .................................................................
40,500
(4,500) 21,500
(8,000)
Owner’s withdrawals during the year ................................. (24,750) (27,000) (15,000) (15,750) (63,000) Owner’s equity, December $51,000 $49,500 $12,000 $42,750 $171,00 31 ..................................................................... 0
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Exercise 2-3 (15 minutes) THE DOBBS GROUP Income Statement For Month Ended November 30, 2011 Revenues: Consulting fees earned .................................. Operating expenses: Salaries expense ............................................ Rent expense .................................................. Telephone expense ........................................ Utilities expenses ........................................... Total operating expenses ........................... Net income .............................................................
$18,000 $6,000 2,550 1,680 660
10,890 $ 7,110
Exercise 2-4 (15 minutes) THE DOBBS GROUP Statement of Owner’s Equity For Month Ended November 30, 2011 Jean Dobbs, capital, November 1 .................... Add: Investments by owner .......................... Net income ............................................. Total ............................................................ Less: Withdrawals by owner ............................ Jean Dobbs, capital, November 30 ..................
$ 84,000 7,110
0
91,110 $91,110 3,360 $87,750
Analysis component:
The owner, Jean Dobbs, invested $84,000 of assets during the month, which caused equity to increase. Also, net income earned during the month was $7,110 also causing equity to increase during November. The total increases in equity during the month were a total of $91,110 ($84,000 + $7,110). NOTE: Students might point out that equity decreased by a total of $3,360 in withdrawals which in combination with the total increase of $91,110 caused a net increase in equity of $87,750.
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Exercise 2-5 (15 minutes) THE DOBBS GROUP Balance Sheet November 30, 2011 Assets Cash .............................................. Accounts receivable .................... Office supplies ............................. Automobiles ................................. Office equipment .......................... Total assets ..................................
$12,000 17,000 2,250 36,000 28,000 $95,250
Liabilities Accounts payable ................... Owner’s Equity Jean Dobbs, capital ................ Total liabilities and owner’s equity.....................
$ 7,500 87,750 $95,250
Analysis component:
$87,750 (or 92.13% calculated as $87,750/$95,250 × 100) of the total $95,250 assets are owned by Jean Dobbs, the owner of The Dobbs Group. Exercise 2-6 (15 minutes) EXCEL LEARNING SERVICES Income Statement For Month Ended July 31, 2011 Revenues: Tutoring fees earned ...................................... Textbook rental revenue ................................ Total revenues ............................................ Operating expenses: Office rent expense ........................................ Tutors wages expense ................................... Utilities expense ............................................. Total operating expenses ........................... Net loss ..................................................................
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$4,200 300 $ 4,500 $2,500 1,540 580
4,620 $ 120
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Exercise 2-7 (15 minutes) EXCEL LEARNING SERVICES Statement of Owner’s Equity For Month Ended July 31, 2011 George Pelzer, capital, July 1 .......................... Add: Investments by owner .......................... Total ............................................................ Less: Withdrawals by owner ............................ Net loss .................................................... George Pelzer, capital, July 31 ........................
$ 1,000 120
$ 7,400 1,200 $ 8,600 1,120 $ 7,480
Analysis component: Withdrawals of $1,000 by the owner, George Pelzer, caused equity to decrease during July, 2011. Also, the net loss of $120 caused equity to decrease in July. The total decrease in equity during the month of July was $1,120 (calculated as $1,000 + $120). NOTE: Students might point out that equity increased by $1,200 of owner investments which, in combination with the total decrease of $1,120, caused a net increase in equity of $80. Exercise 2-8 (15 minutes) EXCEL LEARNING SERVICES Balance Sheet July 31, 2011 Assets Cash .............................................. Accounts receivable .................... Supplies ........................................ Furniture ....................................... Computer equipment ...................
$ 1,600 2,680 600 1,800 2,200
Total assets ...................................................
$8,880
Liabilities Accounts payable ...................
$ 1,400
Owner’s Equity George Pelzer, capital ............ Total liabilities and
7,480
owner’s equity................................
$8,880
Analysis component: $1,400 or 15.77% (calculated as $1,400/$8,880 × 100) of the total $8,880 assets held by Excel Learning Services are financed by debt. Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 3
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Exercise 2-9 (10 minutes)
Description B D
1. Requires every business to be accounted for separately from its owner or owners. 2. Requires financial statement information to be supported by evidence other than someone’s opinion or imagination.
A
3. Requires financial statement information to be based on costs incurred in transactions.
E
4. Requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold. 5. Requires revenue to be recorded only when the earnings process is complete.
C
Exercise 2-10 (20 minutes) a.
Assets – Liabilities = Owner’s Equity Beginning of the year ...................... $ 150,000 – $60,000 = $90,000 End of the year ................................. $240,000 – $92,000 = 148,000 Net increase in owner’s equity ............................................................... $58,000 Net income ............................................................................................... $58,000 (Because there were no additional investments or withdrawals, the net income for the year equals the net increase in owner’s equity.)
b. Net increase in owner’s equity ................................... Add: Withdrawals (12 months @ $3,500) ................... Net income ...................................................................
$58,000 42,000 $100,000
An alternative calculation: $90,000 + x - $42,000 = $148,000; x = $100,000 c.
Net increase in owner’s equity ................................... Less: Additional investment ....................................... Net loss.........................................................................
$58,000 65,000 $ 7,000
An alternative calculation: $90,000 + $65,000 + x = $148,000; x = ($7,000) where the negative represents a loss. d. Net increase in owner’s equity ................................... Add: Withdrawals (12 months @ $3,500) ................... Gross increase in owner’s equity ............................... Less: Additional investment ....................................... Net income ................................................................... Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 3
$58,000 42,000 $100,000 50,000 $50,000 7
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An alternative calculation: $90,000 + $50,000 - $42,000 + x = $148,000; x = $50,000 Exercise 2-11 (10 minutes) a. If assets decreased by $5,000 during August, then $20,000 + $5,000 = $25,000 Assets at August 1, 2011. Therefore, Owner’s Equity at August 1, 2011 = $25,000 - $1,000 = $24,000
b. If liabilities increased by $3,000 during August, then $1,000 + $3,000 = $4,000 Liabilities at August 31, 2011. Therefore, Owner’s Equity at August 31, 2011 = $20,000 - $4,000 = $16,000 Exercise 2-12 (15 minutes) Assets Cash a)
Accounts Payable
Noel Bridges, + Capital + $2,500
2,500
2,500
b) Totals
Totals
Accounts Office + Receivable + Supplies =
+ $2,500
Totals
c)
Liabilities + Owner’s Equity
2,500 +
+ $200
+ $200
200
200
600 3,100
2,500 +
200
200
600 3,100
d)*
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Totals e) Totals
3,100
200
3,100
– 1,500
– 1,500
1,600
f) Totals
200
200
200
1,600
+ $1,250 $1,600
$1,250
+ 1,250 $200
$3,050
$200 =
$2,850 $3,050
*Note: For (d), since no exchange has occurred, no entry is required.
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Exercise 2-13 (20 minutes) Assets Cash
Liabilities + Owner’s Equity
Accounts Parts Equipmen Accounts Janine Commry, + Receivable + Supplies + t = Payable + Capital
a)
+ $7,000
+ $ 7,000
b)
- 2,500
- 2,500
Totals
$4,500
$ 4,500
c) Totals
e) Totals
+ $1,200
$1,200
$1,200
$4,500
d) Totals
+ $1,200
+ $3,400 $4,500
$3,400
$ 4,500 + $ 3,400
$1,200
– $ 950
$1,200
$7,900
+ $950
$3,550
$3,400
$1,200
$950
$1,200
$7,900
$3,550
$3,400
$1,200
$950
$1,200
$ 7,900
f)* Totals g) Totals h) Totals i) Totals
– $1,200 $2,350
– $1,200 $3,400
$1,200
$950
$
0
+ $1,400 $3,750
+ $ 1,400 $3,400
$1,200
$950
$
0
– $2,700 $1,050
$7,900
$9,300 – $ 2,700
$3,400
$1,200
$950
$6,600
$
=
0
$6,600
$6,600
*Note: For (f), since no exchange has occurred, no entry is required. Exercise 2-14: (15 minutes) b. Office Supplies were purchased paying cash of $500. c. Office Furniture was purchased paying cash of $8,000. Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 3
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d. e. f. g.
Completed work for a client on credit; $1,000. Purchased office supplies on credit; $400. Paid $250 to a creditor. Collected $750 cash from a credit customer.
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Exercise 2-15 (10 minutes) a) b) c) d) e) f) g) h)
The business purchased land paying $3,000. $400 of office supplies were purchased on credit (or on account). Paid $700 for the purchase of office supplies $1,050 of revenue on account (or on credit) was earned. Collected $1,000 cash for revenue performed. Paid $400 to a creditor. Collected $1,050 from a credit customer. The owner invested $5,000 of land.
Exercise 2-16 (30 minutes) Cash
+ Accounts Receivable
a. $25,000 Investment
+
Equip- = ment
Accounts + Ellen Manson, Explanation Payable Capital of Change
$5,000
$30,000
b. – 1,300 Rent Expense
–$1,300
$23,700
$5,000
c. $23,700
$28,700
+6,000
+6,000
$11,000
$6,000
d. + 500 Revenue
+
$24,200 e. Revenue
f.
$11,000
$6,000
+$1,000
$24,200
$1,000
– 4,000 $20,200
$29,200
$11,000
$6,000
$30,200
$6,000
$30,200
+ 4,000 $1,000
$15,000
– 1,200
$19,000
$1,000
+
– 250
250
500
+ 1,000
g. – 1,200 Wages Expense
h.
$28,700
$15,000
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$6,000
$29,000
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$19,250 i.
$750
$15,000
$6,000
–6,000 $13,250
$29,000
– 6,000 $750
$15,000
$
0
$29,000
j. – 250 Withdrawal $13,000
– $750
$15,000
$28,750 Revenue ($500 + $1,000)
– –
$
= Expenses ($1,300 + $1,200)
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= =
0
250
$28,750
$28,750 Net loss $1,000
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Exercise 2-17 (15 minutes) (Answers may vary.) Possible examples include: a.
The business purchases office supplies (or some other asset) for cash.
b. The owner withdraws cash (or some other asset) from the business; also, the business incurs an expense paid with cash. c.
The business incurs an expense on credit.
d. The business purchases equipment (or some other asset) on credit. e.
The owner invests cash (or some other asset); or, the business earns a revenue and accepts cash or an account receivable.
f.
The business pays an account payable (or some other liability) with cash.
Exercise 2-18 (20 minutes) Assets Cash
Liabilitie + s
+ Accounts + Supplies + Equipmen = Accounts + Annie Explanation Receivable t Payable Deweerd, Capital
a) b) Totals
d) Totals
Owner +$2,500 Investment
+ $2,500 + $4,000 $4,000
+$4,000 Revenue $
0
c) Totals
Owner’s Equity
$ 0
$2,500
+ $150 $4,000
$
0
$150
$ 0
$6,500
+ $150 $2,500
$150
– $ 450
$6,500 – $ 450 Sal. Expense
$3,550
$
0
$150
$2,500
$150
$6,050
$3,550
$
0
$150
$2,500
$150
$6,050
e)* Totals f) Totals g)
– $ 1,400 $2,150
– $ 1,400 Rent Expense $
0
$150
+ $2,000
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$2,500
$150
$4,650 +$2,000 Revenue
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Totals
$2,150
$2,000
$150
$6,800
$2,500
$150 =
$6,650
$6,800
*Note: For (e), since no exchange has occurred, no entry is required.
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Exercise 2-19 (25 minutes) Annie Deweerd – Freelance Writing Income Statement For Month Ended March 31, 2011
Revenues: Freelance writing revenue
$6,000
Operating expenses: Salaries expense
$ 450
Rent expense
1,400
Total operating expenses
1,850 $4,15 0
Net income
Annie Deweerd – Freelance Writing Statement of Owner’s Equity For Month Ended March 31, 2011
Annie Deweerd, capital, March 1 Add: Investment by owner Net income Annie Deweerd, capital, March 31
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$
0
$2,500 4,15 0
6,650 $6,65 0
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Annie Deweerd – Freelance Writing Balance Sheet March 31, 2011 Liabilities
Assets Cash
$2,15 0
Accounts receivable
2,000
Supplies Equipment
Accounts payable
$ 15 0
150 2,500 Owner’s Equity Annie Deweerd, capital
Total assets
$6,80 0
6,650
Total liabilities and owner’s $6,80 equity 0
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Exercise 2-19 (concluded) Analysis component: a. Supplies of $150 were financed by accounts payable, a liability. b. Equipment of $2,500 was financed by owner investment, an equity transaction. c. Cash of $2,150 and Accounts receivable of $2,000 were financed by net income of $4,150. Net income includes the equity transactions of revenues and expenses (revenues of $6,000 less expenses of $1,850). Exercise 2-20 (20 minutes) Assets Cash
a)
+
$500 +$400 $500
Owner +$15,500 Investment
+$15,000
$
0
c) Totals
Owner’s Equity
+ Accounts + Supplies + Equipmen = Accounts + Pete Jong, Explanation Receivable t Payable Capital
b) Totals
Liabilitie + s
$400
+$400 $15,000
+$600
$400
$15,500
+$600
$500
$
0
$1,000
$15,000
$1,000
$15,500
$500
$
0
$1,000
$15,000
$1,000
$15,500
d)* Totals e) Totals
+$550 $500
f)
$550
+$550 Revenue $1,000
$15,000
$1,000
+$600
Totals
$500
g)
-$200
Totals
$300
h)
-$250
$1,150
$16,050 +$600 Revenue
$1,000
$15,000
$1,000
$16,650
-$200 $1,150
$1,000
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$15,000
$800
$16,650 -$250 Adv. Expense
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Totals
$50
$1,150
$1,000
$17,200
$15,000
$800 =
$16,400
$17,200
*Note: For (d), since no exchange has occurred, no entry is required.
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Exercise 2-21 (25 minutes) Pete’s Yard Care Income Statement For Month Ended March 31, 2011 Revenues: Yard care revenue
$1,150
Operating expenses: Advertising expense
250
Net income
$ 900 Pete’s Yard Care Statement of Owner’s Equity For Month Ended March 31, 2011
Pete Jong, capital, March 1
$
Add: Investment by owner
0
$15,500
Net income
900
16,400 $16,40 0
Pete Jong, capital, March 31
Pete’s Yard Care Balance Sheet March 31, 2011 Liabilities
Assets Cash
$ 50
Accounts receivable
1,150
Accounts payable
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$ 800
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Supplies Equipment
1,000 15,000 Owner’s Equity Pete Jong, capital
16,400
Total liabilities and Total assets
$17,200
owner’s equity
$17,20 0
Analysis component: The $900 of net income does not represent cash because all of the revenues ($550 + $600 = $1,150) were on account. The $250 of advertising expense was paid in cash. The net income or net loss on an income statement represents accrual net income (loss) as opposed to a cash basis net income (loss). Recall that accrual basis net income represents revenues and expenses that occurred regardless of when cash is actually received/paid.
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Exercise 2-22 (20 minutes) Assets Cash
Owner’s Equity
+ Accounts + Supplies + Equipmen = Accounts + Otto Ingles, Explanatio Receivable t Payable Capital n
Bal.
$4,000
$1,200
a)
+$1,000
-$1,000
Totals
$5,000
$200
b)
-$2,000
Totals
$3,000
c)
+$700
Totals
$3,700
d)
-$500
Totals
$3,200
e)
-$1,200
Totals
$2,000
f)
-$600
Totals
$1,400
g) Totals
Liabilitie + s
$900
$7,500
$4,000
$9,600
$900
$7,500
$4,000
$9,600
-$2,000 $200
$900
$7,500
$2,000
$9,600 +$700 Revenue
$200
$900
$7,500
$2,000
$10,300 -$500 Wage Exp.
$200
$900
$7,500
$2,000
$9,800 -$1,200 Rent Exp.
$200
$900
$7,500
$2,000
$8,600 -$600 Utilities Exp.
$200
$900
$7,500
$2,000
+$400
$8,000 +$400 Revenue
$1,400
$600
$900
$7,500
$2,000
$8,400
$1,400
$600
$900
$7,500
$2,000
$8,400
h)* Totals
$10,400
=
$10,400
*Note: For (h), since no exchange has occurred, no entry is required.
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Exercise 2-23 (25 minutes) Otto’s Wrecking Service Income Statement For Month Ended July 31, 2011 Revenues: Wrecking revenue
$1,100
Operating expenses: Rent expense
$ 1,200
Wages expense
500
Utilities expense
600
Total operating expenses
2,300 $1,20 0
Net loss
Otto’s Wrecking Service Statement of Owner’s Equity For Month Ended July 31, 2011 Otto Ingles, capital, July 1
$ 9,600
Less: Net loss
1,200 $ 8,40 0
Otto Ingles, capital, July 31
Otto’s Wrecking Service Balance Sheet July 31, 2011
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Liabilities
Assets Cash
$1,400
Accounts receivable
600
Supplies
900
Equipment
Accounts payable
$ 2,000
7,500 Owner’s Equity Otto Ingles, capital
8,400
Total liabilities and Total assets
$10,400
owner’s equity
$10,40 0
Analysis component: $8,400 or 80.77% (calculated as $8,400/$10,400 × 100) of the assets are financed by Otto Ingles, the owner. $2,000 or 19.23% (calculated as $2,000/$10,400 × 100) of the assets are financed by debt.
Chapter 2 and
Financial Statements Accounting Transactions
QUESTIONS EXERCISES Exercise 2-1 (10 minutes) e) $80,000 – $65,000 = $15,000 net income f) $92,000 – $149,000 = $57,000 net loss g) $10,000 + 0 – 0 + x = $86,000 x = $86,000 – $10,000 Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 3
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x = $76,000 net income
h) $25,000 + $40,000 – 0 + x = $52,000 x = 52,000 – 25,000 – 40,000 x = –$13,000 or a $13,000 Net loss
Exercise 2-2 (15 minutes) (a) Answers
(b)
(c)
(d)
(e)
$ (24,750) $36,000 $12,000 $21,500 $92,000
Proofs: Owner’s equity, January 1................. $
0
$
0 $
0
$
0 $92,000
Owner’s investments during the year ..................................60,000
36,000
31,500
37,000 150,000
Net income (loss) for the 15,750 year .................................................................
40,500
(4,500) 21,500
(8,000)
Owner’s withdrawals during the year ................................. (24,750) (27,000) (15,000) (15,750) (63,000) Owner’s equity, December $51,000 $49,500 $12,000 $42,750 $171,00 31 ..................................................................... 0
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Exercise 2-3 (15 minutes) THE DOBBS GROUP Income Statement For Month Ended November 30, 2011 Revenues: Consulting fees earned .................................. Operating expenses: Salaries expense ............................................ Rent expense .................................................. Telephone expense ........................................ Utilities expenses ........................................... Total operating expenses ........................... Net income .............................................................
$18,000 $6,000 2,550 1,680 660
10,890 $ 7,110
Exercise 2-4 (15 minutes) THE DOBBS GROUP Statement of Owner’s Equity For Month Ended November 30, 2011 Jean Dobbs, capital, November 1 .................... Add: Investments by owner .......................... Net income ............................................. Total ............................................................ Less: Withdrawals by owner ............................ Jean Dobbs, capital, November 30 ..................
$ 84,000 7,110
0
91,110 $91,110 3,360 $87,750
Analysis component:
The owner, Jean Dobbs, invested $84,000 of assets during the month, which caused equity to increase. Also, net income earned during the month was $7,110 also causing equity to increase during November. The total increases in equity during the month were a total of $91,110 ($84,000 + $7,110). NOTE: Students might point out that equity decreased by a total of $3,360 in withdrawals which in combination with the total increase of $91,110 caused a net increase in equity of $87,750.
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Exercise 2-5 (15 minutes) THE DOBBS GROUP Balance Sheet November 30, 2011 Assets Cash .............................................. Accounts receivable .................... Office supplies ............................. Automobiles ................................. Office equipment .......................... Total assets ..................................
$12,000 17,000 2,250 36,000 28,000 $95,250
Liabilities Accounts payable ................... Owner’s Equity Jean Dobbs, capital ................ Total liabilities and owner’s equity.....................
$ 7,500 87,750 $95,250
Analysis component:
$87,750 (or 92.13% calculated as $87,750/$95,250 × 100) of the total $95,250 assets are owned by Jean Dobbs, the owner of The Dobbs Group. Exercise 2-6 (15 minutes) EXCEL LEARNING SERVICES Income Statement For Month Ended July 31, 2011 Revenues: Tutoring fees earned ...................................... Textbook rental revenue ................................ Total revenues ............................................ Operating expenses: Office rent expense ........................................ Tutors wages expense ................................... Utilities expense ............................................. Total operating expenses ........................... Net loss ..................................................................
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$4,200 300 $ 4,500 $2,500 1,540 580
4,620 $ 120
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Exercise 2-7 (15 minutes) EXCEL LEARNING SERVICES Statement of Owner’s Equity For Month Ended July 31, 2011 George Pelzer, capital, July 1 .......................... Add: Investments by owner .......................... Total ............................................................ Less: Withdrawals by owner ............................ Net loss .................................................... George Pelzer, capital, July 31 ........................
$ 1,000 120
$ 7,400 1,200 $ 8,600 1,120 $ 7,480
Analysis component: Withdrawals of $1,000 by the owner, George Pelzer, caused equity to decrease during July, 2011. Also, the net loss of $120 caused equity to decrease in July. The total decrease in equity during the month of July was $1,120 (calculated as $1,000 + $120). NOTE: Students might point out that equity increased by $1,200 of owner investments which, in combination with the total decrease of $1,120, caused a net increase in equity of $80. Exercise 2-8 (15 minutes) EXCEL LEARNING SERVICES Balance Sheet July 31, 2011 Assets Cash .............................................. Accounts receivable .................... Supplies ........................................ Furniture ....................................... Computer equipment ...................
$ 1,600 2,680 600 1,800 2,200
Total assets ...................................................
$8,880
Liabilities Accounts payable ...................
$ 1,400
Owner’s Equity George Pelzer, capital ............ Total liabilities and
7,480
owner’s equity................................
$8,880
Analysis component: $1,400 or 15.77% (calculated as $1,400/$8,880 × 100) of the total $8,880 assets held by Excel Learning Services are financed by debt. Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 3
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Exercise 2-9 (10 minutes)
Description B D
1. Requires every business to be accounted for separately from its owner or owners. 2. Requires financial statement information to be supported by evidence other than someone’s opinion or imagination.
A
3. Requires financial statement information to be based on costs incurred in transactions.
E
4. Requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold. 5. Requires revenue to be recorded only when the earnings process is complete.
C
Exercise 2-10 (20 minutes) a.
Assets – Liabilities = Owner’s Equity Beginning of the year ...................... $ 150,000 – $60,000 = $90,000 End of the year ................................. $240,000 – $92,000 = 148,000 Net increase in owner’s equity ............................................................... $58,000 Net income ............................................................................................... $58,000 (Because there were no additional investments or withdrawals, the net income for the year equals the net increase in owner’s equity.)
b. Net increase in owner’s equity ................................... Add: Withdrawals (12 months @ $3,500) ................... Net income ...................................................................
$58,000 42,000 $100,000
An alternative calculation: $90,000 + x - $42,000 = $148,000; x = $100,000 c.
Net increase in owner’s equity ................................... Less: Additional investment ....................................... Net loss.........................................................................
$58,000 65,000 $ 7,000
An alternative calculation: $90,000 + $65,000 + x = $148,000; x = ($7,000) where the negative represents a loss. d. Net increase in owner’s equity ................................... Add: Withdrawals (12 months @ $3,500) ................... Gross increase in owner’s equity ............................... Less: Additional investment ....................................... Net income ................................................................... Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 3
$58,000 42,000 $100,000 50,000 $50,000 30
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An alternative calculation: $90,000 + $50,000 - $42,000 + x = $148,000; x = $50,000 Exercise 2-11 (10 minutes) a. If assets decreased by $5,000 during August, then $20,000 + $5,000 = $25,000 Assets at August 1, 2011. Therefore, Owner’s Equity at August 1, 2011 = $25,000 - $1,000 = $24,000
b. If liabilities increased by $3,000 during August, then $1,000 + $3,000 = $4,000 Liabilities at August 31, 2011. Therefore, Owner’s Equity at August 31, 2011 = $20,000 - $4,000 = $16,000 Exercise 2-12 (15 minutes) Assets Cash a)
Accounts Payable
Noel Bridges, + Capital + $2,500
2,500
2,500
b) Totals
Totals
Accounts Office + Receivable + Supplies =
+ $2,500
Totals
c)
Liabilities + Owner’s Equity
2,500 +
+ $200
+ $200
200
200
600 3,100
2,500 +
200
200
600 3,100
d)*
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Totals e) Totals
3,100
200
3,100
– 1,500
– 1,500
1,600
f) Totals
200
200
200
1,600
+ $1,250 $1,600
$1,250
+ 1,250 $200
$3,050
$200 =
$2,850 $3,050
*Note: For (d), since no exchange has occurred, no entry is required.
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Exercise 2-13 (20 minutes) Assets Cash
Liabilities + Owner’s Equity
Accounts Parts Equipmen Accounts Janine Commry, + Receivable + Supplies + t = Payable + Capital
a)
+ $7,000
+ $ 7,000
b)
- 2,500
- 2,500
Totals
$4,500
$ 4,500
c) Totals
e) Totals
+ $1,200
$1,200
$1,200
$4,500
d) Totals
+ $1,200
+ $3,400 $4,500
$3,400
$ 4,500 + $ 3,400
$1,200
– $ 950
$1,200
$7,900
+ $950
$3,550
$3,400
$1,200
$950
$1,200
$7,900
$3,550
$3,400
$1,200
$950
$1,200
$ 7,900
f)* Totals g) Totals h) Totals i) Totals
– $1,200 $2,350
– $1,200 $3,400
$1,200
$950
$
0
+ $1,400 $3,750
+ $ 1,400 $3,400
$1,200
$950
$
0
– $2,700 $1,050
$7,900
$9,300 – $ 2,700
$3,400
$1,200
$950
$6,600
$
=
0
$6,600
$6,600
*Note: For (f), since no exchange has occurred, no entry is required. Exercise 2-14: (15 minutes) b. Office Supplies were purchased paying cash of $500. c. Office Furniture was purchased paying cash of $8,000. Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 3
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d. e. f. g.
Completed work for a client on credit; $1,000. Purchased office supplies on credit; $400. Paid $250 to a creditor. Collected $750 cash from a credit customer.
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Exercise 2-15 (10 minutes) i) The business purchased land paying $3,000. j) $400 of office supplies were purchased on credit (or on account). k) Paid $700 for the purchase of office supplies l) $1,050 of revenue on account (or on credit) was earned. m) Collected $1,000 cash for revenue performed. n) Paid $400 to a creditor. o) Collected $1,050 from a credit customer. p) The owner invested $5,000 of land. Exercise 2-16 (30 minutes) Cash
+ Accounts Receivable
a. $25,000 Investment
+
Equip- = ment
Accounts + Ellen Manson, Explanation Payable Capital of Change
$5,000
$30,000
b. – 1,300 Rent Expense
–$1,300
$23,700
$5,000
c. $23,700
$28,700
+6,000
+6,000
$11,000
$6,000
d. + 500 Revenue
+
$24,200 e. Revenue
f.
$11,000
$6,000
+$1,000
$24,200
$1,000
– 4,000 $20,200
$29,200
$11,000
$6,000
$30,200
$6,000
$30,200
+ 4,000 $1,000
$15,000
– 1,200
$19,000
$1,000
+
– 250
250
500
+ 1,000
g. – 1,200 Wages Expense
h.
$28,700
$15,000
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$6,000
$29,000
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$19,250 i.
$750
$15,000
$6,000
–6,000 $13,250
$29,000
– 6,000 $750
$15,000
$
0
$29,000
j. – 250 Withdrawal $13,000
– $750
$15,000
$28,750 Revenue ($500 + $1,000)
– –
$
= Expenses ($1,300 + $1,200)
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= =
0
250
$28,750
$28,750 Net loss $1,000
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Exercise 2-17 (15 minutes) (Answers may vary.) Possible examples include: a.
The business purchases office supplies (or some other asset) for cash.
b. The owner withdraws cash (or some other asset) from the business; also, the business incurs an expense paid with cash. c.
The business incurs an expense on credit.
d. The business purchases equipment (or some other asset) on credit. e.
The owner invests cash (or some other asset); or, the business earns a revenue and accepts cash or an account receivable.
f.
The business pays an account payable (or some other liability) with cash.
Exercise 2-18 (20 minutes) Assets Cash
Liabilitie + s
+ Accounts + Supplies + Equipmen = Accounts + Annie Explanation Receivable t Payable Deweerd, Capital
a) b) Totals
d) Totals
Owner +$2,500 Investment
+ $2,500 + $4,000 $4,000
+$4,000 Revenue $
0
c) Totals
Owner’s Equity
$ 0
$2,500
+ $150 $4,000
$
0
$150
$ 0
$6,500
+ $150 $2,500
$150
– $ 450
$6,500 – $ 450 Sal. Expense
$3,550
$
0
$150
$2,500
$150
$6,050
$3,550
$
0
$150
$2,500
$150
$6,050
e)* Totals f) Totals g)
– $ 1,400 $2,150
– $ 1,400 Rent Expense $
0
$150
+ $2,000
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$2,500
$150
$4,650 +$2,000 Revenue
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Totals
$2,150
$2,000
$150
$6,800
$2,500
$150 =
$6,650
$6,800
*Note: For (e), since no exchange has occurred, no entry is required.
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Exercise 2-19 (25 minutes) Annie Deweerd – Freelance Writing Income Statement For Month Ended March 31, 2011
Revenues: Freelance writing revenue
$6,000
Operating expenses: Salaries expense
$ 450
Rent expense
1,400
Total operating expenses
1,850 $4,15 0
Net income
Annie Deweerd – Freelance Writing Statement of Owner’s Equity For Month Ended March 31, 2011
Annie Deweerd, capital, March 1 Add: Investment by owner Net income Annie Deweerd, capital, March 31
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$
0
$2,500 4,15 0
6,650 $6,65 0
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Annie Deweerd – Freelance Writing Balance Sheet March 31, 2011 Liabilities
Assets Cash
$2,15 0
Accounts receivable
2,000
Supplies Equipment
Accounts payable
$ 15 0
150 2,500 Owner’s Equity Annie Deweerd, capital
Total assets
$6,80 0
6,650
Total liabilities and owner’s $6,80 equity 0
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Exercise 2-19 (concluded) Analysis component: d. Supplies of $150 were financed by accounts payable, a liability. e. Equipment of $2,500 was financed by owner investment, an equity transaction. f. Cash of $2,150 and Accounts receivable of $2,000 were financed by net income of $4,150. Net income includes the equity transactions of revenues and expenses (revenues of $6,000 less expenses of $1,850). Exercise 2-20 (20 minutes) Assets Cash
a)
+
$500 +$400 $500
Owner +$15,500 Investment
+$15,000
$
0
c) Totals
Owner’s Equity
+ Accounts + Supplies + Equipmen = Accounts + Pete Jong, Explanation Receivable t Payable Capital
b) Totals
Liabilitie + s
$400
+$400 $15,000
+$600
$400
$15,500
+$600
$500
$
0
$1,000
$15,000
$1,000
$15,500
$500
$
0
$1,000
$15,000
$1,000
$15,500
d)* Totals e) Totals
+$550 $500
f)
$550
+$550 Revenue $1,000
$15,000
$1,000
+$600
Totals
$500
g)
-$200
Totals
$300
h)
-$250
$1,150
$16,050 +$600 Revenue
$1,000
$15,000
$1,000
$16,650
-$200 $1,150
$1,000
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$15,000
$800
$16,650 -$250 Adv. Expense
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Totals
$50
$1,150
$1,000
$17,200
$15,000
$800 =
$16,400
$17,200
*Note: For (d), since no exchange has occurred, no entry is required.
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Exercise 2-21 (25 minutes) Pete’s Yard Care Income Statement For Month Ended March 31, 2011 Revenues: Yard care revenue
$1,150
Operating expenses: Advertising expense
250
Net income
$ 900 Pete’s Yard Care Statement of Owner’s Equity For Month Ended March 31, 2011
Pete Jong, capital, March 1
$
Add: Investment by owner
0
$15,500
Net income
900
16,400 $16,40 0
Pete Jong, capital, March 31
Pete’s Yard Care Balance Sheet March 31, 2011 Liabilities
Assets Cash
$ 50
Accounts receivable
1,150
Accounts payable
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$ 800
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Supplies Equipment
1,000 15,000 Owner’s Equity Pete Jong, capital
16,400
Total liabilities and Total assets
$17,200
owner’s equity
$17,20 0
Analysis component: The $900 of net income does not represent cash because all of the revenues ($550 + $600 = $1,150) were on account. The $250 of advertising expense was paid in cash. The net income or net loss on an income statement represents accrual net income (loss) as opposed to a cash basis net income (loss). Recall that accrual basis net income represents revenues and expenses that occurred regardless of when cash is actually received/paid.
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Exercise 2-22 (20 minutes) Assets Cash
Owner’s Equity
+ Accounts + Supplies + Equipmen = Accounts + Otto Ingles, Explanatio Receivable t Payable Capital n
Bal.
$4,000
$1,200
a)
+$1,000
-$1,000
Totals
$5,000
$200
b)
-$2,000
Totals
$3,000
c)
+$700
Totals
$3,700
d)
-$500
Totals
$3,200
e)
-$1,200
Totals
$2,000
f)
-$600
Totals
$1,400
g) Totals
Liabilitie + s
$900
$7,500
$4,000
$9,600
$900
$7,500
$4,000
$9,600
-$2,000 $200
$900
$7,500
$2,000
$9,600 +$700 Revenue
$200
$900
$7,500
$2,000
$10,300 -$500 Wage Exp.
$200
$900
$7,500
$2,000
$9,800 -$1,200 Rent Exp.
$200
$900
$7,500
$2,000
$8,600 -$600 Utilities Exp.
$200
$900
$7,500
$2,000
+$400
$8,000 +$400 Revenue
$1,400
$600
$900
$7,500
$2,000
$8,400
$1,400
$600
$900
$7,500
$2,000
$8,400
h)* Totals
$10,400
=
$10,400
*Note: For (h), since no exchange has occurred, no entry is required.
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Exercise 2-23 (25 minutes) Otto’s Wrecking Service Income Statement For Month Ended July 31, 2011 Revenues: Wrecking revenue
$1,100
Operating expenses: Rent expense
$ 1,200
Wages expense
500
Utilities expense
600
Total operating expenses
2,300 $1,20 0
Net loss
Otto’s Wrecking Service Statement of Owner’s Equity For Month Ended July 31, 2011 Otto Ingles, capital, July 1
$ 9,600
Less: Net loss
1,200 $ 8,40 0
Otto Ingles, capital, July 31
Otto’s Wrecking Service Balance Sheet July 31, 2011
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Liabilities
Assets Cash
$1,400
Accounts receivable
600
Supplies
900
Equipment
Accounts payable
$ 2,000
7,500 Owner’s Equity Otto Ingles, capital
8,400
Total liabilities and Total assets
$10,400
owner’s equity
$10,40 0
Analysis component: $8,400 or 80.77% (calculated as $8,400/$10,400 × 100) of the assets are financed by Otto Ingles, the owner. $2,000 or 19.23% (calculated as $2,000/$10,400 × 100) of the assets are financed by debt.
Chapter 2 and
Financial Statements Accounting Transactions
QUESTIONS EXERCISES Exercise 2-1 (10 minutes) i) $80,000 – $65,000 = $15,000 net income j) $92,000 – $149,000 = $57,000 net loss k) $10,000 + 0 – 0 + x = $86,000 x = $86,000 – $10,000 Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 3
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x = $76,000 net income
l) $25,000 + $40,000 – 0 + x = $52,000 x = 52,000 – 25,000 – 40,000 x = –$13,000 or a $13,000 Net loss
Exercise 2-2 (15 minutes) (a) Answers
(b)
(c)
(d)
(e)
$ (24,750) $36,000 $12,000 $21,500 $92,000
Proofs: Owner’s equity, January 1................. $
0
$
0 $
0
$
0 $92,000
Owner’s investments during the year ..................................60,000
36,000
31,500
37,000 150,000
Net income (loss) for the 15,750 year .................................................................
40,500
(4,500) 21,500
(8,000)
Owner’s withdrawals during the year ................................. (24,750) (27,000) (15,000) (15,750) (63,000) Owner’s equity, December $51,000 $49,500 $12,000 $42,750 $171,00 31 ..................................................................... 0
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Exercise 2-3 (15 minutes) THE DOBBS GROUP Income Statement For Month Ended November 30, 2011 Revenues: Consulting fees earned .................................. Operating expenses: Salaries expense ............................................ Rent expense .................................................. Telephone expense ........................................ Utilities expenses ........................................... Total operating expenses ........................... Net income .............................................................
$18,000 $6,000 2,550 1,680 660
10,890 $ 7,110
Exercise 2-4 (15 minutes) THE DOBBS GROUP Statement of Owner’s Equity For Month Ended November 30, 2011 Jean Dobbs, capital, November 1 .................... Add: Investments by owner .......................... Net income ............................................. Total ............................................................ Less: Withdrawals by owner ............................ Jean Dobbs, capital, November 30 ..................
$ 84,000 7,110
0
91,110 $91,110 3,360 $87,750
Analysis component:
The owner, Jean Dobbs, invested $84,000 of assets during the month, which caused equity to increase. Also, net income earned during the month was $7,110 also causing equity to increase during November. The total increases in equity during the month were a total of $91,110 ($84,000 + $7,110). NOTE: Students might point out that equity decreased by a total of $3,360 in withdrawals which in combination with the total increase of $91,110 caused a net increase in equity of $87,750.
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Exercise 2-5 (15 minutes) THE DOBBS GROUP Balance Sheet November 30, 2011 Assets Cash .............................................. Accounts receivable .................... Office supplies ............................. Automobiles ................................. Office equipment .......................... Total assets ..................................
$12,000 17,000 2,250 36,000 28,000 $95,250
Liabilities Accounts payable ................... Owner’s Equity Jean Dobbs, capital ................ Total liabilities and owner’s equity.....................
$ 7,500 87,750 $95,250
Analysis component:
$87,750 (or 92.13% calculated as $87,750/$95,250 × 100) of the total $95,250 assets are owned by Jean Dobbs, the owner of The Dobbs Group. Exercise 2-6 (15 minutes) EXCEL LEARNING SERVICES Income Statement For Month Ended July 31, 2011 Revenues: Tutoring fees earned ...................................... Textbook rental revenue ................................ Total revenues ............................................ Operating expenses: Office rent expense ........................................ Tutors wages expense ................................... Utilities expense ............................................. Total operating expenses ........................... Net loss ..................................................................
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$4,200 300 $ 4,500 $2,500 1,540 580
4,620 $ 120
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Exercise 2-7 (15 minutes) EXCEL LEARNING SERVICES Statement of Owner’s Equity For Month Ended July 31, 2011 George Pelzer, capital, July 1 .......................... Add: Investments by owner .......................... Total ............................................................ Less: Withdrawals by owner ............................ Net loss .................................................... George Pelzer, capital, July 31 ........................
$ 1,000 120
$ 7,400 1,200 $ 8,600 1,120 $ 7,480
Analysis component: Withdrawals of $1,000 by the owner, George Pelzer, caused equity to decrease during July, 2011. Also, the net loss of $120 caused equity to decrease in July. The total decrease in equity during the month of July was $1,120 (calculated as $1,000 + $120). NOTE: Students might point out that equity increased by $1,200 of owner investments which, in combination with the total decrease of $1,120, caused a net increase in equity of $80. Exercise 2-8 (15 minutes) EXCEL LEARNING SERVICES Balance Sheet July 31, 2011 Assets Cash .............................................. Accounts receivable .................... Supplies ........................................ Furniture ....................................... Computer equipment ...................
$ 1,600 2,680 600 1,800 2,200
Total assets ...................................................
$8,880
Liabilities Accounts payable ...................
$ 1,400
Owner’s Equity George Pelzer, capital ............ Total liabilities and
7,480
owner’s equity................................
$8,880
Analysis component: $1,400 or 15.77% (calculated as $1,400/$8,880 × 100) of the total $8,880 assets held by Excel Learning Services are financed by debt. Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 3
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Exercise 2-9 (10 minutes)
Description B D
1. Requires every business to be accounted for separately from its owner or owners. 2. Requires financial statement information to be supported by evidence other than someone’s opinion or imagination.
A
3. Requires financial statement information to be based on costs incurred in transactions.
E
4. Requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold. 5. Requires revenue to be recorded only when the earnings process is complete.
C
Exercise 2-10 (20 minutes) a.
Assets – Liabilities = Owner’s Equity Beginning of the year ...................... $ 150,000 – $60,000 = $90,000 End of the year ................................. $240,000 – $92,000 = 148,000 Net increase in owner’s equity ............................................................... $58,000 Net income ............................................................................................... $58,000 (Because there were no additional investments or withdrawals, the net income for the year equals the net increase in owner’s equity.)
b. Net increase in owner’s equity ................................... Add: Withdrawals (12 months @ $3,500) ................... Net income ...................................................................
$58,000 42,000 $100,000
An alternative calculation: $90,000 + x - $42,000 = $148,000; x = $100,000 c.
Net increase in owner’s equity ................................... Less: Additional investment ....................................... Net loss.........................................................................
$58,000 65,000 $ 7,000
An alternative calculation: $90,000 + $65,000 + x = $148,000; x = ($7,000) where the negative represents a loss. d. Net increase in owner’s equity ................................... Add: Withdrawals (12 months @ $3,500) ................... Gross increase in owner’s equity ............................... Less: Additional investment ....................................... Net income ................................................................... Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 3
$58,000 42,000 $100,000 50,000 $50,000 53
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An alternative calculation: $90,000 + $50,000 - $42,000 + x = $148,000; x = $50,000 Exercise 2-11 (10 minutes) a. If assets decreased by $5,000 during August, then $20,000 + $5,000 = $25,000 Assets at August 1, 2011. Therefore, Owner’s Equity at August 1, 2011 = $25,000 - $1,000 = $24,000
b. If liabilities increased by $3,000 during August, then $1,000 + $3,000 = $4,000 Liabilities at August 31, 2011. Therefore, Owner’s Equity at August 31, 2011 = $20,000 - $4,000 = $16,000 Exercise 2-12 (15 minutes) Assets Cash a)
Accounts Payable
Noel Bridges, + Capital + $2,500
2,500
2,500
b) Totals
Totals
Accounts Office + Receivable + Supplies =
+ $2,500
Totals
c)
Liabilities + Owner’s Equity
2,500 +
+ $200
+ $200
200
200
600 3,100
2,500 +
200
200
600 3,100
d)*
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Totals e) Totals
3,100
200
3,100
– 1,500
– 1,500
1,600
f) Totals
200
200
200
1,600
+ $1,250 $1,600
$1,250
+ 1,250 $200
$3,050
$200 =
$2,850 $3,050
*Note: For (d), since no exchange has occurred, no entry is required.
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Exercise 2-13 (20 minutes) Assets Cash
Liabilities + Owner’s Equity
Accounts Parts Equipmen Accounts Janine Commry, + Receivable + Supplies + t = Payable + Capital
a)
+ $7,000
+ $ 7,000
b)
- 2,500
- 2,500
Totals
$4,500
$ 4,500
c) Totals
e) Totals
+ $1,200
$1,200
$1,200
$4,500
d) Totals
+ $1,200
+ $3,400 $4,500
$3,400
$ 4,500 + $ 3,400
$1,200
– $ 950
$1,200
$7,900
+ $950
$3,550
$3,400
$1,200
$950
$1,200
$7,900
$3,550
$3,400
$1,200
$950
$1,200
$ 7,900
f)* Totals g) Totals h) Totals i) Totals
– $1,200 $2,350
– $1,200 $3,400
$1,200
$950
$
0
+ $1,400 $3,750
+ $ 1,400 $3,400
$1,200
$950
$
0
– $2,700 $1,050
$7,900
$9,300 – $ 2,700
$3,400
$1,200
$950
$6,600
$
=
0
$6,600
$6,600
*Note: For (f), since no exchange has occurred, no entry is required. Exercise 2-14: (15 minutes) b. Office Supplies were purchased paying cash of $500. c. Office Furniture was purchased paying cash of $8,000. Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 3
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d. e. f. g.
Completed work for a client on credit; $1,000. Purchased office supplies on credit; $400. Paid $250 to a creditor. Collected $750 cash from a credit customer.
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Exercise 2-15 (10 minutes) q) The business purchased land paying $3,000. r) $400 of office supplies were purchased on credit (or on account). s) Paid $700 for the purchase of office supplies t) $1,050 of revenue on account (or on credit) was earned. u) Collected $1,000 cash for revenue performed. v) Paid $400 to a creditor. w) Collected $1,050 from a credit customer. x) The owner invested $5,000 of land. Exercise 2-16 (30 minutes) Cash
+ Accounts Receivable
a. $25,000 Investment
+
Equip- = ment
Accounts + Ellen Manson, Explanation Payable Capital of Change
$5,000
$30,000
b. – 1,300 Rent Expense
–$1,300
$23,700
$5,000
c. $23,700
$28,700
+6,000
+6,000
$11,000
$6,000
d. + 500 Revenue
+
$24,200 e. Revenue
f.
$11,000
$6,000
+$1,000
$24,200
$1,000
– 4,000 $20,200
$29,200
$11,000
$6,000
$30,200
$6,000
$30,200
+ 4,000 $1,000
$15,000
– 1,200
$19,000
$1,000
+
– 250
250
500
+ 1,000
g. – 1,200 Wages Expense
h.
$28,700
$15,000
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$6,000
$29,000
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$19,250 i.
$750
$15,000
$6,000
–6,000 $13,250
$29,000
– 6,000 $750
$15,000
$
0
$29,000
j. – 250 Withdrawal $13,000
– $750
$15,000
$28,750 Revenue ($500 + $1,000)
– –
$
= Expenses ($1,300 + $1,200)
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= =
0
250
$28,750
$28,750 Net loss $1,000
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Exercise 2-17 (15 minutes) (Answers may vary.) Possible examples include: a.
The business purchases office supplies (or some other asset) for cash.
b. The owner withdraws cash (or some other asset) from the business; also, the business incurs an expense paid with cash. c.
The business incurs an expense on credit.
d. The business purchases equipment (or some other asset) on credit. e.
The owner invests cash (or some other asset); or, the business earns a revenue and accepts cash or an account receivable.
f.
The business pays an account payable (or some other liability) with cash.
Exercise 2-18 (20 minutes) Assets Cash
Liabilitie + s
+ Accounts + Supplies + Equipmen = Accounts + Annie Explanation Receivable t Payable Deweerd, Capital
a) b) Totals
d) Totals
Owner +$2,500 Investment
+ $2,500 + $4,000 $4,000
+$4,000 Revenue $
0
c) Totals
Owner’s Equity
$ 0
$2,500
+ $150 $4,000
$
0
$150
$ 0
$6,500
+ $150 $2,500
$150
– $ 450
$6,500 – $ 450 Sal. Expense
$3,550
$
0
$150
$2,500
$150
$6,050
$3,550
$
0
$150
$2,500
$150
$6,050
e)* Totals f) Totals g)
– $ 1,400 $2,150
– $ 1,400 Rent Expense $
0
$150
+ $2,000
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$2,500
$150
$4,650 +$2,000 Revenue
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Totals
$2,150
$2,000
$150
$6,800
$2,500
$150 =
$6,650
$6,800
*Note: For (e), since no exchange has occurred, no entry is required.
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Exercise 2-19 (25 minutes) Annie Deweerd – Freelance Writing Income Statement For Month Ended March 31, 2011
Revenues: Freelance writing revenue
$6,000
Operating expenses: Salaries expense
$ 450
Rent expense
1,400
Total operating expenses
1,850 $4,15 0
Net income
Annie Deweerd – Freelance Writing Statement of Owner’s Equity For Month Ended March 31, 2011
Annie Deweerd, capital, March 1 Add: Investment by owner Net income Annie Deweerd, capital, March 31
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$
0
$2,500 4,15 0
6,650 $6,65 0
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Annie Deweerd – Freelance Writing Balance Sheet March 31, 2011 Liabilities
Assets Cash
$2,15 0
Accounts receivable
2,000
Supplies Equipment
Accounts payable
$ 15 0
150 2,500 Owner’s Equity Annie Deweerd, capital
Total assets
$6,80 0
6,650
Total liabilities and owner’s $6,80 equity 0
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Exercise 2-19 (concluded) Analysis component: g. Supplies of $150 were financed by accounts payable, a liability. h. Equipment of $2,500 was financed by owner investment, an equity transaction. i. Cash of $2,150 and Accounts receivable of $2,000 were financed by net income of $4,150. Net income includes the equity transactions of revenues and expenses (revenues of $6,000 less expenses of $1,850). Exercise 2-20 (20 minutes) Assets Cash
a)
+
$500 +$400 $500
Owner +$15,500 Investment
+$15,000
$
0
c) Totals
Owner’s Equity
+ Accounts + Supplies + Equipmen = Accounts + Pete Jong, Explanation Receivable t Payable Capital
b) Totals
Liabilitie + s
$400
+$400 $15,000
+$600
$400
$15,500
+$600
$500
$
0
$1,000
$15,000
$1,000
$15,500
$500
$
0
$1,000
$15,000
$1,000
$15,500
d)* Totals e) Totals
+$550 $500
f)
$550
+$550 Revenue $1,000
$15,000
$1,000
+$600
Totals
$500
g)
-$200
Totals
$300
h)
-$250
$1,150
$16,050 +$600 Revenue
$1,000
$15,000
$1,000
$16,650
-$200 $1,150
$1,000
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$15,000
$800
$16,650 -$250 Adv. Expense
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Totals
$50
$1,150
$1,000
$17,200
$15,000
$800 =
$16,400
$17,200
*Note: For (d), since no exchange has occurred, no entry is required.
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Exercise 2-21 (25 minutes) Pete’s Yard Care Income Statement For Month Ended March 31, 2011 Revenues: Yard care revenue
$1,150
Operating expenses: Advertising expense
250
Net income
$ 900 Pete’s Yard Care Statement of Owner’s Equity For Month Ended March 31, 2011
Pete Jong, capital, March 1
$
Add: Investment by owner
0
$15,500
Net income
900
16,400 $16,40 0
Pete Jong, capital, March 31
Pete’s Yard Care Balance Sheet March 31, 2011 Liabilities
Assets Cash
$ 50
Accounts receivable
1,150
Accounts payable
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$ 800
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Supplies Equipment
1,000 15,000 Owner’s Equity Pete Jong, capital
16,400
Total liabilities and Total assets
$17,200
owner’s equity
$17,20 0
Analysis component: The $900 of net income does not represent cash because all of the revenues ($550 + $600 = $1,150) were on account. The $250 of advertising expense was paid in cash. The net income or net loss on an income statement represents accrual net income (loss) as opposed to a cash basis net income (loss). Recall that accrual basis net income represents revenues and expenses that occurred regardless of when cash is actually received/paid.
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Exercise 2-22 (20 minutes) Assets Cash
Owner’s Equity
+ Accounts + Supplies + Equipmen = Accounts + Otto Ingles, Explanatio Receivable t Payable Capital n
Bal.
$4,000
$1,200
a)
+$1,000
-$1,000
Totals
$5,000
$200
b)
-$2,000
Totals
$3,000
c)
+$700
Totals
$3,700
d)
-$500
Totals
$3,200
e)
-$1,200
Totals
$2,000
f)
-$600
Totals
$1,400
g) Totals
Liabilitie + s
$900
$7,500
$4,000
$9,600
$900
$7,500
$4,000
$9,600
-$2,000 $200
$900
$7,500
$2,000
$9,600 +$700 Revenue
$200
$900
$7,500
$2,000
$10,300 -$500 Wage Exp.
$200
$900
$7,500
$2,000
$9,800 -$1,200 Rent Exp.
$200
$900
$7,500
$2,000
$8,600 -$600 Utilities Exp.
$200
$900
$7,500
$2,000
+$400
$8,000 +$400 Revenue
$1,400
$600
$900
$7,500
$2,000
$8,400
$1,400
$600
$900
$7,500
$2,000
$8,400
h)* Totals
$10,400
=
$10,400
*Note: For (h), since no exchange has occurred, no entry is required.
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Exercise 2-23 (25 minutes) Otto’s Wrecking Service Income Statement For Month Ended July 31, 2011 Revenues: Wrecking revenue
$1,100
Operating expenses: Rent expense
$ 1,200
Wages expense
500
Utilities expense
600
Total operating expenses
2,300 $1,20 0
Net loss
Otto’s Wrecking Service Statement of Owner’s Equity For Month Ended July 31, 2011 Otto Ingles, capital, July 1
$ 9,600
Less: Net loss
1,200 $ 8,40 0
Otto Ingles, capital, July 31
Otto’s Wrecking Service Balance Sheet July 31, 2011
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Liabilities
Assets Cash
$1,400
Accounts receivable
600
Supplies
900
Equipment
Accounts payable
$ 2,000
7,500 Owner’s Equity Otto Ingles, capital
8,400
Total liabilities and Total assets
$10,400
$10,40 0
owner’s equity
Analysis component: $8,400 or 80.77% (calculated as $8,400/$10,400 × 100) of the assets are financed by Otto Ingles, the owner. $2,000 or 19.23% (calculated as $2,000/$10,400 × 100) of the assets are financed by debt.
Chapter 3
Analyzing and Recording Transactions
EXERCISES
Exercise 3-1 (30 minutes) Cash (a)
25,500
Accounts Payable 750 (b)
(d)
3,000 14,100 (e)
(h)
2,250
Balance
1,050 (g)
2,000 (i)
12,850
(e)
14,100
14,100 (c) 0 Balance
Ella Tims, Capital
25,500 (a) 25,500 Balance
Accounts Receivable
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(f)
5,400
Balance
3,150
Ella Tims, Withdrawals
2,250 (h) (i)
2,000
Balance
2,000
Office Supplies
(b)
750
Balance
750
Fees Earned
3,000 (d) 5,400 (f)
Office Equipment
(c)
14,100
Balance
14,100
8,400 Balance
Rent Expense
(g)
1,050
Balance
1,050
Exercise 3-2 (10 minutes) Cash
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Neil Simon, Capital
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72
Jan. 31 Feb.
700
4,000
Feb. 14
2
2,800
60
23
20
2,400
1,000
25
800
26
Bal.
800 Jan. 31 800 Bal.
Neil Simon, Withdrawals
40
Accounts Receivable
Jan. 31
1,200
Feb. 12
15,000
18
1,900
Bal.
2,400
Feb. 20
Jan. 31
-0-
Feb. 25
1,000
Bal.
1,000
Service Revenue
2,600 Jan. 31
15,700
2,800 Feb. Prepaid Insurance
Jan. 31
-0-
Feb. 14
4,000
Bal.
4,000
2
15,000
12
1,900
18
22,300 Bal.
Wages Expense Computer Equipment
Jan. 31
480
Feb. 10
7,600
Bal.
8,080
Jan. 31
1,080
Feb. 26
800
Bal.
1,880
Accounts Payable
Feb. 23
60
60 Jan. 31 -0- Bal.
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NOTE: There is no entry to be recorded for February 21.
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73
Notes Payable
-0- Jan. 31 7,600 Feb. 10 7,600 Bal.
Analysis component: Revenue recognition requires that when a transaction has occurred, it must be recorded whether cash has been received or not. A transaction has occurred when there has been an economic exchange — when something has been given up or received. On February 12, services were performed and, although cash will not be received until a future date, a revenue must be recorded because an economic exchange has occurred.
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Exercise 3-3 (10 minutes) Nels Sigurdsen, Withdrawals
Cash
Mar. 31
1,800
Apr. 2
780
19
2,000
Bal.
400 Apr. 10
Mar. 31
500
300
15
Apr. 29
1,000
1,000
29
Bal.
1,500
2,880 Repair Revenue
14,000 Mar. 31
Accounts Receivable
Mar. 31
4,800
Apr. 18
1,200
Bal.
4,000
2,000 Apr. 19
780 Apr. 1,200
18
15,980 Bal.
Repair Supplies
Rent Expense
Mar. 31
1,400
Mar. 31
950
Apr. 9
890
Apr. 25
250
Bal.
2
Bal.
2,290
1,200
Equipment
Mar. 31
7,400
Apr. 15
300
Bal.
7,700
Accounts Payable
Apr. 10
400
500 Mar. 31 890 Apr. 250
9 25
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1,240 Bal.
Nels Sigurdsen, Capital
2,350 Mar. 31 2,350 Bal.
NOTE: There is no entry to be recorded for April 5.
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Exercise 3-4 (45 minutes) 2.
GENERAL JOURNAL Account Titles and Explanations PR
Date 2011 July 1 Cash .................................................... Sue Ware, Capital........................ To record investment by owner.
Page 1 Credit
Debit
101 301
5,000
10 Equipment .......................................... Accounts Payable ....................... Purchased equipment on credit.
150 201
2,500
12 Cash .................................................... Revenue ....................................... Performed services for cash.
101 401
10,000
14 Expenses ............................................ Cash ............................................. Paid expenses.
501 101
3,500
15 Accounts Receivable ........................ Revenue ....................................... Completed services on account.
106 401
1,500
31 Sue Ware, Withdrawals...................... Cash ............................................. Owner withdrew cash.
302 101
250
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5,000
2,500
10,000
3,500
1,500
250
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Exercise 3-4 (continued) *Note: The student could use T-accounts or balance column format accounts as their general ledger. Both are shown in this solution. 1 and 3.
Cash July 1
5,000
12
10,000
Balance
11,250
101 3,500 July 14 250
Accts. Receivable July 15
150
2,500
Accounts Payable 2,500
Sue Ware, Capital
5,000
Sue Ware, Withdrawals
July 31
106
1,500
Equipment July 10
31
201 July 10
301
July 1
302
250
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Revenue
401 10,000
1,500
15
11,500
Balance
Expenses July 14
July 12
501
3,500
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Exercise 3-4 (continued) 1 and 3.
Account No. 101
Cash
Date
Explanation
PR
Debit
Credit
Balance
2011 July
1
G1
5,000
5,000
12
G1
10,000
15,000
14
G1
3,500
11,500
31
G1
250
11,250
Account No. 106
Accounts Receivable
Date
Explanation
PR
Debit
Credit
Balance
2011 July 15
G1
1,500
1,500
Account No. 150
Equipment
Date
Explanation
PR
Debit
Credit
Balance
2011 July 10
G1
2,500
2,500
Account No. 201
Accounts Payable
Date
Explanation
PR
Debit
Credit
Balance
2011 July 10
G1
2,500
Account No. 301
Sue Ware, Capital
Date
Explanation
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2,500
PR
Debit
Credit
Balance
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2011 July
1
G1
5,000
Account No. 302
Sue Ware, Withdrawals
Date
Explanation
5,000
PR
Debit
Credit
Balance
2011 July 31
G1
250
250
Account No. 401
Revenue
Date
Explanation
PR
Debit
Credit
Balance
2011 July 12
G1
10,000
10,000
15
G1
1,500
11,500
Account No. 501
Expenses
Date
Explanation
PR
Debit
Credit
Balance
2011 July 14
G1
3,500
3,500
Exercise 3-4 (continued) 4.
Acct. No. 101 106 150 201 301 302
DelaWare Trial Balance July 31, 2011 Account Title Cash ................................................. Accounts receivable ....................... Equipment ........................................ Accounts payable ............................ Sue Ware, capital ............................. Sue Ware, withdrawals ....................
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Debit $11,250 1,500 2,500 250
Credit
$ 2,500 5,000
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81
401 501
Revenue ........................................... Expenses.......................................... Totals................................................
5.
3,5 00
11,500
$19,000 $19,000
DelaWare Income Statement For Month Ended July 31, 2011
Revenue .......................................................... Expenses......................................................... Net income ......................................................
$11,500 3,500 $8,000
DelaWare Statement of Owner’s Equity For Month Ended July 31, 2011 Sue Ware, capital, July 1 ................................ $ 0 Add: Investments by owner .......................... $5,000 Net income............................................. 8,000 13,000 Total ............................................................. 13,000 Less: Withdrawals by owner ......................... 250 Sue Ware, capital, July 31 .............................. $12,750
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Exercise 3-4 (concluded) 5. (concluded)
DelaWare Balance Sheet July 31, 2011
Assets Cash ......................................................
$11,250
Accounts receivable .......................
1,500
Equipment .........................................
2,500
Liabilities
Accounts payable .....................................
$ 2,500
Owner’s Equity
Sue Ware, capital ......................................
12,750
Total liabilities and Total assets ........................................
$15,250
owner’s equity ......................................
$15,250
Analysis component: Accounts receivable result from credit sales to customers (debit accounts receivable and credit a revenue). Sales, or revenue, is part of equity. As revenues on account are recorded, assets on the one side of the accounting equation increase and equity on the opposite side of the accounting equation also increases. Therefore, accounts receivable are financed by, or created by, an equity transaction. Exercise 3-5 (10 minutes) Note: Students could choose any account number within the specified range.
Account Number
Account Name
110
Cash
115
Accounts Receivable
160
Office Equipment
210
Accounts Payable
215
Unearned Revenue
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310
Wes Bosse, Capital
320
Wes Bosse, Withdrawals
410
Consulting Revenues
510
Salaries Expense
520
Rent Expense
530
Utilities Expense
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Exercise 3-6 (30 Minutes) 2. Bal Feb 1 10 Bal
Cash 110 Accounts Receivable 11,500 2,000 Feb 5 Bal 6,000 8,500 500 17 2,500 10,000 28 10,000
Unearned Revenue 500 2,500 3,000 Salaries Expense Bal 10,000 Feb 28 10,000 Bal 20,000
215 Bal Feb 10 Bal 510
115
Wes Bosse, Capital 310 9,500 Bal
Rent Expense Bal 7,500
160
Accounts Payable 210 Feb 5 2,000 3,000 Bal 1,000 Bal
Wes Bosse, Withdrawals 320 Bal 2,000 Feb 17 500 Bal 2,500
Consulting Revenues 410 37,500 Bal 8,500 Feb 1 46,000 Bal
Bal
520
Office Equipment 12,500
Utilities Expense Bal 1,000
530
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Exercise 3-6 (continued) 1. Date 2011 Feb. 1
General Journal Account Titles and Explanations
PR
Page G1 Credit
Debit
Cash .................................................. Consulting Revenues ............... Performed work for cash.
101 410
8,500
5
Accounts Payable ............................ Cash ........................................... Paid account.
210 101
2,000
10
Cash .................................................. Unearned Revenue.................... Received cash in advance.
101 215
2,500
12
No entry.
17
Wes Bosse, Withdrawals ................. Cash ........................................... Owner withdrew cash.
320 101
500
28
Salaries Expense.............................. Cash ........................................... Paid salaries.
510 101
10,000
8,500
2,000
2,500
500
10,000
3.
Acct. No. 101 115 160 210 215 310 320 410 510 520 530
Bosse Advisors Trial Balance February 28, 2011 Account Title Cash............................................................... Accounts receivable .................................... Office equipment .......................................... Accounts payable ......................................... Unearned revenue ........................................ Wes Bosse, capital ....................................... Wes Bosse, withdrawals .............................. Consulting revenues .................................... Salaries expense........................................... Rent expense ................................................ Utilities expense ...........................................
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Debit $ 10,000 6,000 12,500
2,500 20,000 7,500 1,000
Credit
$ 1,000 3,000 9,500 46,000
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Totals .............................................................
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$59,500
$59,500
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Exercise 3-6 (concluded) 4.
Assets Cash .................................... Accounts receivable ........... Office equipment ................
Total assets......................... 1 Capital
= 9,500 + 46,000 – 28,500 – 2,500 = 24,500
Bosse Advisers Balance Sheet February 28, 2011 $10,000 6,000 12,500
Liabilities Accounts payable ................... Unearned revenue................... Total liabilities .........................
$28,500
Owner’s Equity Wes Bosse, capital ................. Total liabilities and owner’s equity .....................
$ 1,000 3,000 $ 4,000 24,5001 $28,500
Opening Balance Revenues Salaries, Rent and Utilities expenses Withdrawals Closing Balance
Analysis component: Unearned revenue occurs when cash is received from a customer in advance of the work being done. The collection is not recorded as a revenue because it has not been earned until the work is done. Unearned revenue is therefore a liability because the business owes the customer a service (or work). For example, WestJet receives cash from customers in advance of the customer actually flying. These cash collections are recorded as unearned revenue, a liability, because the cash doesn’t belong to WestJet until they have earned it which occurs when the customer takes their flight.
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Exercise 3-7 (30 minutes) a.
Cash ............................................................................................................
7,000
Equipment ...............................................................................................
5,600
Automobiles ............................................................................................
11,000
Jerry Steiner, Capital ................................................ 23,600 Owner invested cash, an automobile and equipment in the business. b. Prepaid Insurance ............................................................
Cash...................................................................................................
3,600
3,600
Purchased insurance coverage in advance.
c.
Office Supplies .................................................................
Cash...................................................................................................
600
600
Purchased supplies with cash.
d. Office Supplies .................................................................
Equipment ...............................................................................................
200
9,400
Accounts Payable.........................................................................
9,600
Purchased supplies and equipment on credit.
e.
Cash...................................................................................
Delivery Services Revenue ......................................................
2,500
2,500
Received cash from customer.
f.
Accounts Payable .............................................................
Cash...................................................................................................
2,400
2,400
Made payment on payables.
g. Gas and Oil Expense ........................................................
Cash...................................................................................................
700
700
Paid for gas and oil.
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Exercise 3-8 (20 minutes) 2011 April 5 Cash ......................................................................................................
1,500
Surgical Revenues ...............................................
1,500
Performed surgery and collected cash.
8 Supplies .......................................................................
3,000
Accounts Payable ..................................................................
3,000
Purchased surgical supplies on credit.
15 Salaries Expense .............................................................................
57,000
Cash ............................................................................................
57,000
Paid salaries.
20 Accounts Payable ............................................................................
3,000
Cash ............................................................................................
3,000
Paid for the credit purchase of April 8.
21 No entry.
22 Accounts Receivable ......................................................................
9,000
Surgical Revenues .................................................................
9,000
Performed six surgeries on credit; $1,500 x 6 = $9,000
29 Cash ...................................................................................................... Accounts Receivable .............................................................
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3,000 3,000
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Collection from credit customers of April 22.
30 Utilities Expense ............................................................................. Cash ............................................................................................
1,800 1,800
Paid the April utilities.
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Exercise 3-9 (20 minutes) b. Accounts Receivable.......................................................... Services Revenue ....................................................... Provided services on credit.
2,700
c.
3,150
Cash..................................................................................... Services Revenue ....................................................... Provided services for cash.
2,700 3,150
Revenues are inflows of assets (or decreases in liabilities) received in exchange for goods or services provided to customers. The other transactions did not create revenues for the following reasons: a.
This transaction brought in cash, but it was an investment in the company.
d. This transaction brought in cash, but it also created a liability because the services have not yet been provided to the client. e.
This transaction changed the form of the asset from accounts receivable to cash. Total assets were not increased. Revenue was not generated.
f.
This transaction brought cash into the company and increased assets, but it also increased a liability by the same amount.
Exercise 3-10 (20 minutes) b. Salaries Expense .............................................................. Cash ........................................................................... Paid the salary of the receptionist.
1,125
d. Utilities Expense ............................................................... Cash ........................................................................... Paid the utilities for the office.
930
1,125 930
Expenses are outflows or using up of assets (or the creation of liabilities) that occur in the process of providing goods or services to customers. The transactions labelled a, c, and e were not expenses for the following reasons: a.
This transaction decreased assets in settlement of a previously existing liability. Thus, the using up of assets did not reduce owner’s equity.
c.
This transaction was the purchase of an asset. The form of the company’s assets changed, but total assets did not change, and the equity did not decrease.
e.
This transaction was a distribution of cash to the owner. Even though owner’s equity decreased, the decrease did not occur in the process of providing goods or services to customers.
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Exercise 3-11 (25 minutes) Parts a and b: Account No. 101
Cash
Date
Explanation
PR
Debit
Credit
Balance
2010 Dec.
3 1 Beginning balance
850
2011 Jan.
1
G1
3,500
4,350
2 0
G1
3 1
G1
3 1
G1
3,000
4,350
3 1
G1
750
3,600
2,000 5,000
7,350
Account No. 106
Accounts Receivable
Date
Explanation
2,350
PR
Debit
Credit
Balance
2010 Dec.
3 1 Beginning balance
300
2011 Jan.
1 2
G1
3 1
G1
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9,000
9,300 5,000
4,300
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Account No. 167
Equipment
Date
Explanation
PR
Debit
Credit
Balance
2010 Dec.
3 1 Beginning balance
1,500
2011 Jan.
2 0
G1
12,000
Account No. 201
Accounts Payable
Date
Explanation
13,500
PR
Debit
Credit
Balance
2010 Dec.
3 1 Beginning balance
325
2011 Jan.
2 0
G1
10,000
Account No. 301
Jay Walker, Capital
Date
Explanation
10,325
PR
Debit
Credit
Balance
2010 Dec.
3 1 Beginning balance
2,325
2011 Jan.
1
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G1
3,500
5,825
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Exercise 3-11 (Parts a and b continued) Account No. 302
Jay Walker, Withdrawals
Date
Explanation
PR
Debit
Credit
Balance
2010 Dec.
3 1 Beginning balance
300
2011 Jan.
3 1
G1
750
Fees Earned Date
Explanation
1,050
Account No. 401 PR
Debit
Credit
Balance
2010 Dec.
3 1 Beginning balance
1,800
2011 Jan.
1 2
G1
9,000
Salaries Expense Date
Explanation
10,800
Account No. 622 PR
Debit
Credit
Balance
2010 Dec.
3 1 Beginning balance
1,500
2011 Jan.
3 1
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G1
3,000
4,500
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Exercise 3-11 (Parts a and b continued) Note: After posting the journal entries, the PR column in the General Journal would appear as follows: General Journal
Date
Account Titles and Explanations
Page 1
PR
Debit
Credit
2011 Jan. 1 Cash ........................................................................................................ 10 1
3,500
Jay Walker, Capital.................................................................. 30 1
3,500
Additional owner investment. 12 Accounts Receivable ........................................................................ 10 6
9,000
Fees Earned ............................................................................... 40 1
9,000
Performed work for a customer on account. 20 Equipment ........................................................................................... 16 7
12,000
Cash .............................................................................................. 10 1
2,000
Accounts Payable .................................................................... 20 1
10,000
Purchased equipment paying cash and the balance on credit. 31 Cash ........................................................................................................ 10 1
5,000
Accounts Receivable .............................................................. 10 6
5,000
Collected cash from credit customer. 31 Salaries Expense ............................................................................... 62
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3,000
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2 Cash .............................................................................................. 10 1
3,000
Paid month end salaries. 31 Jay Walker, Withdrawals ............................................................... 30 2
750
Cash .............................................................................................. 10 1
750
Jay Walker withdrew cash for personal use.
Exercise 3-11 (concluded) Analysis component: All of the details regarding a transaction, such as serial numbers or invoice numbers, form part of the journal entry recorded in the journal. The general ledger does not accommodate these kind of very necessary details. Therefore, we need to journalize to ensure important details are readily available. The general ledger summarizes by account all of the transactions recorded in the journal. For example, without the ledger, we would not be able to determine the balance in cash without going through the journal and adding/subtracting all of the individual transactions. The ledger allows us to have account balance information. In summary, although it appears that journalizing and posting are recording the same information twice, the journal and ledger each serve different and important functions in the accounting system.
Exercise 3-12 (25 minutes) General Journal
Account Titles and Explanations
Date
Page G1 PR
Debit
10 1
15,000
Credit
2011 Aug.
1
Cash............................................................
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Photography Equipment .....................................
16 7
Tara Harper, Capital ...........................
30 1
17,000 32,000
Owner invested in the business. 1
Prepaid Rent.............................................................
13 1
Cash ....................................................................
10 1
6,500 6,500
Rented studio space. 5
Office Supplies .........................................................
12 4
Cash ....................................................................
10 1
1,800 1,800
Purchased office supplies. 20
Cash..............................................................................
10 1
Photography Fees Earned .........................
40 1
9,200 9,200
Collected photography fees. 31
Utilities Expense..........................................
69 0
Cash ....................................................
10 1
1,100 1,100
Paid for August utilities.
Note: The account numbers in the PR column above would be included only during the posting of these journal entries into the ledger accounts in Exercise 3-13.
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Exercise 3-13 (30 minutes) Cash Date
Explanation
Account No. 101 PR
Debit
Credit
Balance
1
G1
15,000
1
G1
6,500
8,500
5
G1
1,800
6,700
2 0
G1
3 1
G1
2011
Aug.
9,200
Explanation
15,900 1,100
14,800
Account No. 124
Office Supplies
Date
15,000
PR
Debit
Credit
Balance
2011 Aug.
5
G1
1,800
Account No. 131
Prepaid Rent
Date
Explanation
1,800
PR
Debit
Credit
Balance
2011 Aug.
1
G1
6,500
Account No. 167
Photography Equipment
Date
Explanation
6,500
PR
Debit
G1
17,000
Credit
Balance
2011 Aug.
1
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17,000
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Account No. 301
Tara Harper, Capital
Date
Explanation
PR
Debit
Credit
Balance
2011 Aug.
1
G1
32,000
Account No. 401
Photography Fees Earned
Date
Explanation
32,000
PR
Debit
Credit
Balance
2011 Aug.
2 0
G1
9,200
Utilities Expense Date
Explanation
9,200
Account No. 690 PR
Debit
Credit
Balance
2011 Aug.
3 1
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G1
1,100
1,100
99
100
Exercise 3-13 (concluded)
THE PIXEL SHOP Trial Balance August 31, 2011
Acct No.
Account Title
Debit
101 Cash ......................................................
$ 14,800
124 Office supplies ..................................
1,800
131 Prepaid rent ......................................
6,500
167 Photography equipment ..............
17,000
Credit
301 Tara Harper, capital .......................
$32,000
401 Photography fees earned .............
9,200
690 Utilities expense ..............................
1,100
Totals ...................................................
$41,200
$41,200
Analysis component: The trial balance is an internal working paper used to verify that debits and credits in the general ledger are equal and to review account balances. The trial balance format does not readily communicate information such as financial performance and financial position, information that is desired by external decision makers. Financial statements are used for external reporting because the formats of these communicate information desired by external users. For example, the income statement reports financial performance while the balance sheet reports financial position.
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Exercise 3-14 (20 minutes) Aug. 1 20 Bal
Cash 101 15,000 6,500 Aug. 1 9,200 1,800 5 1,100 31 14,800
Photography Equipment 167 Aug. 1 17,000
Photography Fees Earned 401 9,200 Aug. 20
Aug. 5
Office Supplies 1,800
124 Aug. 1
Prepaid Rent 6,500
131
Tara Harper, Capital 301 32,000 Aug. 1
Utilities Expense Aug. 31 1,100
690
THE PIXEL SHOP Trial Balance August 31, 2011
Acct. No.
Account Title Debit
Credit
101
Cash .........................................................................
$ 14,800
124
Office supplies.....................................................
1,800
131
Prepaid rent .........................................................
6,500
167
Photography equipment .................................
17,000
301
Tara Harper, capital ..........................................
$32,000
401
Photography fees earned................................
9,200
690
Utilities expense .................................................
1,100
Totals ......................................................................
$41,200
$41,200
Analysis component: The trial balance is an internal working paper used to verify that debits and credits in the general ledger are equal and to review account balances. The trial balance format does not readily communicate information such as financial performance and financial position, information that is desired by external decision makers. Financial statements are used for external reporting because the formats of these communicate information desired by external users. For example,
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102
the income statement reports financial performance while the balance sheet reports financial position.
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Exercise 3-15 (20 minutes) Hogan’s Consulting Income Statement For Year Ended December 31, 2011 Consulting fees earned .................................. Operating expenses: Wages expense.......................................... Rent expense ............................................. Total operating expenses .................... Net loss ...........................................................
$46,000 $37,000 14,000
51,000 $ 5,000
Hogan’s Consulting Statement of Owner’s Equity
For Year Ended December 31, 2011
Lisa Hogan, capital, January 1 ...................... Add: Investments by owner .......................... Total ............................................................. Less: Withdrawals by owner ......................... Net loss ................................................. Lisa Hogan, capital, December 31 .................
Assets
$2,000 5,000
Hogan’s Consulting Balance Sheet December 31, 2011
$ 0 50,000 $50,000 7,000 $43,000
Liabilities
Cash ......................................................
$12,000
Accounts payable .....................................
$ 800
Cleaning supplies ............................
8,300
Notes payable ............................................
53,500
Prepaid rent ......................................
5,000
Total liabilities ..........................................
$54,300
Equipment .........................................
72,000
Owner’s Equity
Lisa Hogan, capital...................................
43,000
Total liabilities and Total assets ........................................
$97,300
owner’s equity ......................................
$97,300
Analysis component: Losses cause equity to decrease. If equity decreases, either assets have to decrease and/or liabilities must increase to keep the balance sheet in balance. Therefore, if Hogan’s Consulting continues to experience losses, there are two short-term alternatives available to prevent a decrease in assets. First, the business could borrow which would increase liabilities and temporarily increase assets until payments had to be made. Longer term, the cash to make the payments cannot be borrowed. Second, Copyright © 2007 by McGraw-Hill rights reserved. Lisa Hogan, the owner,Ryerson could Limited. investAlladditional assets into the business which would increase equity Solutions Manual for Chapter 5 and assets. However, for the long-term, the owner does not want to support the business through 103 continual investments; the business must be able to support itself through positive performance (net income).
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Exercise 3-16 (20 minutes) JenCo
Income Statement For Month Ended March 31, 2011
Revenues: Service revenue .................................................................................................
$1,900
Operating expenses: Salaries expense ................................................................................................
$ 800
Interest expense................................................................................................
10
Total operating expenses ..........................................................................
810
Net income................................................................................................................
$1,090
JenCo Statement of Owner’s Equity For Month Ended March 31, 2011
Marie Jensen, capital, March 1 ..........................................................................
$
Add: Investment by owner ................................................................................
$2,050
Net income .....................................................................................................
1,090
0
$3,140
Total .......................................................................................................................
$3,140
Less: Withdrawal by owner ..............................................................................
1,500
Marie Jensen, capital, March 31 .......................................................................
$1,640
JenCo Balance Sheet March 31, 2011
Liabilities
Assets Cash ................................................... $1,000
Accounts payable .............................. $ 260
Accounts receivable ....................
Unearned service revenues ......................
950
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250
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105
Prepaid insurance........................
300
Equipment ......................................
700
Notes payable .................................................
800
Total liabilities .......................................... $1,310
Owner’s Equity Marie Jensen, capital.................................... Total assets..................................... $2,950
1,640
Total liabilities and owner’s equity ....... $2,950
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Exercise 3-17 (20 minutes) Bentley Marketing Services Income Statement For Month Ended March 31, 2011
Revenues: Fees earned ...........................................................................................
$170,000
Operating expenses: Wages expense .....................................................................................
$166,000
Office supplies expense ....................................................................
7,000
Total operating expenses ..............................................................
173,000
Net loss...........................................................................................................
$ 3,000
Bentley Marketing Services Statement of Owner’s Equity For Month Ended March 31, 2011
Dee Bentley, capital, March 1 ................................................................
$112,000 *
Add: Investment by owner ....................................................................
10,000
Total ..........................................................................................................
$122,000
Less: Withdrawal by owner ..................................................................
$ 18,000
Net loss ...............................................................................................
3,000
Dee Bentley, capital, March 31 .............................................................
21,000 $101,000
Bentley Marketing Services Balance Sheet
March 31, 2011
Liabilities
Assets
Cash ...........................
$ 30,000
Accounts payable ...........................
$ 46,000
Accounts receivable ......
14,000
Notes payable ..............................................
146,000
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Office supplies .................
3,000
Total liabilities .......................................... $ 192,000
Building..............................
80,000
Land ....................................
116,000
Owner’s Equity
Machinery .........................
50,000
Dee Bentley, capital ......................................
101,000
Total assets.......................
$293,000
Total liabilities and owner’s equity .......
$293,000
*$122,000 March 31/11 Balance - $10,000 invested in March = $112,000 March 1/11 Balance
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Exercise 3-18 (20 minutes)
Description a. A $2,400 debit to Rent Expense was posted as a $1,590 debit. b. A $42,000 debit to Machinery was posted as a debit to Accounts Payable.
(1) (2) Difference Column between Debit with the and Credit Larger Columns Total $810
$0
(3) Identify account(s) incorrectly stated
(4) Amount that account(s) is overstated or understated
Credit
Rent Expense
Rent Expense is understated by $810
—
Machinery
Machinery is understated by $42,000 and Accounts Payable is understated by $42,000
Accounts Payable c. A $4,950 credit to Services Revenue was posted as a $495 credit.
$4,455
Debit
Services Revenue
Services Revenue is understated by $4,455
d. A $1,440 debit to Store Supplies was not posted at all.
$1,440
Credit
Store Supplies
Store Supplies is understated by $1,440
—
Prepaid Insurance
Prepaid Insurance is understated by $2,250 and Insurance Expense is overstated by $2,250
e. A $2,250 debit to Prepaid Insurance was posted as a debit to Insurance Expense.
$0
Insurance Expense f.
A $4,050 credit to Cash was posted twice as two credits to the Cash account.
$4,050
g. A $9,900 debit to the owner’s withdrawals account was debited to the owner’s capital account.
$0
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Credit
Cash
Cash is understated by $4,050
—
Owner’s Capital
Owner’s Capital account is understated by $9,900
Owner’s Withdrawals
Owner’s Withdrawals is understated by $9,900
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Exercise 3-19 (15 minutes) a. 1. Dr = Cr 2. Accounts Receivable is understated (too low) by $3,500 and Revenue is understated by $3,500. b. 1. Dr = Cr 2. Accounts Payable is overstated (too high) by $600 and Cash is overstated by $600. c. 1. Dr Cr 2. Cash is overstated by $180. d. 1. Dr Cr 2. Accounts Receivable is overstated. e. 1. Dr = Cr 2. Accounts Payable is understated by $2,000 and Equipment is understated by $2,000. Exercise 3-20 (15 minutes) Case A: 1. Subtract total debits in the trial balance from total credits 5,010 – 4,290 = 720 2. Divide the difference by 9 720 9 = 80 3. The quotient equals the difference between the two transposed numbers. The difference between the correct number and the incorrect number is 80. 4. The number of digits in the quotient tells us the location of the transposition. Look for a difference of 8 between the second number from the right and the third number from the right.
Through a process of elimination, the incorrect value is Accounts Payable of $190. The correct value must be $910.
Proof: Recalculate the trial balance replacing $910 for the incorrect $190 and the trial balance now balances at $5,010.
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Exercise 3-20 (concluded) Case B: 1. Subtract total debits in the trial balance from total credits 34,400 – 28,100 = 6,300 2. Divide the difference by 9 to reveal a slide error 6,300 9 = 700 3. The quotient identifies a slide error and equals the correct value. Through a process of elimination, the incorrect value is Withdrawals for $7,000. The correct value must be $700.
Proof: Recalculate the trial balance replacing $700 for the incorrect $7,000 and the trial balance now balances at $28,100. Case C: 1. Subtract total debits in the trial balance from total credits 942 – 906 = 36 2. Divide the difference by 9 36 9 = 4 3. The quotient equals the difference between the two transposed numbers. The difference between the correct number and the incorrect number is 4. 4. The number of digits in the quotient tells us the location of the transposition. Look for a difference of 4 between the first number from the right and the second number from the right.
Through a process of elimination, the incorrect value is Cash for $59. The correct value must be $95.
Proof: Recalculate the trial balance replacing $95 for the incorrect $59 and the trial balance now balances at $942.
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Chapter 4
Adjusting Accounts for Financial Statements
EXERCISES Exercise 4-1 (10 minutes) 1.
a
7.
c
2.
e
8.
f
3.
c
9.
f
4.
b
10.
f
5.
f
11.
d
6.
b
12.
f
Exercise 4-2 (25 minutes)
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2011 a) Dec.
31 Amortization Expense, Equipment .......................... Accumulated Amortization, Equipment ............ To record amortization expense for the year.
32,000
b)
31 Insurance Expense ................................................. Prepaid Insurance ............................................ To record insurance coverage that expired during the year; $14,000 – $2,080.
11,920
c)
31 Office Supplies Expense ......................................... Office Supplies ................................................. To record office supplies consumed during the year; $600 + $5,360 – $708.
5,252
d)
31 Unearned Fee Revenue .......................................... Fee Revenue ................................................... To record earned portion of fee received in advance; $30,000 × 2/3 = $20,000.
20,000
e)
31 Insurance Expense ................................................. Prepaid Insurance ............................................ To record insurance coverage that expired during the year.
9,200
f)
31 Wages Expense ...................................................... Wages Payable ................................................ To record wages accrued but not yet paid.
8,000
6 Wages Payable ....................................................... Wages Expense ...................................................... Cash ............................................................... To record the payment of wages.
8,000 12,000
2012 g) Jan.
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32,000
11,920
5,252
20,000
9,200
8,000
20,000
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Exercise 4-3 (20 minutes) 2011 a)
Dec.
31 Unearned Revenue ......................................................
16,00 0
Revenue ...........................................................................
16,000
To record earned revenue; $18,500 - $2,500 = $16,000.
31 Amortization Expense, Building .................................
b)
10,50 0
Accumulated Amortization, Building ....................
10,500
To record amortization expense.
c)
31 Spare Parts Expense .............................................................
350
Spare Parts Inventory .................................................
350
To record the use of spare parts inventory; $450 - $100 = $350.
d)
31 Accounts Receivable ............................................................
3,550
Revenue ...........................................................................
3,550
To record accrued revenue.
e)
31 Utilities Expense .................................................................... Utilities Payable (or Accounts Payable) ...............
1,300 1,300
To record accrued utilities.
2012
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f)
Jan.
4 Cash ............................................................................................
3,550
Accounts Receivable .....................................................
3,550
To record collection of accrued revenues.
g)
14 Utilities Payable (or Accounts Payable) ........................
1,300
Cash ....................................................................................
1,300
To record payment of accrued utilities.
Exercise 4-4 (20 minutes) 2011 a)
Sept.
30 Unearned Revenue .............................................................
12,00 0
Revenue .........................................................................
12,000
To record earned revenue.
30 Amortization Expense, Furniture .....................................................................
b)
150
Accumulated Amortization, Furniture ...............
150
To record amortization for one month; 7,200/4 yrs = 1,800/yr; 1,800/12 months = 150/month.
Exercise 4-4 (continued) c)
Sept.
30 Office Supplies Expense ..................................................
5,000
Office Supplies ...........................................................
5,000
To record the use of office supplies.
d)
30 Accounts Receivable ........................................................ Revenue .......................................................................
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28,00 0 28,000
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To record accrued revenue.
e)
30 Rent Expense ......................................................................
7,000
Rent Payable (or Accounts Payable) .................
7,000
To record accrued rent.
f)
Oct.
3 Cash ...................................................................................
28,00 0
Accounts Receivable............................................
28,000
To record collection of accrued revenue.
g)
4 Rent Payable (or Accounts Payable) .....................
7,000
Cash ...........................................................................
7,000
To record payment of accrued rent.
Exercise 4-5 (25 minutes) 2011
a)
Mar.
31 Unearned Rent .......................................................................................................... 7,500 Rent Earned ..........................................................................
7,500
Earned five months’ rent previously paid in advance; $1,500 x 5 = $7,500. b)
31 Rent Receivable ........................................................................... 2,700 Rent Earned ..........................................................................
2,700
Earned two months’ rent that has not yet been collected; $1,350 x 2 = $2,700.
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117
c)
Apr.
22 Cash .................................................................................................. 4,050 Rent Receivable ...................................................................
2,700
Rent Earned ..........................................................................
1,350
Collected rent for February, March, and April.
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118
Exercise 4-6 (15 minutes) 2011 a)
Dec.
31 Accounts Receivable ...........................................................................................
2,000
Fees Earned (or Revenue) ...........................................
2,000
To record accrued fees earned. b)
31 Rent Expense ............................................................................
8,000
Prepaid Rent ....................................................................
8,000
To record expired rent. c)
31 Amortization Expense, Machinery ....................................
400
Accumulated Amortization, Machinery ..................
400
To record amortization expense. d)
31 Unearned Fees ..........................................................................
2,800
Fees Earned (or Revenue) ...........................................
2,800
To record fees earned. e)
31 Salaries Expense ...................................................................... Salaries Payable ..............................................................
5,000 5,000
To record accrued salaries.
Exercise 4-7 (15 minutes) a. $1,650 (300 + 2,100 – 750 = 1,650) b. $5,700 (1,600 + 5,400 – 1,300 = 5,700) c. $10,080 (9,600 + 1,840 – 1,360 = 10,080) d. $1,375 (6,575 + 800 – 6,000 = 1,375) Proof: Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 5
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119
(a)
(b)
Supplies on hand—January 1 ............................
$ 300
$1,600
$ 1,360
$1,375
Supplies purchased during the year ...............
2,100
5,400
10,080
6,000
Total supplies available ......................................
$2,400
$7,000
$11,440
$7,375
Supplies on hand—December 31 ..................... Supplies expense for the year ...........................
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(750) $1,650
(5,700) $1,300
(c)
(1,840) $ 9,600
(d)
(800) $6,575
119
120
Exercise 4-8 (15 minutes) Adjusting entry: 2012 Dec. 31
Wages Expense .................................................................. Wages Payable ........................................................... Adjusting entry to record accrued wages for one day; 5 × $200.
1,000
Wages Expense .................................................................. Wages Payable ................................................................... Cash ............................................................................ Paid employees' accrued and current wages; 5 employees x $200/day x 4 days = $4,000.
3,000 1,000
1,000
Payday entry: 2013 Jan.
4
4,000
Exercise 4-9 (25 minutes) 201 1 a)
Apr.
30 Interest Expense ........................................................
2,080
Interest Payable ..........................................................
2,080
To record accrued interest expense; 0.8% × $780,000 × 10/30.
May
20 Interest Payable...................................................................
2,080
Interest Expense ..................................................................
4,160
Cash .................................................................................
6,240
To record payment of accrued and current expense; 0.8% × $780,000 × 20/30.
201 1 b)
Apr.
30 Salaries Expense ..................................................................
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3,600
120
121
Salaries Payable ..........................................................
3,600
To record accrued salaries; $9,000/5 days = $1,800/day; 2 days x $1,800 = $3,600.
May
3 Salaries Payable...................................................................
3,600
Salaries Expense ..................................................................
5,400
Cash .................................................................................
9,000
To record payment of accrued and current salaries; 3 days x $1,800 = $5,400.
Exercise 4-9 (concluded) 201 1 c)
Apr.
30 Legal Fees Expense .............................................................
2,500
Legal Fees Payable .....................................................
2,500
To record accrued legal fees.
May
12 Legal Fees Payable ..............................................................
2,500
Cash .................................................................................
2,500
To pay accrued legal fees.
Exercise 4-10 (25 minutes) 2011
Dec. 31
Accounts Receivable .......................................................... Fees Earned ................................................................ To record unbilled fees; 30% × $12,000.
3,600
31
Unearned Fees ................................................................... Fees Earned ................................................................
8,400
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3,600
8,400
121
122
To record earned fees that had been collected in advance; 70% × $12,000. 31
Amortization Expense, Computers ...................................... Accumulated Amortization, Computers ........................ To record amortization on computers.
3,000
31
Amortization Expense, Office Furniture............................... Accumulated Amortization, Office Furniture ........................................................ To record amortization on office furniture.
3,500
31
Salaries Expense ................................................................ Salaries Payable.......................................................... To record accrued salaries.
4,900
31
Insurance Expense ............................................................. Prepaid Insurance ....................................................... To record expired prepaid insurance.
2,600
31
Office Supplies Expense ..................................................... Office Supplies ............................................................ To record use of office supplies.
960
31
Utilities Expense ................................................................... Utilities Payable ............................................................. To record unpaid utility costs.
3,000
3,500
140
4,900
2,600
960
140
Exercise 4-10 (concluded) Analysis component: The GAAP of matching and revenue recognition requires that adjusting entries be recorded at the end of each accounting period to ensure revenues and expenses are allocated to the period in which they were incurred. If the December 31, 2011 adjustments for Javelin Company were not recorded, revenues would be understated by $12,000; expenses would be understated by $15,100; and net income would be overstated by the difference of $3,100 ($15,100 - $12,000 = $3,100).
Exercise 4-11 (25 minutes)
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122
123
Ayotte Music Partial Work Sheet February 28, 2011 Unadjusted Trial Balance
Account
Debit Cash...........................................................
5,000
Accounts receivable ............................
4,500
Prepaid insurance ...............................
700
Credit
Adjustments Debit
Credit
c) 1,400
Credit
5,900
b) 250
450 12,000
6,000
equipment ........
Debit 5,000
Equipment .............................................. 12,000 Accumulated amortization,
Adjusted Trial Balance
a)2,400
8,400
Accounts payable .................................
1,200
1,200
Jane Adams, capital .............................
9,000
9,000
Jane Adams, withdrawals..................
3,000
Revenues .................................................
3,000 45,000
Amortization expense, equipment
0
c) 1,400 a)2,400
2,400
Salaries expense ................................... 29,000 Insurance expense...............................
7,000
Totals ....................................................... 61,200 61,200
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46,400
29,000 b) 250 4,050
7,250 4,050
65,000 65,000
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124
Exercise 4-12 (25 minutes) Ayotte Music Income Statement For Year Ended February 28, 2011 Revenue........................................................................................................
$46,400
Operating expenses: Salaries expense ...................................................................................
$29,000
Insurance expense ...............................................................................
7,250
Amortization expense, equipment ................................................
2,400
Total operating expenses ..............................................................
38,650
Net income ..................................................................................................
$ 7,750
Ayotte Music Statement of Owner’s Equity For Year Ended February 28, 2011
Jane Adams, capital, March 1 ................................................................ Add: Net income ........................................................................................
$ 9,000 7,750
Total..........................................................................................................
$16,750
Less: Withdrawal by owner..................................................................
3,000
Jane Adams, capital, February 28 .......................................................
$13,750
Ayotte Music Balance Sheet February 28, 2011
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124
125
Cash................................................................................................................
$ 5,000
Accounts receivable .................................................................................
5,900
Prepaid insurance ....................................................................................
450
Office equipment.......................................................................................
$12,000
Less: Accumulated amortization, office equipment ...............
8,400
Total assets .................................................................................................
3,600 $14,950
Liabilities Accounts payable ......................................................................................
$ 1,200
Owner’s Equity Jane Adams, capital ..................................................................................
13,750
Total liabilities and owner’s equity ...................................................
$14,950
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126
Exercise 4-12 (concluded) Analysis component:
The GAAP which requires the preparation of financial statements is the time period principle. The time period principle assumes that an organization’s activities can be divided into specific time periods. Since information must reach decision makers frequently and promptly, the accounting system needs to prepare reports regularly. The standard reporting period is one year although many companies report quarterly. *Exercise 4-13 a)
Cash ............................................................................ Accounts Payable ........................................................
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1,800 1,800
126
127
To correct the original entry.
OR 1,800
Cash ........................................................................... 1,800
Office Supplies ...................................................
To reverse the incorrect entry.
1,800
Office Supplies ..........................................................
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128
1,800
Accounts Payable ..............................................
To journalize the correct entry. b)
Revenue ...................................................................... Accounts Receivable ..................................................
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4,500 4,500
128
129
To correct the original entry.
OR 4,500
Revenue ..................................................................... 4,500
Cash ....................................................................
To reverse the incorrect entry.
4,500
Cash ...........................................................................
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130
4,500
Accounts Receivable .........................................
To journalize the correct entry. c)
Withdrawals ................................................................. Salaries Expense..........................................................
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1,500 1,500
130
131
To correct the original entry.
OR
Cash ............................................................................
1,500
Salaries Expense........................................................
1,500
To reverse the incorrect entry.
Withdrawals ..........................................................................
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1,500
131
132
Cash ....................................................................
1,500
To journalize the correct entry.
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132
133
*Exercise 4-13 (concluded) d)
Accounts Receivable ....................................................................
750
Revenue .............................................................................
750
To correct the original entry. OR Accounts Receivable ..............................................................................
750
Cash ....................................................................................................
750
To reverse the incorrect entry.
Cash.............................................................................................
750
Revenue ............................................................................................
750
To journalize the correct entry.
Analysis component: If the error in (b) is not corrected, revenue and net income on the income statement will be overstated each by $4,500. On the balance sheet, assets (accounts receivable) and equity will be overstated each by $4,500.
*Exercise 4-14 (30 minutes) 2011 a) Dec.
1
Supplies Expense ........................................................ Cash ..................................................................... Purchased supplies. b) 2 Insurance Expense ...................................................... Cash ..................................................................... Paid insurance premiums. c) 15 Cash ............................................................................ Remodelling Fees Earned .................................... Received fees for work to be done. Adjusting entries: 2011 d) Dec.31 Supplies .............................................................................. Supplies Expense ................................................. Adjusted expense for unused supplies on hand. e) 31 Prepaid Insurance ....................................................... Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 5
6,000 2,880 24,000
3,840
6,000 2,880 24,000
3,840
2,400 133
134
f)
Insurance Expense ............................................... Adjusted expense for unexpired coverage; $2,880 – $480. 31 Remodelling Fees Earned ........................................... Unearned Remodelling Fees ................................ Adjusted revenues for unfinished projects; $24,000 – $7,200.
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2,400 16,800
16,800
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135
*Exercise 4-15 (25 minutes) a) Initial credit recorded in Unearned Fees account: July 1 Cash .................................................................... Unearned Fees ............................................. Received fees for work to be done.
2,000
6
Cash .................................................................... Unearned Fees ............................................. Received fees for work to be done.
8,400
12
Unearned Fees .................................................... Fees Earned ................................................. Completed work for customer.
2,000
18
Cash .................................................................... Unearned Fees ............................................. Received fees for work to be done.
7,500
27
Unearned Fees .................................................... Fees Earned ................................................. Completed work for customer.
8,400
31
No entry.
b) Initial credit recorded in Fees Earned account: July 1 Cash .................................................................... Fees Earned ................................................. Received fees for work to be done. 6
Cash .................................................................... Fees Earned ................................................. Received fees for work to be done.
12
No entry.
18
Cash .................................................................... Fees Earned ................................................. Received fees for work to be done.
27
No entry.
31
Fees Earned ........................................................ Unearned Fees .............................................
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2,000
8,400
7,500
7,500
2,000
8,400
2,000
7,500
8,400
2,000
8,400
7,500
7,500 135
136
Adjusting entry to reflect unearned fees for unfinished job. *Exercise 4-15 (concluded) c)
Under the first method: Unearned fees = $2,000 + $8,400 – $2,000 + $7,500 – $8,400 = $7,500 Fees earned = $2,000 + $8,400 = $10,400 Under the second method: Unearned fees = $7,500 Fees earned = $2,000 + $8,400 + $7,500 – $7,500 = $10,400
Chapter 4
Adjusting Accounts for Financial Statements
EXERCISES Exercise 4-1 (10 minutes) 1.
a
7.
c
2.
e
8.
f
3.
c
9.
f
4.
b
10.
f
5.
f
11.
d
6.
b
12.
f
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136
137
Exercise 4-2 (25 minutes) 2011 a) Dec.
31 Amortization Expense, Equipment .......................... Accumulated Amortization, Equipment ............ To record amortization expense for the year.
32,000
b)
31 Insurance Expense ................................................. Prepaid Insurance ............................................ To record insurance coverage that expired during the year; $14,000 – $2,080.
11,920
c)
31 Office Supplies Expense ......................................... Office Supplies ................................................. To record office supplies consumed during the year; $600 + $5,360 – $708.
5,252
d)
31 Unearned Fee Revenue .......................................... Fee Revenue ................................................... To record earned portion of fee received in advance; $30,000 × 2/3 = $20,000.
20,000
e)
31 Insurance Expense ................................................. Prepaid Insurance ............................................ To record insurance coverage that expired during the year.
9,200
f)
31 Wages Expense ...................................................... Wages Payable ................................................ To record wages accrued but not yet paid.
8,000
6 Wages Payable ....................................................... Wages Expense ...................................................... Cash ............................................................... To record the payment of wages.
8,000 12,000
2012 g) Jan.
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32,000
11,920
5,252
20,000
9,200
8,000
20,000
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138
Exercise 4-3 (20 minutes) 2011 a)
Dec.
31 Unearned Revenue ......................................................
16,00 0
Revenue ...........................................................................
16,000
To record earned revenue; $18,500 - $2,500 = $16,000.
31 Amortization Expense, Building .................................
b)
10,50 0
Accumulated Amortization, Building ....................
10,500
To record amortization expense.
c)
31 Spare Parts Expense .............................................................
350
Spare Parts Inventory .................................................
350
To record the use of spare parts inventory; $450 - $100 = $350.
d)
31 Accounts Receivable ............................................................
3,550
Revenue ...........................................................................
3,550
To record accrued revenue.
e)
31 Utilities Expense .................................................................... Utilities Payable (or Accounts Payable) ...............
1,300 1,300
To record accrued utilities.
2012
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138
139
f)
Jan.
4 Cash ............................................................................................
3,550
Accounts Receivable .....................................................
3,550
To record collection of accrued revenues.
g)
14 Utilities Payable (or Accounts Payable) ........................
1,300
Cash ....................................................................................
1,300
To record payment of accrued utilities.
Exercise 4-4 (20 minutes) 2011 a)
Sept.
30 Unearned Revenue .............................................................
12,00 0
Revenue .........................................................................
12,000
To record earned revenue.
30 Amortization Expense, Furniture .....................................................................
b)
150
Accumulated Amortization, Furniture ...............
150
To record amortization for one month; 7,200/4 yrs = 1,800/yr; 1,800/12 months = 150/month.
Exercise 4-4 (continued) c)
Sept.
30 Office Supplies Expense ..................................................
5,000
Office Supplies ...........................................................
5,000
To record the use of office supplies.
d)
30 Accounts Receivable ........................................................ Revenue .......................................................................
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28,00 0 28,000
139
140
To record accrued revenue.
e)
30 Rent Expense ......................................................................
7,000
Rent Payable (or Accounts Payable) .................
7,000
To record accrued rent.
f)
Oct.
3 Cash ...................................................................................
28,00 0
Accounts Receivable............................................
28,000
To record collection of accrued revenue.
g)
4 Rent Payable (or Accounts Payable) .....................
7,000
Cash ...........................................................................
7,000
To record payment of accrued rent.
Exercise 4-5 (25 minutes) 2011
a)
Mar.
31 Unearned Rent .......................................................................................................... 7,500 Rent Earned ..........................................................................
7,500
Earned five months’ rent previously paid in advance; $1,500 x 5 = $7,500. b)
31 Rent Receivable ........................................................................... 2,700 Rent Earned ..........................................................................
2,700
Earned two months’ rent that has not yet been collected; $1,350 x 2 = $2,700.
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140
141
c)
Apr.
22 Cash .................................................................................................. 4,050 Rent Receivable ...................................................................
2,700
Rent Earned ..........................................................................
1,350
Collected rent for February, March, and April.
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141
142
Exercise 4-6 (15 minutes) 2011 a)
Dec.
31 Accounts Receivable ...........................................................................................
2,000
Fees Earned (or Revenue) ...........................................
2,000
To record accrued fees earned. b)
31 Rent Expense ............................................................................
8,000
Prepaid Rent ....................................................................
8,000
To record expired rent. c)
31 Amortization Expense, Machinery ....................................
400
Accumulated Amortization, Machinery ..................
400
To record amortization expense. d)
31 Unearned Fees ..........................................................................
2,800
Fees Earned (or Revenue) ...........................................
2,800
To record fees earned. e)
31 Salaries Expense ...................................................................... Salaries Payable ..............................................................
5,000 5,000
To record accrued salaries.
Exercise 4-7 (15 minutes) a. $1,650 (300 + 2,100 – 750 = 1,650) b. $5,700 (1,600 + 5,400 – 1,300 = 5,700) c. $10,080 (9,600 + 1,840 – 1,360 = 10,080) d. $1,375 (6,575 + 800 – 6,000 = 1,375) Proof: Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 5
142
143
(a)
(b)
Supplies on hand—January 1 ............................
$ 300
$1,600
$ 1,360
$1,375
Supplies purchased during the year ...............
2,100
5,400
10,080
6,000
Total supplies available ......................................
$2,400
$7,000
$11,440
$7,375
Supplies on hand—December 31 ..................... Supplies expense for the year ...........................
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(750) $1,650
(5,700) $1,300
(c)
(1,840) $ 9,600
(d)
(800) $6,575
143
144
Exercise 4-8 (15 minutes) Adjusting entry: 2012 Dec. 31
Wages Expense .................................................................. Wages Payable ........................................................... Adjusting entry to record accrued wages for one day; 5 × $200.
1,000
Wages Expense .................................................................. Wages Payable ................................................................... Cash ............................................................................ Paid employees' accrued and current wages; 5 employees x $200/day x 4 days = $4,000.
3,000 1,000
1,000
Payday entry: 2013 Jan.
4
4,000
Exercise 4-9 (25 minutes) 201 1 a)
Apr.
30 Interest Expense ........................................................
2,080
Interest Payable ..........................................................
2,080
To record accrued interest expense; 0.8% × $780,000 × 10/30.
May
20 Interest Payable...................................................................
2,080
Interest Expense ..................................................................
4,160
Cash .................................................................................
6,240
To record payment of accrued and current expense; 0.8% × $780,000 × 20/30.
201 1 b)
Apr.
30 Salaries Expense ..................................................................
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3,600
144
145
Salaries Payable ..........................................................
3,600
To record accrued salaries; $9,000/5 days = $1,800/day; 2 days x $1,800 = $3,600.
May
3 Salaries Payable...................................................................
3,600
Salaries Expense ..................................................................
5,400
Cash .................................................................................
9,000
To record payment of accrued and current salaries; 3 days x $1,800 = $5,400.
Exercise 4-9 (concluded) 201 1 c)
Apr.
30 Legal Fees Expense .............................................................
2,500
Legal Fees Payable .....................................................
2,500
To record accrued legal fees.
May
12 Legal Fees Payable ..............................................................
2,500
Cash .................................................................................
2,500
To pay accrued legal fees.
Exercise 4-10 (25 minutes) 2011
Dec. 31
Accounts Receivable .......................................................... Fees Earned ................................................................ To record unbilled fees; 30% × $12,000.
3,600
31
Unearned Fees ................................................................... Fees Earned ................................................................
8,400
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3,600
8,400
145
146
To record earned fees that had been collected in advance; 70% × $12,000. 31
Amortization Expense, Computers ...................................... Accumulated Amortization, Computers ........................ To record amortization on computers.
3,000
31
Amortization Expense, Office Furniture............................... Accumulated Amortization, Office Furniture ........................................................ To record amortization on office furniture.
3,500
31
Salaries Expense ................................................................ Salaries Payable.......................................................... To record accrued salaries.
4,900
31
Insurance Expense ............................................................. Prepaid Insurance ....................................................... To record expired prepaid insurance.
2,600
31
Office Supplies Expense ..................................................... Office Supplies ............................................................ To record use of office supplies.
960
31
Utilities Expense ................................................................... Utilities Payable ............................................................. To record unpaid utility costs.
3,000
3,500
140
4,900
2,600
960
140
Exercise 4-10 (concluded) Analysis component: The GAAP of matching and revenue recognition requires that adjusting entries be recorded at the end of each accounting period to ensure revenues and expenses are allocated to the period in which they were incurred. If the December 31, 2011 adjustments for Javelin Company were not recorded, revenues would be understated by $12,000; expenses would be understated by $15,100; and net income would be overstated by the difference of $3,100 ($15,100 - $12,000 = $3,100).
Exercise 4-11 (25 minutes)
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146
147
Ayotte Music Partial Work Sheet February 28, 2011 Unadjusted Trial Balance
Account
Debit Cash...........................................................
5,000
Accounts receivable ............................
4,500
Prepaid insurance ...............................
700
Credit
Adjustments Debit
Credit
c) 1,400
Credit
5,900
b) 250
450 12,000
6,000
equipment ........
Debit 5,000
Equipment .............................................. 12,000 Accumulated amortization,
Adjusted Trial Balance
a)2,400
8,400
Accounts payable .................................
1,200
1,200
Jane Adams, capital .............................
9,000
9,000
Jane Adams, withdrawals..................
3,000
Revenues .................................................
3,000 45,000
Amortization expense, equipment
0
c) 1,400 a)2,400
2,400
Salaries expense ................................... 29,000 Insurance expense...............................
7,000
Totals ....................................................... 61,200 61,200
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46,400
29,000 b) 250 4,050
7,250 4,050
65,000 65,000
147
148
Exercise 4-12 (25 minutes) Ayotte Music Income Statement For Year Ended February 28, 2011 Revenue........................................................................................................
$46,400
Operating expenses: Salaries expense ...................................................................................
$29,000
Insurance expense ...............................................................................
7,250
Amortization expense, equipment ................................................
2,400
Total operating expenses ..............................................................
38,650
Net income ..................................................................................................
$ 7,750
Ayotte Music Statement of Owner’s Equity For Year Ended February 28, 2011
Jane Adams, capital, March 1 ................................................................ Add: Net income ........................................................................................
$ 9,000 7,750
Total..........................................................................................................
$16,750
Less: Withdrawal by owner..................................................................
3,000
Jane Adams, capital, February 28 .......................................................
$13,750
Ayotte Music Balance Sheet February 28, 2011
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148
149
Cash................................................................................................................
$ 5,000
Accounts receivable .................................................................................
5,900
Prepaid insurance ....................................................................................
450
Office equipment.......................................................................................
$12,000
Less: Accumulated amortization, office equipment ...............
8,400
Total assets .................................................................................................
3,600 $14,950
Liabilities Accounts payable ......................................................................................
$ 1,200
Owner’s Equity Jane Adams, capital ..................................................................................
13,750
Total liabilities and owner’s equity ...................................................
$14,950
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150
Exercise 4-12 (concluded) Analysis component:
The GAAP which requires the preparation of financial statements is the time period principle. The time period principle assumes that an organization’s activities can be divided into specific time periods. Since information must reach decision makers frequently and promptly, the accounting system needs to prepare reports regularly. The standard reporting period is one year although many companies report quarterly. *Exercise 4-13 a)
Cash ............................................................................ Accounts Payable ........................................................
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1,800 1,800
150
151
To correct the original entry.
OR 1,800
Cash ........................................................................... 1,800
Office Supplies ...................................................
To reverse the incorrect entry.
1,800
Office Supplies ..........................................................
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152
1,800
Accounts Payable ..............................................
To journalize the correct entry. b)
Revenue ...................................................................... Accounts Receivable ..................................................
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4,500 4,500
152
153
To correct the original entry.
OR 4,500
Revenue ..................................................................... 4,500
Cash ....................................................................
To reverse the incorrect entry.
4,500
Cash ...........................................................................
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153
154
4,500
Accounts Receivable .........................................
To journalize the correct entry. c)
Withdrawals ................................................................. Salaries Expense..........................................................
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1,500 1,500
154
155
To correct the original entry.
OR
Cash ............................................................................
1,500
Salaries Expense........................................................
1,500
To reverse the incorrect entry.
Withdrawals ..........................................................................
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1,500
155
156
Cash ....................................................................
1,500
To journalize the correct entry.
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156
157
*Exercise 4-13 (concluded) d)
Accounts Receivable ....................................................................
750
Revenue .............................................................................
750
To correct the original entry. OR Accounts Receivable ..............................................................................
750
Cash ....................................................................................................
750
To reverse the incorrect entry.
Cash.............................................................................................
750
Revenue ............................................................................................
750
To journalize the correct entry.
Analysis component: If the error in (b) is not corrected, revenue and net income on the income statement will be overstated each by $4,500. On the balance sheet, assets (accounts receivable) and equity will be overstated each by $4,500.
*Exercise 4-14 (30 minutes) 2011 a) Dec.
1
Supplies Expense ........................................................ Cash ..................................................................... Purchased supplies. b) 2 Insurance Expense ...................................................... Cash ..................................................................... Paid insurance premiums. c) 15 Cash ............................................................................ Remodelling Fees Earned .................................... Received fees for work to be done. Adjusting entries: 2011 d) Dec.31 Supplies .............................................................................. Supplies Expense ................................................. Adjusted expense for unused supplies on hand. e) 31 Prepaid Insurance ....................................................... Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 5
6,000 2,880 24,000
3,840
6,000 2,880 24,000
3,840
2,400 157
158
f)
Insurance Expense ............................................... Adjusted expense for unexpired coverage; $2,880 – $480. 31 Remodelling Fees Earned ........................................... Unearned Remodelling Fees ................................ Adjusted revenues for unfinished projects; $24,000 – $7,200.
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2,400 16,800
16,800
158
159
*Exercise 4-15 (25 minutes) a) Initial credit recorded in Unearned Fees account: July 1 Cash .................................................................... Unearned Fees ............................................. Received fees for work to be done.
2,000
6
Cash .................................................................... Unearned Fees ............................................. Received fees for work to be done.
8,400
12
Unearned Fees .................................................... Fees Earned ................................................. Completed work for customer.
2,000
18
Cash .................................................................... Unearned Fees ............................................. Received fees for work to be done.
7,500
27
Unearned Fees .................................................... Fees Earned ................................................. Completed work for customer.
8,400
31
No entry.
b) Initial credit recorded in Fees Earned account: July 1 Cash .................................................................... Fees Earned ................................................. Received fees for work to be done. 6
Cash .................................................................... Fees Earned ................................................. Received fees for work to be done.
12
No entry.
18
Cash .................................................................... Fees Earned ................................................. Received fees for work to be done.
27
No entry.
31
Fees Earned ........................................................ Unearned Fees .............................................
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2,000
8,400
7,500
7,500
2,000
8,400
2,000
7,500
8,400
2,000
8,400
7,500
7,500 159
160
Adjusting entry to reflect unearned fees for unfinished job. *Exercise 4-15 (concluded) c)
Under the first method: Unearned fees = $2,000 + $8,400 – $2,000 + $7,500 – $8,400 = $7,500 Fees earned = $2,000 + $8,400 = $10,400 Under the second method: Unearned fees = $7,500 Fees earned = $2,000 + $8,400 + $7,500 – $7,500 = $10,400
Chapter 5 Accounting
Completing the Cycle and Classifying Accounts
EXERCISES Exercise 5-1 (15 minutes) 1.
C
5.
C
9. C
13.
C
2.
B
6.
A
10. C
14.
A
3.
D
7.
A
11. D
15.
A
4.
B
8.
D
12. D
16.
C
Exercise 5-2 (20 minutes) Adjusted Trial Balance No. Title Debit 101 Cash ........................ 3,000 106 Accounts receivable .............. 153 Trucks ...................... 41,000
Balance Sheet and Income Statement of Statement Owner’s Equity Credit Debit Credit Debit 3,000 13,100 13,100 41,000
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Credit
160
161
154 193 201 209 233 301 302 401 611 622 640 677
Accum. amortization, trucks .. 16,500 16,500 Franchise .............................. 15,000 15,000 Accounts payable.................. 7,000 7,000 Salaries payable ................... 1,600 1,600 Unearned fees ...................... 1,300 1,300 Bo Webber, capital................ 37,750 37,750 Bo Webber, withdrawals….. 7,200 7,200 Plumbing fees earned ........... 49,000 49,000 Amortization expense, trucks5,500 5,500 Salaries expense .................. 18,500 18,500 Rent expense........................ 6,000 6,000 Misc. expenses ..................... 3,850 3,850 Totals ................................ 113,150 113,150 33,85049,00079,300 64,150 Net income............................ 15,150 15,150 Totals ................................ 49,00049,00079,300 79,300
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162
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Exercise 5-3 (25 minutes) Parts 1, 2, and 3
Musical Sensations Work Sheet For Year Ended December 31, 2011 Unadjusted Trial Balance Account
Debit
Credit
Adjusted Trial Balance
Adjustments Debit
Credit
Debit
Credit
Income Statement Debit
Credit
Balance Sheet & Statement of Owner’s Equity Debit
Cash .................................. 14,000
14,000
14,000
Accounts receivable .... 26,000
26,000
26,000
520
520
212,00 0
212,00 0
Office supplies ..............
950
d) 430
Musical equipment...... 212,00 0
Fundamental Accounting Principles, Twelfth Canadian Edition
Accum. amort. musical equip. ......
16,200
Accounts payable .........
3,350
Unearned performance revenue ...........................
12,400
Jim Daley, capital .........
b) 16,200
a) 10,600
272,00 0
Jim Daley, 52,000 withdrawals................... Performance revenue
32,400
32,400
3,350
3,350
1,800
1,800
272,00 0
272,00 0
52,000 119,00
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a)
Credit
52,000 129,60
129,60
162
163
0 Salaries expense .......... 76,000
10,600 c) 13,800
Travelling expense ...... 42,000
0
0
89,800
89,800
42,000
42,000
16,200
16,200
Totals ........................... 422,95 422,95 0 0 Amortization expense, musical equip. ...............
b) 16,200
Salaries payable ...........
c) 13,800
Office supplies expense ...........................
d) 430
Totals ...........................
41,030
13,800 430
13,800 430
41,030 452,95 452,95 148,43 129,60 304,52 323,35 0 0 0 0 0 0
Net loss ............................ Totals ...........................
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18,830 18,830 148,43 148,43 323,35 323,35 0 0 0 0
163
Exercise 5-3 (concluded) Part 4 $272,000 – $52,000 – $18,830 = $201,170
or
Jim Daley, Capital
(With.)
52,000
(Net Loss)
18,830
272,000
(Beg. bal.)
201,170
(End. bal.)
Exercise 5-4 (20 minutes) 1. (a) Income = $36,800 2. (a) Mar. 31 Income Summary...................................................................
36,800
Capital ...................................................................................
36,800
To close the income summary account to capital.
3. (a)
Capital 63,000
$63,000 + $36,800 – $17,000 = $82,800 OR
(With. 17,000 36,800 ) 82,800
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(Beg. bal.) (Net income) (End. bal.)
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165
1. (b) Net Loss = $60,000 2. (b) June 30
Capital ....................................................................................... Income Summary ..............................................................
60,000 60,000
To close the income summary account to capital.
3. (b)
Capital 114,000 (Beg. bal.)
$114,000 – $60,000 = $54,000 OR
(Net loss) 60,000 54,000 (End. bal.)
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165
166
Exercise 5-5 (30 minutes) Debit Rent earned .....................................................................................
99,000
Salaries expense ............................................................................
35,300
Insurance expense ........................................................................
4,400
Dock rental expense .....................................................................
12,000
Boat supplies expense .................................................................
6,220
Amortization expense, boats .....................................................
21,500
Totals...................................................................................
79,420
Net income...............................................................................
19,580
Totals .................................................................................................
99,000
2011
Credit
99,000
99,000
Closing entries:
Dec. 31 Rent Earned .................................................................................... 99,000 Income Summary..................................................................
99,000
To close the revenue account.
31 Income Summary .......................................................................... 79,420 Salaries Expense ...................................................................
35,300
Insurance Expense ...............................................................
4,400
Dock Rental Expense ...........................................................
12,000
Boat Supplies Expense ........................................................
6,220
Amortization Expense, Boats ...........................................
21,500
To close the expense accounts.
31 Income Summary ................................................................. 19,580
Carl Winston, Capital .................................................... Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 5
19,580
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167
To close Income Summary. 31 Carl Winston, Capital ........................................................... 18,000
Carl Winston, Withdrawals ............................................
18,000
To close the withdrawals account.
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168
Exercise 5-6 (20 minutes) 2011 Apr.
3 0
Closing entries: Plumbing Fees Earned ............................................
39,500
Income Summary.................................................
39,500
To close revenue to the income summary.
3 0
Income Summary .....................................................
31,100
Amortization Expense, Trucks .......................
5,500
Salaries Expense ..................................................
15,750
Rent Expense.........................................................
6,000
Advertising Expense ...........................................
3,850
To close expense accounts to income summary.
3 0
Income Summary .....................................................
8,400
Frank Block, Capital ...........................................
8,400
To close income summary to capital.
3 0
Frank Block, Capital ................................................ Frank Block, Withdrawals ................................
7,200 7,200
To close withdrawals to capital. Block Plumbing Co. Post-Closing Trial Balance April 30, 2011 Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 5
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169
Acct. No.
Debit
Account
$
Credit
101
Cash
106
Accounts receivable .......................................................
12,000
153
Trucks .................................................................................
20,500
154
Accumulated amortization, trucks ...........................
193
Franchise ...........................................................................
201
Accounts payable ............................................................
7,000
209
Salaries payable ..............................................................
1,600
233
Unearned fees ..................................................................
1,300
301
Frank Block, capital .......................................................
33,450*
Totals ..................................................................................
4,100
$
8,250
15,000
$51,600
$51,600
Frank Block, Capital
*Calculated as:
(Adj. Bal,
32,250 + 8,400 – 7,200 = 33,450 or
32,250 Apr. 30) (Withdrawals)
7,200
8,400 (Net income) (Post-closing
33,450 Bal., Apr. 30)
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170
Exercise 5-7 (20 minutes) 2011
Closing entries:
January 31 Subscription Revenues .............................................
62,000
Interest Revenue .........................................................
450
Income Summary ...................................................
62,450
To close revenues to the income summary.
31 Income Summary ........................................................
65,400
Amortization Expense, Equipment ..................
2,000
Rent Expense ...........................................................
7,400
Salaries Expense .....................................................
56,000
To close expense accounts to income summary.
31 Kate Goldberg, Capital...............................................
2,950
Income Summary ...................................................
2,950
To close income summary to capital.
31 Kate Goldberg, Capital............................................... Kate Goldberg, Withdrawals ..............................
4,000 4,000
To close withdrawals to capital.
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171
Exercise 5-8 (20 minutes) 2011 Dec. 31
Closing entries: Services Revenue ............................................. Income Summary ...................................... To close the revenue account to the income summary.
31
Income Summary .............................................. Amortization Expense, Equipment ........... Salaries Expense ....................................... Insurance Expense .................................... Rent Expense ............................................. Supplies Expense ...................................... To close the expense accounts to the income summary.
73,400
31
Jo Weller, Capital ............................................... Income Summary ...................................... To close the income summary to capital.
1,400
31
Jo Weller, Capital .............................................. Jo Weller, Withdrawals ............................. To close withdrawals to capital.
12,000
72,000
72,000
4,000 42,000 3,000 22,000 2,400
1,400
12,000
Exercise 5-9 (20 minutes) 2011
Closing entries:
Sept. 30 Consulting Fees Earned ...........................................
68,000
Income Summary ..................................................
68,000
To close revenues to the income summary.
30 Income Summary .......................................................
18,750
Amortization Expense, Office Equipment ....
3,500
Rent Expense ..........................................................
1,750
Wages Expense ......................................................
13,500
To close expense accounts to income summary. Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 5
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172
30 Income Summary .......................................................
49,250
Sandra Sloley, Capital ..........................................
49,250
To close income summary to capital.
30 Sandra Sloley, Capital ...............................................
19,000
Sandra Sloley, Withdrawals ..............................
19,000
To close withdrawals to capital.
Exercise 5-10 (35 minutes) Closing entries:
2011 (1)
Dec.
31
Services Revenue ................................................
73,000
Income Summary ..............................................
73,000
To close the revenue account to the Income Summary.
(2)
31
Income Summary .................................................................. 48,100 Rent Expense .................................................................
8,600
Salaries Expense ...........................................................
20,000
Insurance Expense .......................................................
3,500
Amortization Expense ................................................
16,000
To close the expense accounts to the income summary.
(3)
31
Income Summary .................................................................. 24,900 Marcy Jones, Capital ...................................................
24,900
To close the income summary to capital.
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173
(4)
31
Marcy Jones, Capital ............................................................ 24,000 Marcy Jones, Withdrawals.........................................
24,000
To close withdrawals to capital.
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174
Exercise 5-10 (concluded) Posted accounts: Assets Dec. 31
Rent Expense
80,000
Dec. 31 Balance
8,600
8,600 (2)
0
Liabilities 38,10 0
Dec. 31
Salaries Expense Dec. 31
Marcy Jones, Capital (4)
24,000 41,00 0
Balance
20,000
20,000 (2)
0
Dec. 31
24,90 0
(3)
41,90 0
Balance
Insurance Expense Dec. 31 Balance
3,500
3,500 (2)
0
Marcy Jones, Withdrawals Dec. 31 Balance
24,000 24,00 0
(4)
0
Amortization Expense Dec. 31 Balance
16,000
16,000 (2)
0
Income Summary (2)
48,100
73,00 (1) 0
(3)
24,900
24,90 Balance 0 0 Balance
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175
Services Revenue (1)
73,000
73,00 Dec. 31 0 0 Balance
Exercise 5-11 (10 minutes) Jones’ Consulting Post-Closing Trial Balance December 31, 2011
Account Assets ......................................................................
Debit
Credit
$ 80,000
Liabilities ...........................................................................
$ 38,100
Marcy Jones, Capital .......................................................
41,900
Totals...................................................................................
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$80,000
$80,000
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176
Exercise 5-12 (12 minutes) 1.
Bill Duggan, Withdrawals; Interest Revenue, and Other Expenses have not been closed.
2. 2011 June 30
Bill Duggan, Capital ..........................................
71,000
Interest Revenue ....................................................
1,150
Bill Duggan, Withdrawals ..............................
72,000
Other Expenses ..................................................
150
To close interest earned, withdrawals and other expenses directly to capital. Bill Duggan, Capital 216,20 0
3.
$216,200 – $71,000 = $145,200 OR
71,000 145,20 (Balance) 0
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176
177
Exercise 5-13 (15 minutes) Part A
Accounts payable ........................................................... Accounts receivable ....................................................... Accumulated amortization, equipment.......................... Accumulated amortization, truck ................................... Amortization expense ..................................................... Cash ................................................................................. Equipment ....................................................................... Franchise ......................................................................... Gas and oil expense ....................................................... Interest expense .............................................................. Interest payable ............................................................... Land not currently used in business operations .......... Long-term notes payableNote 1......................................... Notes payable, due February 1, 2012 ............................ Notes receivableNote 2....................................................... Patent ............................................................................... Prepaid rent ..................................................................... Rent expense................................................................... Repair revenue ................................................................ Repair supplies ............................................................... Repair supplies expense ................................................ Sid Whimsly, capital ....................................................... Sid Whimsly, withdrawals .............................................. Truck ................................................................................... Unearned repair revenue ................................................
Adjusted Trial Balance Credit Debit $ 11,000 $ 59,000 9,000 21,000 3,800 29,000 13,000 17,800 7,500 4,500 750 52,000 35,000 7,000 6,000 7,000 14,000 39,000 247,000 17,000 14,000 24,050 49,000 26,000 3,800
Totals ...............................................................................
$358,600 $358,600
Account Title
X
X X
X X X X X
b.
$24,050 -$3,800 - $7,500 - $4,500 - $39,000 + $247,000 - $14,000 - $49,000 = $153,250.
Analysis component: Amortization expense, gas and oil expense, interest expense, rent expense, repair revenue, repair supplies expense, and withdrawals are all temporary accounts and do not appear on the post-closing trial balance because their balances were transferred to Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 5
177
178
capital during the closing process leaving each with a zero post-closing balance. The adjusted balance of $24,050 in capital is the balance prior to closing all temporary accounts into it. A capital account balance does appear on the post-closing trial balance but it is the post-closing balance of $153,250 as determined in part (b) above. Therefore, the adjusted capital balance of $24,050 will not appear on the post-closing trial balance Note to instructor: Reinforce to the student that the question asks which account balances from the adjusted trial balance will not appear on the post-closing trial balance.
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179
Exercise 5-14 (15 minutes) a. b. c. d. e. f. g. h. i.
Current assets = $59,000 + $29,000 + $2,000 + $14,000 + $17,000 = $121,000. Property, plant and equipment = -$9,000 - $21,000 + $13,000 + $26,000 = $9,000. Intangible assets = $17,800 + 7,000 = $24,800. Long-term investments = $4,000 + $52,000 = $56,000. Total assets = $121,000 + $9,000 + $24,800 + $56,000 = $210,800. Current liabilities = $11,000 + $750 + $5,000 + $7,000 + $3,800 = $27,550 Long-term liabilities = $30,000. Total liabilities = $27,550 + $30,000 = $57,550. Total liabilities and owner’s equity = $210,800.
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180
Exercise 5-15 (30 minutes) DOVER PACIFIC TOURS Balance Sheet November 30, 2011
Assets Current assets: Cash .........................................................................................................................
$ 5,000
Accounts receivable .................................................................................................
13,000
Prepaid insurance .....................................................................................................
700
Prepaid rent ..............................................................................................................
9,000
Supplies ....................................................................................................................
2,250
Current portion of notes receivable...........................................................................
7,500
$ 37,45 0
Total current assets ..................................................................................................
Long-term investments:
13,000
Notes receivable, less $7,500 current portion .........................................................
Property, plant and equipment: Vehicles ....................................................................................................................
$64,000
Less: Accumulated amortization ...........................................................................
17,000
Office furniture ..........................................................................................................
$ 6,500
Less: Accumulated amortization ...........................................................................
3,600
Total property, plant and equipment .........................................................................
$47,000
2,900
49,900
Intangible assets: Copyright...............................................................................................................
1,000
Total assets .....................................................................................................................
$101,35
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181
0
Liabilities Current liabilities: Accounts payable ............................................................................................
$ 11,000
Salaries payable ..............................................................................................
900
Unearned touring revenue ...............................................................................
23,000
Notes payable ..................................................................................................
4,000
Current portion of long-term notes payable .....................................................
10,000
Total current liabilities ...........................................................................................
$ 48,900
Long-term liabilities: Long-term notes payable, less $10,000 current portion ................................................................................................................... Total liabilities ...........................................................................................................
10,500
$59,400
Owner’s Equity Pat Dover, capital* ....................................................................................................
41,950
Total liabilities and owner’s equity ...................................................................................
$101,35 0
*Calculated as Total assets of $101,350 less Total liabilities of $59,400 = $41,950.
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182
Exercise 5-16 (20 minutes)
HANSON TRUCKING COMPANY Balance Sheet December 31, 2011
Assets Current assets: Cash .................................................................................
$ 7,000
Accounts receivable ..................................................
16,500
Office supplies .............................................................
2,000
Total current assets...................................................
$ 25,500
Property, plant and equipment: Land ................................................................................
$ 75,000
Trucks ............................................................................
$170,000
Less: Accumulated amortization ......................
35,000
135,000
Total property, plant and equipment .................
$210,000
Total assets ...........................................................................
$235,500
Liabilities Current liabilities: Accounts payable .......................................................
$ 11,000
Interest payable ..........................................................
3,000
Total current liabilities ............................................
$ 14,000
Long-term notes payable .............................................
52,000
Total liabilities ................................................................
$ 66,000
Owner’s Equity Stanley Hanson, capital ...............................................
169,500
Total liabilities and owner’s equity ..............................
$235,500
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183
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184
Exercise 5-17 (60 minutes) a. Withdrawals, tutoring fees earned, rent expense, amortization expense, and advertising expense have zero balances because each account was closed at December 31, 2011 resulting in each balance being transferred to capital leaving a zero balance behind. b. 2012 Jan. 15 Accounts Receivable .........................................
8,000
Tutoring Fees Earned ...............................
8,000
To record revenues earned on account.
Feb. 20 Advertising Expense .........................................
2,000
Cash .................................................................
2,000
To record payment for advertising.
July 7 Cash.........................................................................
9,000
Accounts Receivable .................................
9,000
To record collection from customers.
Dec. 10 Leda Svenson, Withdrawals ........................... Cash .................................................................
3,000 3,000
To record cash withdrawals by owner.
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Exercise 5-17 (continued) b. Cash Dec 31/11
2,000 9,000
2,000 3,000
Jul 07/12 Unadj Bal
Accounts Receivable Feb 20/12
5,000
Jan. 15/12
8,000
Unadj Bal
4,000
9,00 0
Jul 07/12
Dec 31/11
3,00 0
Dec 10/12 6,000
Office Equip. Dec 31/11
Dec 31/11
Prepaid Rent
Accum. Amort., Office Equipment
20,0 00
10,0 00
Fundamental Accounting Principles, Twelfth Canadian Edition
Leda Svenson, Capital
Dec 31/11
Leda Svenson, Withdrawals 17,10 0
Rent Expense
Dec 31/11
Unearned Fees 2,90 0
Tutoring Fees Earned
Dec 31/11
-0-
Dec 10/12
3,000
8,00 0
Unadj Bal
3,000
8,00 0
Amortization Expense
Dec 31/11
-0-
Dec 31/11 Jan. 15/12
Advertising Expense
Unadj Bal
186
Dec 31/11
-0-
Dec 31/11
-0-
Dec 31/11 Feb 20/12 Unadj Bal
-02,00 0 2,00 0
Exercise 5-17 (continued) c.
Svenson’s Tutoring Clinic Unadjusted Trial Balance December 31, 2012 Account Cash ................................................................................. Accounts receivable........................................................ Prepaid rent ..................................................................... Office equipment ............................................................. Accumulated amortization, office equipment ................. Unearned fees.................................................................. Leda Svenson, capital ..................................................... Leda Svenson, withdrawals ............................................ Tutoring fees earned ....................................................... Advertising expense ....................................................... Totals................................................................................
Debit $ 6,000 4,000 3,000 20,000
3,000 2,000 $38,000
Credit
$10,000 2,900 17,100 8,000 $38,000
d. Journalize adjustments: 2012
Dec. 31
Amortization Expense........................................
2,000
Accum. Amort., office equipment ...........
2,000
To record annual amortization.
31
Unearned Fees ......................................................
2,400
Tutoring Fees Earned .................................
2,400
To record earned fees.
31
Rent Expense ......................................................... Prepaid Rent ..................................................
3,000 3,000
To record expired prepaid rent.
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188
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Exercise 5-17 (continued) d. Post adjustments: Cash Dec 31/11
2,000 9,000
2,000 3,000
Jul 07/12
Accounts Receivable Feb 20/12
9,000 Jul 07/12
Jan. 15/12 8,000
Dec 31/11
3,000
Adj Bal
-0-
3,000 Dec 31/12
Dec 10/12
Unadj Bal 6,000
Unadj Bal
Office Equip. Dec 31/11
Dec 31/11 5,000
Prepaid Rent
4,000
Accum. Amort., Office Equipment
20,000
10,000 Dec 31/11 2,000 Dec 31/12
Fundamental Accounting Principles, Twelfth Canadian Edition
12,000
Leda Svenson,
Leda Svenson, Withdrawals
Capital 17,100
Adj Bal
Dec 31/11
Dec 31/11 -0-
Unearned Fees Dec 31/12
2,400
2,900 Dec 31/11
500
Adj Bal
Tutoring Fees Earned -0- Dec 31/11
Dec 10/12 3,000
8,000 Jan 15/12
Unadj Bal
8,000
3,000
Unadj Bal
2,400 Dec 31/12 10,400
Adj Bal
189
Rent Expense Dec 31/11 Dec 31/12
Adj Bal
Amortization Expense
-0-
Dec 31/11 -0-
3,000
Dec 31/12 2,000
3,000
Adj Bal
2,000
Advertising Expense Dec 31/11 Feb 20/12
-02,000
Unadj Bal 2,000
Exercise 5–17 (continued) e. Svenson’s Tutoring Clinic Adjusted Trial Balance December 31, 2012 Account Cash ........................................................................ Accounts receivable .............................................. Office equipment.................................................... Accumulated amortization, office equipment ....... Unearned fees ........................................................ Leda Svenson, capital ........................................... Leda Svenson, withdrawals .................................. Tutoring fees earned.............................................. Rent expense.......................................................... Amortization expense ............................................ Advertising expense .............................................. Totals ......................................................................
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Debit $ 6,000 4,000 20,000
3,000 3,000 2,000 2,000 $40,000
Credit
$12,000 500 17,100 10,400
$40,000
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191
Exercise 5–17 (continued) f. Svenson’s Tutoring Clinic Income Statement For Year Ended December 31, 2012 Revenue ........................................................................................................
$10,400
Operating expenses: Rent expense..........................................................................................
$3,000
Advertising expense ............................................................................
2,000
Amortization expense ........................................................................
2,000
Total operating expenses ..............................................................
7,000
Net income...................................................................................................
$ 3,400
Svenson’s Tutoring Clinic Statement of Owner’s Equity For Year Ended December 31, 2012 Leda Svenson, capital, January 1 ......................................................... Add: Investments by owner.................................................................. Net income .........................................................................................
$17,100 $
0
3,400
3,400
Total ..........................................................................................................
$20,500
Less: Withdrawals by owner ................................................................
3,000
Leda Svenson, capital, December 31 ..................................................
$17,500
Svenson’s Tutoring Clinic Balance Sheet December 31, 2012
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192
Assets Current assets: Cash ...................................................................................................................................
$ 6,000
Accounts receivable ...........................................................................................................
4,000
$ 10,000
Total current assets ............................................................................................................
Property, plant and equipment: Office equipment ................................................................................................................
$20,000
Less: Accumulated amortization .....................................................................................
12,000
8,000 $18,000
Total assets ...............................................................................................................................
Liabilities Current liabilities:
$ 500
Unearned fees ....................................................................................................................
Owner’s Equity Leda Svenson, capital ............................................................................................................
17,500
Total liabilities and owner’s equity .............................................................................................
$18,000
Exercise 5–17 (continued) g. Journalize the closing entries: 2012 (1)
Dec. 31 Tutoring Fees Earned ...................................... 10,400 Income Summary .......................................
10,400
To close the revenue account to the income summary.
(2)
31 Income Summary ..............................................7,000
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193
Rent Expense ...............................................
3,000
Amortization Expense ..............................
2,000
Advertising Expense .................................
2,000
To close the expense accounts to the income summary.
(3)
31 Income Summary ..............................................3,400 Leda Svenson, Capital ...............................
3,400
To close the income summary to capital.
(4)
31 Leda Svenson, Capital ......................................3,000 Leda Svenson, Withdrawals ...................
3,000
To close withdrawals to capital.
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Exercise 5–17 (continued) g. Post the closing entries: Cash Dec 31/11 Jul 07/12 Unadj Bal
2,000 9,000
Accounts Receivable 2,000 Feb 20/12
Dec 31/11 5,000
3,000 Dec 10/12
Jan. 15/12 8,000
6,000
Unadj Bal
Office Equip. Dec 31/11
9,000
Prepaid Rent Jul 07/12
4,000
Dec 31/11 Adj Bal
Accum. Amort., Office Equip.
20,000
10,00 Dec 0 31/11
3,000 3,000
Dec 31/12
-0-
Unearned Fees Dec 31/12
2,400 2,900 Dec 31/11
2,000 Dec 31/12 12,00 Adj Bal 0
Fundamental Accounting Principles, Twelfth Canadian Edition
Leda Svenson, Capital (4) 3,000
Leda Svenson, Withdrawals 17,100 Dec 31/11 3,400 (3)
17,500
Dec 31/11
-0-
Unadj Bal
3,000
Tutoring Fees Earned -0- Dec 31/11 8,000 Jan 15/12
Dec 10/12 3,000
Postclosing
500 Adj Bal
3,000 (4)
8,000 Unadj Bal
195
balance
2,400 Dec 31/12 (1) 10,400 10,40 Adj Bal 0
-0-
-0-
Rent Expense Dec 31/11 Dec 31/12
Adj Bal
-0-
Dec 31/11
3,000
3,000
Amortization Expense -0-
Dec 31/11
Dec 31/12 2,000
3,000 (2)
-0-
Adj Bal
2,000
Advertising Expense
Feb 20/12 2,000 (2)
Unadj Bal
7,000
(3)
3,400
10,400 (1) 3,400 Bal. -0-
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2,000 -0-
-0-
Income Summary (2)
-02,000
195
2,000 (2)
196
Exercise 5–17 (concluded) h. Svenson’s Tutoring Clinic Post-Closing Trial Balance December 31, 2012 Account Cash ....................................................................... Accounts receivable ............................................. Office equipment ................................................... Accumulated amortization, office equipment....... Unearned fees ....................................................... Leda Svenson, capital........................................... Totals .....................................................................
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Debit $ 6,000 4,000 20,000
$30,000
Credit
$12,000 500 17,500 $30,000
196
197
*Exercise 5-18 (10 minutes) Reversing entries are appropriate for adjustments (a) and (e): 2011
Sept. 1
Service Fees Earned ........................................... 5,000 Accounts Receivable ................................. To reverse accrued revenues. 1 Salaries Payable .................................................. 2,400 Salaries Expense ........................................ To reverse accrued salaries. *Exercise 5-19 (30 minutes) 1. Adjusting entries: 2011 Oct. 31 Rent Expense ..................................................... 3,200 Rent Payable ............................................... To record accrued rent expense. 31 Rent Receivable................................................... 750 .................................................................. Rent Earned To record accrued rent revenue. 2. Subsequent entries without reversing: Nov. 5Rent Payable ........................................................ 3,200 Rent Expense ..................................................... 3,200 Cash ......................................................... To record payment of two months’ rent. 8Cash ...................................................................... 1,500 Rent Receivable ...................................... .................................................................. Rent Earned To record collection of two months’ rent. 3. Reversing entries and subsequent entries: Nov. 1Rent Payable ........................................................ 3,200 Rent Expense .......................................... To reverse the accrual of rent expense. 1Rent Earned.......................................................... 750 Rent Receivable ...................................... To reverse the accrual of rent revenue. Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 6
5,000 2,400
3,200 750
6,400
750
750
3,200
750
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198
5Rent Expense ....................................................... 6,400 Cash ......................................................... To record payment of two months’ rent. 8Cash ...................................................................... 1,500 .................................................................. Rent Earned To record collection of two months’ rent.
Chapter 6
6,400
1,500
Accounting for Merchandising Activities
EXERCISES
Exercise 6-1 (15 minutes) a
b
c
d
e
Sales ................................................. $ 240,000
$ 140,000
$ 75,000
$462,000
$85,000
Cost of goods sold ................................. 126,000
86,000
42,000
268,000
46,000
Gross profit from sales........................ $ 114,000
$ 54,000
$33,000
$194,000
$ 39,000
Operating expenses ............................. 95,000
82,000
41,000
146,000
53,000
Net Income (Loss) ................................. $ 19,000 $
(28,00 ($ 8,000) $ 0)
48,000 ($ 14,000)
Exercise 6-2 (25 minutes) Feb.
1 Merchandise Inventory ..................................................
7,000
Accounts Payable .......................................................
7,000
To record purchase; terms 1/10, n30.
5 Merchandise Inventory ..................................................
2,400
Cash .................................................................................
2,400
To record purchase for cash.
6 Merchandise Inventory ..................................................
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10,000
198
199
Accounts Payable .......................................................
10,000
To record purchase; terms 2/15, n45.
9 Office Supplies ...................................................................
900
Accounts Payable .......................................................
900
To record purchase; n15.
1 No entry. 0
1 Accounts Payable .............................................................. 1
7,000
Cash .................................................................................
6,930
Merchandise Inventory............................................
70
To record payment within discount period; $7,000 x 1% = $70 discount.
2 Accounts Payable .............................................................. 4
900
Cash .................................................................................
900
To record payment.
Mar.
2 Accounts Payable .............................................................. 3 Cash .................................................................................
10,000 10,000
To record payment.
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200
Exercise 6-3 (30 minutes) 2011 Mar.
2
Merchandise Inventory ..................................... Accounts Payable — Blanton Company ... Purchased merchandise on credit.
3,600
3
Merchandise Inventory ..................................... Cash ............................................................ Paid shipping charges on purchased merchandise.
200
4
Accounts Payable — Blanton Company ......... Merchandise Inventory .............................. Returned unacceptable merchandise.
600
17
Accounts Payable — Blanton Company .......... Merchandise Inventory............................... Cash ............................................................ Paid balance within the discount period; 3,600 – 600 = 3,000; 3,000 x 2% = 60.
3,000
18
Merchandise Inventory ..................................... Accounts Payable — Fleming Corp. ......... Purchased merchandise on credit.
7,500
21
Accounts Payable — Fleming Corp. ................. Merchandise Inventory .............................. Received an allowance on purchase.
2,100
28
Accounts Payable — Fleming Corp. ................. Merchandise Inventory............................... Cash ............................................................ Paid balance within the discount period; 7,500 – 2,100 = 5,400; 5,400 x 2% = 108.
5,400
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3,600
200
600
60 2,940
7,500
2,100
108 5,292
200
201
Exercise 6-4 (25 minutes) Jan.
5 Accounts Receivable ........................................................
4,000
Sales ................................................................................
4,000
To record sale; terms 1/10, n30.
5 Cost of Goods Sold.............................................................
3,200
Merchandise Inventory............................................
3,200
To record cost of sales.
7 Cash .......................................................................................
3,600
Sales ................................................................................
3,600
To record cash sale.
7 Cost of Goods Sold.............................................................
3,000
Merchandise Inventory............................................
3,000
To record cost of sales.
8 Accounts Receivable ........................................................
9,600
Sales ................................................................................
9,600
To record sale; terms 1/10, n30.
8 Cost of Goods Sold.............................................................
8,200
Merchandise Inventory............................................
8,200
To record cost of sales.
1 Cash ....................................................................................... 5 Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 6
3,960
201
202
Sales Discounts ..................................................................
40
Accounts Receivable .................................................
4,000
To record collection within discount period; $4,000 x 1% = $40 discount.
Feb.
4 Cash ....................................................................................... Accounts Receivable .................................................
9,600 9,600
To record collection.
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203
Exercise 6-5 (30 minutes) Feb.
1 Accounts Receivable ........................................................
2,400
Sales ................................................................................
2,400
To record sale; terms 2/10, n30, FOB destination.
1 Cost of Goods Sold.............................................................
2,000
Merchandise Inventory............................................
2,000
To record cost of sales.
2 Delivery Expense or Freight-Out .................................
150
Cash .................................................................................
150
To record delivery expenses for goods sold.
3 Sales Returns and Allowances .....................................
1,200
Accounts Receivable .................................................
1,200
To record return of merchandise.
3 Merchandise Inventory ..................................................
1,000
Cost of Goods Sold ......................................................
1,000
To return merchandise to inventory.
4 Accounts Receivable ........................................................
3,800
Sales ................................................................................
3,800
To record sale; terms 2/10, n30, FOB destination.
4 Cost of Goods Sold............................................................. Merchandise Inventory............................................ Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 6
3,100 3,100
203
204
To record cost of sales.
1 Cash ....................................................................................... 1
1,176
Sales Discounts ..................................................................
24
Accounts Receivable .................................................
1,200
To record collection, less return and discount; $2,400 - $1,200 = $1,200 x 2% = $24 discount.
2 Cash ....................................................................................... 3
1,200
Sales ................................................................................
1,200
To record cash sale.
2 Cost of Goods Sold............................................................. 3
950
Merchandise Inventory............................................
950
To record cost of sales.
2 Cash ....................................................................................... 8 Accounts Receivable .................................................
3,800 3,800
To record collection.
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205
Exercise 6-6 (30 minutes) a. Mar. 1
Merchandise Inventory ................................................. Accounts Payable - Raintree.................................... Purchased merchandise on credit.
11,000
Accounts Payable - Raintree ......................................... Merchandise Inventory ............................................. Cash ........................................................................ Paid account payable within the discount period; 11,000 x 3% = 330.
11,000
Accounts Receivable – Sundown Company .................. Sales ........................................................................ Sold merchandise on account.
11,000
1
Cost of Goods Sold ...................................................... Merchandise Inventory ............................................ To record cost of sale.
7,500
11
Cash .............................................................................. Sales Discounts ............................................................. Accounts Receivable – Sundown Company............. Collected account receivable.
10,670 330
11
b. Mar. 1
11,000
330 10,670
11,000
7,500
11,000
Analysis component: Amount borrowed to pay the balance owing ........................... Annual rate of interest ............................................................ Interest per year......................................................................
$10,670.00 × 8% $ 853.60
Interest per day ($853.60/365) ................................................
$
2.34
Discount taken ........................................................................ Interest paid on the 50-day* loan (50 $2.34)........................ Net savings from borrowing to pay within the discount period ..............................................................
$
330.00 (117.00)
$
213.00
*60 days in credit period – 10 days in discount period = 50 days.
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206
Exercise 6-7 (25 minutes) a. 2011
May 11
Merchandise Inventory ..................................... Accounts Payable – Hostel Sales.............. Purchased merchandise on credit.
30,000
11
Merchandise Inventory ..................................... Cash ............................................................ Paid shipping charges on purchased merchandise.
335
12
Accounts Payable – Hostel Sales ......................... Merchandise Inventory .................................. Returned unacceptable merchandise.
1,200
20
Accounts Payable – Hostel Sales ......................... Merchandise Inventory................................... Cash ................................................................ Paid balance within the discount period; 30,000 – 1,200 = 28,800; 28,800 x 3% = 864.
28,800
May 11
Accounts Receivable – Wilson Purchasing ......... Sales ................................................................ Sold merchandise on account.
30,000
11
Cost of Goods Sold ............................................... Merchandise Inventory................................... To record cost of sale.
20,000
12
Sales Returns and Allowances ............................. Accounts Receivable – Wilson Purchasing.. Accepted a return from a customer.
1,200
12
Merchandise Inventory ......................................... Cost of Goods Sold ........................................ Returned goods to inventory.
800
21
Cash ........................................................................ Sales Discounts .....................................................
27,936 864
30,000
335
1,200
864 27,936
b. 2011
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30,000
20,000
1,200
800
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207
Accounts Receivable – Wilson Purchasing.. Collected account receivable; 30,000 – 12,000 = 28,800; 28,800 x 3% = 864.
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28,800
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208
Exercise 6-7 (concluded) Analysis Component
Amount borrowed to pay the amount owing .......................... Annual rate of interest .......................................................... Interest per year ....................................................................
$27,936.00 × 5% $ 1,396.80
Interest per day ($1,396.80/365) ...........................................
$
3.83
Discount taken....................................................................... Interest paid on the 80-day* loan (80 $3.83) ...................... Net savings from borrowing to pay within the discount period ..........................................................
$
864.00 (306.40)
$
557.60
*90 days in credit period – 10 days in discount period = 80 days. Exercise 6-8 (10 minutes) 1.
d.
6.
e.
2.
c.
7.
j.
3.
f.
8.
i.
4.
a.
9.
b.
5.
h.
10.
g.
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209
Exercise 6-9 (30 minutes) Merchandise Inventory
Balance, Dec. 31, 2010 ............
37,000
Invoice cost of purchases ........
190,500
Returns by customers .............
2,200
allowances received .................
4,100
Transportation-in .....................
1,900
Cost of sales transactions ............
186,000
Shrinkage ..........................................
32,000
Balance, Dec. 31, 2011 .............
Purchase discounts received ......
1,600
Purchase returns and
7,900
Cost of Goods Sold Represents all entries to record the cost component of sales transactions ..................
Represents all entries to record merchandise returned by customers and restored to inventory during 2011
186,000
2,200
Inventory shrinkage recorded in December 31, 2011, adjusting entry ............... 32,000 Balance .........................................
215,800
Analysis component: The shrinkage was $32,000. The cost of merchandise actually sold to customers was $186,000. The cost of goods sold was $215,800. Shrinkage therefore was 17% of the actual cost of merchandise sold ($32,000/$186,000 × 100) or 15% of the total cost of goods sold ($32,000/$215,800 × 100). As the inventory manager, I would want to know the cause of this significant shrinkage. Is it breakage or spoilage that can be controlled? Is it theft caused by weak internal controls? Reviewing the numbers allows the inventory manager to ask appropriate questions for the purpose of making good decisions.
Exercise 6-10 (10 minutes) a) 500,000 – 17,000 – 3,000 = 480,000 net sales Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 6
209
210
b) 28,000 + 124,000 = 152,000 total operating expenses c) 480,000 – 124,000 = 356,000 cost of goods sold
d) (124,000/480,000) × 100 = 25.83% Analysis component:
The change in the gross profit ratio for the year ended May 31, 2010 was 2.83% (from 23% to 25.83%). This is a favourable change because Westlawn is generating more gross profit per sales dollar that will contribute towards the covering of operating expenses.
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211
Exercise 6-11 (30 minutes) Company A 2011
Company B
2010
2011
2010
Sales ............................................................ 256,000
160,000
110,000
50,000
Sales discounts ........................................2,560
1,600
1,100
500
Sales returns and allowances ............ 51,200
16,000
5,500
2,500
Net sales .................................................... 202,240
142,400
103,400
47,000
Cost of goods sold ................................... 153,600
88,000
55,000
25,000
Gross profit from sales ......................... 48,640
54,400
48,400
22,000
Selling expenses ..................................... 17,920
16,000
24,200
9,000
Administrative expenses ..................... 25,600
24,000
29,700
11,000
Total operating expenses .................... 43,520
40,000
53,900
20,000
Net income (loss) ...................................5,120
14,400
(5,500)
2,000
Gross profit ratio .................................... 24.05%1 38.20%2 46.81%3 46.81%4
Calculations: 1. 2. 3. 4.
(48,640/202,240) × 100 = 24.05% (54,400/142,400) × 100 = 38.20% (48,400/103,400) × 100 = 46.81% (22,000/47,000) × 100 = 46.81%
Analysis component: Company B has more favourable gross profit ratios for both 2010 and 2011. Company A is showing a lower gross profit ratio than Company B and decreasing gross profit as a percentage of net sales.
Note to instructor: You may wish to engage students in a discussion of other interesting comparisons in this information. For example: — COGS as a percentage of sales is lower for Company B than Company A. Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 6
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212
— Sales discounts as a percentage of sales is constant for both companies. — Sales returns and allowances are higher as a percentage of sales for Company A than Company B (which is particularly interesting considering that Company A has a higher COGS than Company B … you might assume higher quality but then why the higher returns/allowances?). — Company B has higher operating expenses as a percentage of sales than Company A.
Company B has more than doubled its sales from 2010 to 2011 in comparison to the growth for Company A.
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Exercise 6-12 (20 minutes) Purchases ................................................
Purchases discounts .....................................
(a) $ 90,000
(4,000)
Purchases returns and allowances .........
(3,000)
Transportation-in..........................................
(b) $ 160,000
(10,000)
(c) $ 122,000
(2,600)
(6,000)
(4,400)
6,400
14,000
16,000
Cost of goods purchased..............................
$ 89,400
$ 158,000
$ 131,000
Beginning inventory .....................................
$
7,000
$38,400
$ 36,000
Cost of goods purchased..............................
89,400
158,000
131,000
Ending inventory ...........................................
(4,400)
(30,000)
(30,480)
Cost of goods sold ..........................................
$92,000
$ 166,400
$ 136,520
a.
Transportation-in is calculated as the amount needed to make cost of goods purchased equal the given amount. Cost of goods sold is calculated the usual way.
b.
Purchases discounts is calculated as the amount needed to make cost of goods purchased equal the given amount. The beginning inventory is calculated as the amount needed to make cost of goods sold equal the given amount.
c.
Cost of goods purchased is calculated the usual way. Then, that amount is transferred to the lower section and the ending inventory is calculated as the amount needed to make cost of goods sold equal the given amount.
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Exercise 6-13 (30 minutes) Company A 2011
2011
2010
180,000
90,000
45,000
Merchandise inventory (beginning) .........................................18,700
22,300
9,875
9,000
Net cost of merchandise purchases ............................................72,000
104,400
49,500
26,100
Merchandise inventory (ending) .................................................... (16,400) (18,700)
(8,920)
(9,875)
Sales............................................................ 120,000
2010
Company B
Cost of goods sold:
Cost of goods sold ...............................74,300
108,000
50,455
25,225
Gross profit from sales ........................45,700
72,000
39,545
19,775
Operating expenses ..............................36,000
54,000
27,000
13,500
Net income (loss) ................................... 9,700
18,000
12,545
6,275
Gross profit ratio ................................... 38.08%1 40.00%2 43.94%3 43.94%4
Calculations: 1. 2. 3. 4.
(45,700/120,000) × 100 = 38.08% (72,000/180,000) × 100 = 40.00% (39,545/90,000) × 100 = 43.94% (25,225/45,000) × 100 = 43.94%
Analysis component: Company B has a stable and more favourable gross profit ratio than Company A. Company A’s gross profit ratio decreased from 2010 to 2011 which is unfavourable.
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215
Exercise 6-14 (20 minutes) Invoice cost of merchandise purchases .....
(a)
(b)
(c)
$ 45,000
$ 20,000
$ 15,250
Purchase discounts received ...........................
(2,000)
Purch. returns and allow. received ...............
(1,500)
Cost of transportation-in ..................................
3,200
1,750
2,000
Total cost of merchandise purchases ...........
$ 44,700
$ 19,750
$ 16,375
Merchandise inventory (beginning) .............
$
3,500
$ 4,800
$ 4,500
Total cost of merchandise purchases ...........
44,700
19,750
16,375
Merchandise inventory (ending) ...................
(2,200)
(3,750)
(3,810)
Cost of goods sold ................................................
$46,000
(1,250) (750)
$ 20,800
(325) (550)
$ 17,065
a.
Transportation-in is calculated as the amount needed to make cost of merchandise purchased equal the given amount. Cost of goods sold is calculated the usual way.
b.
Purchase discounts is calculated as the amount needed to make cost of merchandise purchases equal the given amount. The merchandise inventory (beginning) is calculated as the amount needed to make cost of goods sold equal the given amount.
c.
Total cost of merchandise purchases is calculated the usual way. Then, that amount is transferred to the lower section and the merchandise inventory (ending) is calculated as the amount needed to make cost of goods sold equal the given amount.
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216
Exercise 6-15 (30 minutes) a) Multiple-step income statement: COMPU-SOFT Income For Month Ended November 30, 2011
Statement
Net sales ...............................................................................
$26,935*
Cost of goods sold .............................................................
14,800
Gross profit from sales....................................................
$12,135
Operating expenses: Wages expense ..........................................................
$4,200
Utilities expense .......................................................
2,100
Amortization expense, store equipment .........
120
Total operating expenses .................................
6,420
Income from operations .................................................
$ 5,715
Other revenues and expenses: Rent revenue .............................................................
850
Net income ..........................................................................
$ 6,565
*Calculated as: 27,700 – 45 – 720 = 26,935 b) 2011 Nov.
Closing entries: 3 0
Rent Revenue..................................................................
850
Sales ...................................................................................
27,700
Income Summary..................................................
28,550
To close temporary credit balance accounts.
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217
3 0
Income Summary ..........................................................
21,985
Sales returns and allowances...........................
720
Sales discounts ......................................................
45
Cost of goods sold .................................................
14,800
Amortization expense, store equipment .....
120
Wages expense ......................................................
4,200
Utilities expense ...................................................
2,100
To close temporary debit balance accounts.
3 0
Income Summary ..........................................................
6,565
Peter Delta, capital...............................................
6,565
To close income summary to capital.
3 0
Peter Delta, capital .......................................................
3,500
Peter Delta, withdrawals ...................................
3,500
To close withdrawals to capital.
Exercise 6-15 (concluded) c) Peter Delta, Capital $1,635 – $3,500 + $6,565 = $4,700 OR
(With. )
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3,50 0
1,635
(Beg. bal.)
6,565
(Net income)
4,700
(End. bal.)
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218
Analysis component: The gross profit ratio for October is 40% ($32,000 - $19,200 = $12,800 gross profit; $12,800/$32,000 × 100 = 40%). The gross profit ratio for November is 45% ($12,135/$26,935 × 100 = 45.05%). Compu-Soft generated a higher gross profit per sales dollar in November than in October which is favourable because this represents a greater contribution towards the coverage of operating expenses.
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219
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464
Exercise 6-16 (60 minutes) a)
Perdu Sales Work Sheet For Year Ended December 31, 2011
Unadjusted Account Cash
Adjustments
Trial Balance Debit
Credit
Debit
Credit
Income Statement Debit
Credit
Balance Sheet and Statement of Owner’s Equity Debit
Fundamental Accounting Principles, Twelfth Canadian Edition
26,000
26,00 0
Merchandise inventory
2,000
2,000
Prepaid selling expenses
8,000
Store equipment
40,000
Accumulated amortization, store eq.
2,500
11,500
14,840
Salaries payable
0
Eldon Perdu, capital
Sales
6,500 40,00 0
9,000
Accounts payable
Eldon Perdu, withdrawals
1,500
Credit
14,840 3,200
3,200
45,600
45,600
3,600
3,600 858,00 0
858,00 0
220
Sales returns and allowances
33,000
33,000
8,000
8,000
Cost of goods sold
424,84 0
424,84 0
Sales salaries expense
94,000
Utilities expense, store
28,000
Sales discounts
Amortization expense, store equip.
3,200
97,200 28,000
-
2,500
2,500
Other selling expenses
70,000
1,500
71,500
Other administrative expenses
190,00 0
Totals
927,44 0
190,00 0 927,44 0
7,200
7,200
855,04 0
Net Income
2,960
Totals
858,00 0
858,00 0
78,10 0
75,140 2,960
858,00 0
75,60 0
75,600
221
Exercise 6-16 (continued) b) Classified multiple-step income statement: PERDU SALES Income Statement For Year Ended December 31, 2011 Sales .....................................................................................................................
$858,000
Less: Sales returns and allowances ..........................................
$33,000
Sales discounts ...........................................................
8,000
41,000
Net sales .....................................................................................
$817,000
Cost of goods sold....................................................................
424,840
Gross profit from sales .........................................................................................
$392,160
Operating expenses: Selling expenses: Sales salaries expense .................................................. Other selling expenses .................................................
$97,20 0 71,500
Utilities expense, store ................................................
28,000
Amortization expense, store ........................................
2,500
Total selling expenses ..................................................
$199,200
General and administrative expenses: .......................
190,000
Total operating expenses ................................................
389,200
Net income.................................................................................
$ 2,960
c) 2011 Dec.
31
Closing entries: Sales ...................................................................................................................
Income Summary..................................................
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858,000 858,000
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222
To close sales.
31
Income Summary ...............................................................................................
855,040
Sales Returns and Allowances..................................
33,000
Sales Discounts ..............................................................
8,000
Cost of Goods Sold.........................................................
424,840
Sales Salaries Expense ................................................
97,200
Utilities Expense ...........................................................
28,000
Selling Expenses ............................................................
71,500
Amortization Expense, Store Equipment ...............
2,500
Administrative Expenses ...........................................
190,000
To close temporary debit balance accounts.
3 1
Income Summary .........................................................
2,960
Eldon Perdu, Capital ....................................................
2,960
To close the Income Summary account to capital.
3 1
Eldon Perdu, Capital.................................................... Eldon Perdu, Withdrawals ........................................
3,600 3,600
To close withdrawals to capital.
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Exercise 6-16 (concluded) Analysis component: The gross profit ratio for 2011 is $392,160/$817,000 × 100 = 48%. The gross profit ratio for 2010 was $330,000*/$600,000 × 100 = 55%. The gross profit ratio decreased from 2010 to 2011 which is unfavourable since the gross profit generated per net sales dollar has decreased thereby contributing less towards the coverage of operating expenses in 2011 than in 2010.
*Sales – COGS = GP – Operating Expenses = Net Loss, therefore, $600,000 - ? = ? - $344,000 = -$14,000; GP - $344,000 = -$14,000 so GP = $330,000.
Exercise 6-17 (25 minutes)
a) 531,000 – 14,000 – 7,000 = 510,000 b) Single-step income statement:
SABBA CO. Income Statement For Year Ended January 31, 2011
Revenues: Net sales .......................................................................
$510,000
Expenses:
Cost of goods sold .............................................
$301,000
Selling expenses ................................................
117,000
General and administrative expenses ..............
109,000
Interest expense .......................................................
750
Total expenses ...........................................................
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527,750
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224
Net loss .............................................................................
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$ 17,750
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*Exercise 6-18 (20 minutes) 1) Nov 1 .
Periodic Purchases ...............................
Perpetual 2,80 0
Merchandise Inventory ...... 2,800
Accounts Payable ............. To record purchases on
2,800
Accounts Payable .........
2,800
To record purchases on
account.
account.
2) Nov 5 .
Accounts Payable ..................
2,80 0
Accounts Payable ..............
Purchases Discount .
56
Cash ...............................
2,744
To record cash payment within discount period;
2,800
Merchandise Inventory
56
Cash...............................
2,744
To record cash payment within discount period;
2,800 x 2% = 56.
2,800 x 2% = 56.
3) Nov 7 .
Cash ........................................
196
Purchases Returns and Allowances ............
Cash ...........................................
196
To record cheque received for return of purchases previously paid for with discount already taken; 200 – 2% = 196.
196
Merchandise Inventory
196
To record cheque received for return of merchandise previously paid for with discount already taken; 200 – 2% = 196.
4) Nov. 1
Transportation-In ....................
160
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Merchandise Inventory ......
160
225
226
0 160
Cash ................................. To record payment of freight charges.
160
Cash ..................................... To record payment of freight charges.
5) Nov 1 . 3
Accounts Receivable ............. Sales ..............................
1 3
3,00 0
Accounts Receivable ............ 3,000
3,000
Sales ..................................
To record sale of merchandise on credit.
To record sale of merchandise on credit.
No entry.
Cost of Goods Sold ................ Merchandise Inventory
3,000
1,500 1,500
To record cost of merchandise sold.
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*Exercise 6-18 (concluded) 6) Nov 1 . 6
Sales Returns and Allowances .......................... Accounts Receivable
400
Sales Returns and Allowances .......................... 400
To record return of merchandise bought on account.
1 6
No entry.
400
Accounts Receivable
400
To record return of merchandise bought on account.
Merchandise Inventory ...... Cost of Goods Sold ........
200 200
To record return of merchandise by customer.
*Exercise 6-19 Feb.
1 Purchases.............................................................................
7,000
Accounts Payable .......................................................
7,000
To record purchase; terms 1/10, n30.
5 Purchases.............................................................................
2,400
Cash .................................................................................
2,400
To record purchase for cash.
6 Purchases.............................................................................
10,000
Accounts Payable .......................................................
10,000
To record purchase; terms 2/15, n45.
9 Office Supplies ................................................................... Accounts Payable .......................................................
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900 900
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228
To record purchase; n15.
1 No entry. 0
1 Accounts Payable .............................................................. 1
7,000
Cash .................................................................................
6,930
Purchase Discounts ...................................................
70
To record payment within discount period; $3,500 x 1% = $35 discount.
2 Accounts Payable .............................................................. 4
900
Cash .................................................................................
900
To record payment.
Mar.
2 Accounts Payable .............................................................. 3
10,000
Cash .................................................................................
10,000
To record payment.
*Exercise 6-20 (25 minutes) 2011 Mar
2 Purchases ...............................................................................................................
3,600
Accounts Payable — Blanton Company ...............................................
3,600
Purchased merchandise on credit.
3 Transportation-in ..................................................................... Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 6
200
228
229
Cash ..................................................................................
200
Paid shipping charges on purchased merchandise.
4 Accounts Payable — Blanton Company.............................
600
Purchase Returns and Allowances ......................................
600
Returned unacceptable merchandise.
17 Accounts Payable — Blanton Company.............................
3,000
Purchase Discounts ................................................................................................
60
Cash ................................................................................................
2,940
Paid balance within the discount period; 3,600 – 600 = 3,000; 3,000 x 2% = 60.
18 Purchases .....................................................................................
7,500
Accounts Payable — Fleming Corp......................................
7,500
Purchased merchandise on credit.
21 Accounts Payable — Fleming Corp. ....................................
2,100
Purchase Returns and Allowances ......................................
2,100
Received an allowance on purchase.
28 Accounts Payable — Fleming Corp. ....................................
5,400
Purchase Discounts ..................................................................
108
Cash ................................................................................................
5,292
Paid balance within the discount period; 7,500 – 2,100 = 5,400; 5,400 x 2% = 108.
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*Exercise 6-21 (20 minutes) Jan.
5 Accounts Receivable ........................................................
4,000
Sales ................................................................................
4,000
To record sale; terms 1/10, n30.
7 Cash........................................................................................
3,600
Sales ................................................................................
3,600
To record cash sale.
8 Accounts Receivable ........................................................
9,600
Sales ................................................................................
9,600
To record sale; terms 1/10, n30.
1 Cash........................................................................................ 5
3,960
Sales Discounts ..................................................................
40
Accounts Receivable .................................................
4,000
To record collection within discount period; $2,000 x 1% = $20 discount.
Feb.
4 Cash........................................................................................ Accounts Receivable .................................................
9,600 9,600
To record collection.
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*Exercise 6-22 (20 minutes) Feb.
1 Accounts Receivable ........................................................
2,400
Sales ................................................................................
2,400
To record sale; terms 2/10, n30, FOB destination.
2 Delivery Expense or Freight-Out .................................
150
Cash .................................................................................
150
To record delivery expenses for goods sold.
3 Sales Returns and Allowances ......................................
1,200
Accounts Receivable .................................................
1,200
To record return of merchandise.
4 Accounts Receivable ........................................................
3,800
Sales ................................................................................
3,800
To record sale; terms 2/10, n30, FOB destination.
1 Cash........................................................................................ 1
1,176
Sales Discounts ..................................................................
24
Accounts Receivable .................................................
1,200
To record collection, less return and discount; $2,400 - $1,200 = $1,200 x 2% = $24 discount.
2 Cash........................................................................................ 3 Sales ................................................................................
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1,200 1,200
231
232
To record cash sale.
2 Cash........................................................................................ 8 Accounts Receivable .................................................
3,800 3,800
To record collection.
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*Exercise 6-23 (15 minutes) a) 2011 Mar. 1 Purchases ...............................................................................................................
11,000
Accounts Payable – Raintree ..................................
11,000
Purchased merchandise on credit.
11 Accounts Payable – Raintree .................................................................................
11,000
Purchase Discounts .............................................................................
330
Cash .................................................................................
10,670
Paid account payable within the discount period; 11,000 x 3% = 330.
b) 2011 Mar. 1 Accounts Receivable – Sundown Company ......................
11,000
Sales ................................................................................
11,000
Sold merchandise on account.
11 Cash ................................................................................................
10,670
Sales Discounts ..........................................................................
330
Accounts Receivable – Sundown Company .......
11,000
Collected account receivable.
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*Exercise 6-24 (20 minutes) a)
2011 May 11 Purchases ...............................................................................................................
30,000
Accounts Payable – Hostel Sales .........................................................
30,000
Purchased merchandise on credit.
11 Transportation-In ....................................................................................................
335
Cash .....................................................................................................
335
Paid shipping charges on purchased merchandise.
13 Accounts Payable – Hostel Sales ..........................................
1,200
Purchase Returns and Allowances .......................................................
1,200
Returned unacceptable merchandise.
20 Accounts Payable – Hostel Sales ..................................
28,800
Purchase Discounts ..............................................................................
864
Cash .................................................................................
27,936
Paid balance within the discount period; 30,000 – 1,200 = 28,800; 28,800 x 3% = 864. b)
2011 May 11 Accounts Receivable – Wilson Purchasing ............................................................ Sales .....................................................................................................
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30,000 30,000
234
235
Sold merchandise on account.
12 Sales Returns and Allowances ...............................................................................
1,200
Accounts Receivable – Wilson Purchasing ........
1,200
Accepted a return from a customer.
21 Cash .......................................................................................................................
27,936
Sales Discounts ..........................................................................
864
Accounts Receivable – Wilson Purchasing ........
28,800
Collected account receivable; 30,000 – 1,200 = 28,800; 28,800 x 3% = 864.
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*Exercise 6-25 (35 minutes) a.
b.
c.
Gross profit from sales ........................................ Less: Operating expenses ................................... ? Net income ............................................................ Therefore: Total operating expenses.....................................
$145,000
Sales ...................................................................... Less: Sales discounts .......................................... Sales returns............................................... Net sales ................................................................ Less: Cost of goods sold ..................................... ? Gross profit from sales ........................................ Therefore: Cost of goods sold ...............................................
$340,000
Merchandise inventory (beginning) .................... Invoice cost of merchandise purchases ............ Less: Purchase discounts ................................... Purchase returns ........................................ Net purchases ...................................................... Add: Transportation-in ........................................ Total cost of merchandise purchased ................ Goods available for sale ...................................... Less: Merchandise inventory (ending) ............... ? Cost of goods sold (from b) ................................. Therefore: Merchandise inventory (ending) ..........................
$ 65,000 $ 80,000 $ 5,500 14,000
19,500 $320,500 $145,000 $175,500
$175,000 3,600 6,000 $165,400 11,000
$ 30,000
176,400 $206,400 $175,500 $ 30,900
d. (145,000/320,500) x 100 = 45.24% Gross Profit Ratio (rounded to two decimal places) Analysis component: The gross profit ratio for 2011 is 45.24%. In comparison with the 2010 gross profit ratio of 47%, this represents an unfavourable change. This is unfavourable because the gross profit generated per net sales dollar decreased in 2011 from 2010 thereby contributing less towards the coverage of operating expenses in 2011 than in 2010.
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Solutions Manual for Chapter 6
*Exercise 6-26 (40 minutes) DEWER’S STOP‘N SHOP Work Sheet For Year Ended December 31, 2011
No. 101 106 119 125 201 209 301 302 413 414
Unadjusted Trial Balance Debit Credit 7,400 3,600 2,400 1,200 280
505 506 507 622
Account Cash ................................... Accounts receivable ......... Merchandise inventory ..... Store supplies ................... Accounts payable ............. Salaries payable ................ Mi Dewer, capital ............... Mi Dewer, withdrawals ...... Sales .................................. Sales returns and allowances......................... Purchases.......................... Purchase discounts .......... Transportation-in .............. Salaries expense ...............
640 651
Rent expense .................... Store supplies expense ....
500
Totals.............................. Net income ........................
24,100
750 290 6,400 160 1,400
Adjustments Debit Credit
(a) 300
2,400
2,720
(b) 120
11,570 12,000
290 6,400
250 (b) 120 (a) 300 24,100
Income Statem ent Debit Credit
420
160 1,520 500 30 0 420 11,570 3,400
12,000
Balance Sheet and Statement of Owner’s Equity Debit Credit 7,400 3,600 2,720 900 280 120 11,570 750
250
14,970 15,370
11,970 3,400
475
238
Totals
14,970
14,970 15,370
15,370
239
*Exercise 6-27 (30 minutes) a)
Net Sales: Sales ........................................................................................ Sales returns and allowances .................................................... Sales discounts ...................................................................... Net sales ......................................................................................
$445,000 (25,000) (16,000) $404,000
b)
Cost of goods purchased: Purchases......................................................................................... Purchases returns and allowances ............................................ Purchase discounts......................................................................... Transportation-in ......................................................................... Cost of goods purchased ...............................................................
$286,000 (22,000) (11,400) 8,800 $261,400
c)
Cost of goods sold: Beginning inventory .................................................................... Cost of goods purchased ............................................................... Goods available for sale.................................................................. Ending inventory ......................................................................... Cost of goods sold ..........................................................................
$ 15,000 261,400 $276,400 (11,000) $265,400
d) Multiple-step income statement:
FOX Income For Year Ended March 31, 2011
FIXTURES
Net sales .............................................................. Cost of goods sold ...................................................... 265,400 Gross profit from sales ................................................ $138,600 Operating expenses: Selling expenses ...................................................... General and administrative expenses ...................... Total operating expenses ..................................... 102,500 Income from operations............................................... 36,100 Other revenues and expenses:
CO. Statement
$404,000
$69,000 33,500 $
240
Interest revenue....................................................... 1,200 Net income ..............................................................
$ 37,300
241
*Exercise 6-28 (40 minutes) a) $33,700 – $1,740 = $31,960 Net sales
b) $6,200 + $16,676 – $110 – $28 + $380 – $2,460 = $20,658 Cost of goods sold
c) Classified multiple-step income statement:
JOHN’S ELECTRONICS Income Statement For Month Ended April 30, 2011
Sales ..............................................................................
$33,700
Less: Sales returns and allowances ................................
1,740
Net sales .......................................................................
$31,960
Cost of goods sold: Merchandise inventory, March 31, 2011 .....................
$ 6,200
Purchases ................................................................. $16,676 Less: Purchase discounts................................................
28
Purchase returns and allowances .....................
110
Net purchases...........................................................
$16,538
Add: Transportation-in.........................................
380
Cost of goods purchased ........................................
16,918
Cost of goods available for sale..............................
$23,118
Less: Merchandise inventory, April 30, 2011 ........
2,460
Cost of goods sold .......................................................
20,658
Gross profit from sales.........................................................
$ 11,302
242
Operating expenses:. ............................................................ Selling expenses:
Wages expense, selling ...........................................
$8,000
Amortization expense, delivery trucks ......................
640
Telephone expense, store ...............................................
340
Total selling expenses .............................................
$8,980
General and administrative expenses:
Wages expense, office .............................................
2,800
Telephone expense, office ..............................................
150
Total general and administrative expenses
2,950
Total operating expenses ........................................
11,930
Operating loss .........................................................................
$ 628
Other revenues and expenses: Interest expense ................................................................
130
Net loss ......................................................................................
$ 758
243
*Exercise 6-28 (concluded) d) 2011 Apr. 3 0
Closing entries: Merchandise Inventory ................................................
2,460
Purchases Returns and Allowances .........................
110
Purchases Discounts .....................................................
28
Sales ....................................................................................
33,700
Income Summary ..............................................
36,298
To close temporary credit balance accounts.
3 0
Income Summary............................................................
37,056
Merchandise Inventory .....................................
6,200
Sales Returns and Allowances ..............................
1,740
Purchases ....................................................................
16,676
Transportation-In.....................................................
380
Amortization Expense, Delivery Trucks ...........
640
Wages Expense, Office .............................................
2,800
Wages Expense, Selling ...........................................
8,000
Telephone Expense, Office.....................................
150
Telephone Expense, Store .....................................
340
Interest Expense .......................................................
130
To close temporary debit balance accounts.
3 0
John Yu, Capital .................................................... Income Summary ..............................................
758 758
244
To close income summary to capital.
3 0
John Yu, Capital ...............................................................
9,200
John Yu, Withdrawals.......................................
9,200
To close withdrawals to capital.
Part e:
John Yu, Capital
$30,300 – $9,200 - $758 = $20,342 OR
(Net loss)
758
(With.)
9,200
30,300 (Beg. bal.)
20,342 (End. bal.)
245
*Exercise 6-29 (15 minutes)
June
1
Merchandise Inventory ..................................... GST Receivable ................................................. Accounts Payable ...................................... To record credit purchase; $2,000 x 6% = 120 GST.
2,000 120
5
Accounts Receivable ........................................ PST Payable ............................................... GST Payable .............................................. Sales ........................................................... To record credit sale; $1,400 x 8% = 112 PST; $1,400 x 6% = $84 GST.
1,596
5
Cost of Goods Sold ........................................... Merchandise Inventory .............................. To record cost of sale.
1,000
2,120
112 84 1,400
1,000
*Exercise 6-30 (15 minutes)
June
1
5
Chapter 7
Purchases .......................................................... GST Receivable ................................................. Accounts Payable ...................................... To record credit purchase; $2,000 x 6% = $120 GST.
2,000 120
Accounts Receivable ........................................ PST Payable ............................................... GST Payable .............................................. Sales ........................................................... To record credit sale; $1,400 x 8% = 112 PST; $1,400 x 6% = $84 GST.
1,596
Merchandise Inventory and Cost of Sales
EXERCISES Exercise 7-1 (45 minutes)
2,120
112 84 1,400
246
(a) FIFO perpetual Date
Purchases
Units Jan.
Unit Cost
Inventory Balance
Sales (at cost) Total Cost
Unit s
Unit Cost
Cost of Goods Sold Units
Total Cost
1 Beginning inventory 100 @ $10. = $ 1,000 00 1 0
Mar .
Unit Cost
1 4
100 @ $10. = $ 1,000 00 90 @ $10. = $ 00
900
250 @ $15. = $ 3,750 00
100
10 @ $10. = $ 00
100
250 @ 15.0 = 0 10 @ $10. = 00
1 5
10 @ $10. = $ 00
$
130 @ 15.0 = 0
3,750
10 0
1,950
120 @ $15. = $ 1,800 00 120 @ $15. = $ 1,800 00
Jul.
3 0
400 @ $20. = $ 8,000 00
400 @ 20.0 = 0
8,000
120 @ $15. = $ 1,800 00 Oct. Total
5
180 @ 20.0 = 0 750
$12,750 530
Cost of goods available for sale
=
Gross profit calculation under FIFO:
3,600 $8,350
Cost of goods sold
+
220 @ $20. = $ 4,400 00 220
$4,400 Ending inventory
247
Sales (530 units × $40) ..........
$21,200
Cost of goods sold.....................
8,350
Gross profit ................................
$12,850
248
Exercise 7-1 (continued) (b) Moving weighted-average perpetual Inventory Balance Date
Purchases
Units
Sales (at cost)
Unit Cost
Total Cost
Units
(a)
Cost of Goods Sold
Unit Cost
(b)
(b) (a)
Total Average Units Cost/Unit
Total Cost Inventory Balance Calculations
Beginning inventory Jan.
1
100 @ $10 = $
1000
100
$10.00 $
1,000.0 0 100
10
90 @ $10.00 = $
900.00
–90 @ $10.00 = 10
Mar.
14
250 @ $15 = $
400 @ $20 = $
$14.81 $
1,776.6 0
8,000
5
$18.80 $
9,776.6 0
30 @ $18.80 = $ 5,640.00 0
750
$12,750
$
100.0 0
10
$
100.0 0
$ 3,850.0 0
260
$ 3,850.0 0
53 0
$8,613.40
220
4,136.6 0
$ 4,136.60
– 2,073.40
120
$ 1,776.6 0
120
$ 1,776.6 0 8,000.00
520
$ 9,776.6 0
520
$ 9,776.6 0
–300 @ $18.80 = $18.80 $
3,750.00
260
400 @ $20.00 =
220 Total
3,850.0 0
–900.00
10
–140 @ $14.81 =
520
Oct.
$14.81 $
14 @ $14.81 = $ 2,073.40 0 120
30
100.0 0
250 @ $15.00 = 260
July
$10.00 $
3,750
15
$ 1,000.0 0
220
– 5,640.00 $ 4,136.6 0
249
Cost of goods available for sale
=
Cost of goods sold
+
Gross profit calculation under Weighted-average:
Sales (530 units × $40) ........
$21,200.00
Cost of goods sold...................
8,613.40
Gross profit ..............................
$12,586.60
Ending inventory
250
Exercise 7-1 (concluded) (c) LIFO perpetual Date
Purchases Unit s
Jan.
Unit Cost
Inventory Balance
Sales (at cost) Total Cost
Unit s
Cost of Goods Sold Units
Unit Cost
Total Cost
1 Beginning inventory 100 @ $10. = $ 1,00 00 0 1 0
Mar .
Unit Cost
1 4
100 @ $10. = $ 1,000 00 90 @ $10. = 00
$
900
250 @ $15. = $ 3,75 00 0
10 @ $10. = $ 00
100
10 @ $10. = $ 00
100
250 @ 15.0 = 0 10 @ $10. = $ 00
1 5
140 @ $15. 00
=
$ 2,100
110 @ 15.0 = 0 10 @ $10. = $ 00 110 @ 15.0 = 0
Jul.
3 0
400 @ $20. = $ 8,00 00 0
400 @ 20.0 = 0 10 @ $10. = $ 00 110 @ 15.0 = 0
Oct.
5
300 @ $20. = $ 6,000 00
100 @ 20.0 = 0
3,750 100
1,650 100 1,650
8,000 100 1,650
2,000
251
Total
750
$12,750 530
Cost of goods available for sale =
Cost of goods sold
Gross profit calculation under LIFO:
Sales (530 units × $40) ........
$21,200
Cost of goods sold...................
9,000
Gross profit ..............................
$12,200
$9,000 +
220
$3,750 Ending inventory
252
Exercise 7-2 (20 minutes) Specific identification
Date
Purchases Unit s
Jan.
Unit Cost
Total Cost
Unit s
Unit Cost
Cost of Goods Sold Units
Unit Cost
Total Cost
1 Beginning inventory 100 @ $10. = $ 00
1,00 0
1 0
Mar .
Inventory Balance
Sales (at cost)
1 4
100 @ $10. = $ 1,000 00 90 @ $10. = 00
250 @ $15. = $ 00
$
900
3,75 0
100
10 @ $10. = $ 00
100
250 @ 15.0 = 0 10 @ $10. = 00
1 5
10 @ $10. = $ 00
$
130 @ 15.0 = 0
3,750
10 0
1,950
120 @ $15. = $ 1,800 00 120 @ $15. = $ 1,800 00
Jul.
3 0
400 @ $20. = $ 00
8,00 0
400 @ 20.0 = 0 60 @ $15. = 00
Oct. Total
5
240 @ 20.0 = 0 750
$12,750 530
Cost of goods available for sale Cost of goods sold = +
Gross profit calculation under Specific Identification:
$
900 4,800
$8,650
60 @ $15. 00
= $
160 @ 20.0 = 0 220
8,000 900
3,200 $4,100
Ending inventory
253
Sales (530 units × $40) ........
$21,200
Cost of goods sold...................
8,650
Gross profit ..............................
$12,550
254
Exercise 7-3 (40 minutes) 1. Jan. 1 Mar. 7 July 28 Oct. 3 Totals
120 units 250 units 500 units 450 units 1,320 units
@ @ @ @
$6.00 5.60 5.00 4.60
available for
= = = =
$720 1,400 2,500 2,070 $6,690
cost of goods
sale
available for sale
2. Units sold: Jan. 10 Mar. 15 Oct. 5 Totals
Units remaining in ending inventory: 70 units
1,320 units available for sale less 795 units sold
125 units
= 525 units remaining in ending inventory.
600 units 795 units
3.(a) Moving weighted-average perpetual Inventory Balance Date
Purchases
Unit s
Unit Cost
Sales (at cost)
Total Cost
Units
Unit Cost
(a)
(b) (a)
Tota l Averag Cost of Unit e Cost/ Goods Sold s Unit
(b)
Total Cost
Inventory Balance Calculations
Beginning inventory Jan.
1
120 @ $6.0 = $ 0
720.0 0
120
$6.00 $
720.0 0 120
10
70 @ $6.0 = $ 0
420.0 0
–70 @ $6.0 = 0 50
$6.00 $
300.0 0
$ 720.0 0 – 420.00
50
$ 300.0 0
50
$ 300.0
255
0 Mar.
7
250 @ $5.6 = $ 1,400.0 0 0
250 @ 5.60 = 1,400.00 300
125 @ $5.6 = $ 7
15
708.7 5
28
3
991.2 5
*cost/unit changed due to rounding
175
$ 991.2 5
175
$ 991.2 5
$5.17 $ 3,491. 25
675
$3,491.2 5
675
$3,491.2 5 2,070.00
$6,690.00 795
Cost of goods available for sale =
$1,700.0 0
450 @ 4.60 =
600 @ $4.9 = $ 4
1,320
300
2,500.00
450 @ $4.6 = $ 2,070.0 0 0
5
$1,700.0 0
500 @ 5.00 =
1,12 5
Total
$5.66* $
500 @ $5.0 = $ 2,500.0 0 0 675
Oct.
300
– @ 5.67 = –708.75 125 175
July
$5.67 $ 1,700. 00
2,964. 00
$4,092.75
Cost of goods sold
$4.94 $ 5,561. 25
+
1,12 5
$5,561.2 5
1,12 5
$5,561.2 5
– @ 4.96 = – 600 2,964.00 525
$4.95* $ 2,597. 25
525
$2,597.2 5
Ending inventory
525
$2,597.2 5
256
Exercise 7-3 (continued) 3.(b) FIFO perpetual Date
Purchases Unit s
Jan.
Unit Cost
Sales (at cost) Total Cost
Units
Unit Cost
Inventory Balance
Cost of Goods Sold Units
Total Cost
1 Beginning inventory 120 @ $6.0 = 0
$
720
1 0
Mar. 7
70 @ $6.0 = 0 $
1 5
2 8
120 @ $6.00 = $
72 0
50 @ $6.00 = $
30 0
50 @ $6.00 = $
30 0
42 0
250 @ $5.6 = $ 1,400 0
250 @ 5.60 = 1,400 50 @ $6.0 = $ 0
Jul.
Unit Cost
75 @ 5.60 =
30 0 420
500 @ $5.0 = $ 2,500 0
175 @ $5.60 = $
98 0
175 @ $5.60 = $
98 0
500 @ 5.00 =
2,500
175 @ $5.60 = $
Oct.
3
450 @ $4.6 = $ 2,070 0 175 @ $5.6 = $ 0
5
98 0
@ 5.00 = 425
98 0
500 @ 5.00 =
2,500
450 @ 4.60 =
2,07 0
75 @ $5.00 = $
37 5
450 @ 4.60 = 2,125
2,070
257
Total
1,320
$6,690 795
Cost of goods available for sale =
$4,245 Cost of goods sold +
525
$2,445 Ending inventory
258
Exercise 7-3 (concluded) 3.(c) LIFO perpetual Date
Purchases Unit s
Jan.
Unit Cost
Total Cost
Unit s
Unit Cost
Cost of Goods Sold Units
Unit Cost
Total Cost
1 Beginning inventory 120 @ $6.0 = 0
$
720
1 0
Mar .
Inventory Balance
Sales (at cost)
7
70 @ $6.0 = 0
$
420
250 @ $5.6 = $ 1,400 0
120 @ $6.0 = $ 0
720
50 @ $6.0 = $ 0
300
50 @ $6.0 = $ 0
300
250 @ 5.60 = 50 @ $6.0 = $ 0
1 5
125 @ $5.6 = 0
$
700
125 @ 5.60 = 50 @ $6.0 = $ 0
Jul.
2 8
500 @ $5.0 = $ 2,500 0
3
450 @ $4.6 = $ 2,070 0
300 700 300
125 @ 5.60 =
700
500 @ 5.00 =
2,500
50 @ $6.0 = $ 0
Oct.
1,400
300
125 @ 5.60 =
700
500 @ 5.00 =
2,500
450 @ 4.60 =
2,070
50 @ $6.0 = $
300
259
0
5 Total
1,32 0
450 @ $4.6 = $ 2,070 0
125 @ 5.60 =
700
150 @ 5.00 =
350 @ 5.00 =
1,750
$6,690 795
Cost of goods available for sale =
750 $3,940
Cost of goods sold
+
525
$2,750 Ending inventory
260
Exercise 7-4 (20 minutes) Specific identification — perpetual Date
Purchases Unit s
Jan.
Unit Cost
Total Cost
Unit s
Unit Cost
Cost of Goods Sold Units
Unit Cost
Total Cost
1 Beginning inventory 120 @
$6.0 = $ 0
72 0
1 0
Mar .
Inventory Balance
Sales (at cost)
7
70 @ $6.0 = 0
250 @
$ 420
$5.6 = $ 1,40 0 0
1 5
120 @ $6.0 = $ 0
720
50 @ $6.0 = $ 0
300
50 @ $6.0 = $ 0
300
250 @ 5.60 = 25 @ $6.0 = 0
$ 150
100 @ 5.60 =
560
25 @ $6.0 = $ 0 150 @ 5.60 = 25 @ $6.0 = $ 0
Jul.
2 8
500 @
$5.0 = $ 2,50 0 0
3
450 @
$4.6 = $ 2,07 0 0
150 840 150
150 @ 5.60 =
840
500 @ 5.00 =
2,500
25 @ $6.0 = $ 0
Oct.
1,400
150
150 @ 5.60 =
840
500 @ 5.00 =
2,500
450 @ 4.60 =
2,070
25 @ $6.0 = $
150
261
0
5 Total
1,32 0
150 @ 5.60 =
840
320 @ $5.0 = $ 1,600 0
180 @ 5.00 =
900
280 @ 4.60 =
170 @ 4.60 =
782
$6,690 795
Cost of goods available for sale =
1,288 $4,018
Cost of goods sold
+
525
$2,672 Ending inventory
262
Exercise 7-5 (30 minutes) TROUT COMPANY Income Statement For year ended December 31, 2011
Specific Identification Sales .................................... (795 units × $15 selling price) Cost of goods sold ................... Gross profit .............................. Operating expenses ................. Net income................................
Moving Weighted Average $11,925 4,018 $ 7,907 1,250 $ 6,657
FIFOLIFO $11,925.00
$11,925
$11,925
4,092.75 $ 7,832.25 1,250.00 $ 6,582.25
4,245 $ 7,680 1,250 $ 6,430
3,940 $ 7,985 1,250 $ 6,735
1) The LIFO method results in the highest net income with $6,735. 2) The weighted average net income of $6,582.25 does fall between FIFO net income ($6,430) and LIFO net income ($6,735). 3) If costs were rising instead of falling then the FIFO method would probably result in the highest net income. Exercise 7-6 Purchases/Transportatio Cost of Goods Sold/ n-In/ (Purchase Returns/Discounts) (Returns to Inventory) Cost/Un Units it Total $
Date
2
Cost/Un Unit Avg Units it Total $ s Cost/Unit
Brought Forwar d
Mar. 1 25
Balance in Inventory
$97.00 $2,425.00
Total $
50
$4,750.0 $95.00 0
75
95.67 7,175.00 95.67 6,026.96
3
12
1,148.0 95.67 4 63
4
(2)
95.67
(191.3 4) 65
95.67 6,218.30
7
48
95.67
4,592.1 6 17
95.66 1,626.14
32
93.94 3,006.14
1
15
92.00
1,380.00
263
7 2 8
25
93.94
2,348.5 0
7
93.95
Analysis component: The gross profit ratio for Product W506 for March 2011 is 35.71% calculated as net March sales of $12,284 (83 units × $148) less March cost of goods sold of $7,897.36 = $4,386.64 gross profit ÷ $12,284 = .3571 × 100.
657.64
264
Exercise 7-7 (15 minutes) a. LCM applies to inventory as a whole: $14,260 b. LCM applied separately to each product: $13,792 Calculations: Per Unit Inven tory Items
BB FM MB SL
c.
Unit s on Han d 22 15 36 40
C o s t $100 156 190 72
N R V $108 144 182 87
Tota l Cost
Tota l NRV
$2,200 2,340 6,840 2,880 $14,260
$2,376 2,160 6,552 3,480 $14,568
LCM applied to: a. b. Invent Eac ory h as a Prod Whole uct
$14,260
$2,200 2,160 6,552 2,880
$13,792
2011 Dec. 31 Cost of Goods Sold ............................................................
468
Merchandise Inventory ........................................
468
To write inventory down to market; 14,260 – 13,792 = 468
Exercise 7-8 (20 minutes) 1. $900,000 – $500,000 = $400,000
2.
For years ended
Income statement information
December 31, 2011, 2012, and 2013
actually reported for years ended December 31,
income statement information should have been reported as:
2011
2012
2013
265
Sales
$900,000
$900,00 0
$900,0 00
$900,0 00
Cost of goods sold: Beginning inventory Add: Purchases Less: Ending inventory Cost of goods sold
Gross profit
$200,000
$200,00 0
$180,00 0
$200,0 00
500,000
500,000
500,000
500,00 0
180,000
200,000
200,00 0
200,000
500,000
$400,000
520,000
480,00 0
500,00 0
$380,00 0
$420,0 00
$400,0 00
266
Exercise 7-9 (20 minutes) Goods available for sale: Inventory, January 1 Purchases Purchase returns Transportation-in Goods available for sale Less: Estimated cost of goods sold: Sales Estimated cost of goods sold [$2,000,000 × (1 – 30%)]
..... $ 450,000 $1,590,000 (23,100) 37,600 1,604,500 ..... $2,054,500 $2,000,000 .....
(1,400,000)
Estimated March 31 inventory 654,500
$
Exercise 7-10 (20 minutes) At Cost Goods available for sale: Beginning inventory $ 128,400.00 Net purchases 196,800.00 Goods available for sale $325,200.00 Deduct net sales at retail 260,000.00 Ending inventory at retail 65,200.00 Cost ratio: ($179,420/$325,200) × 100 = 55.17% Ending inventory at cost ($65,200 × 55.17%)
At Retail $63,800.00 115,620.00 $179,420.00
$ $35,970.84
Exercise 7-11 (15 minutes) a.
$54,600 × 55.17% = $30,122.82
b. At Cost Estimated inventory that should have been on hand ....................................... $65,200.00
At Retail $35,970.84
267
Physical inventory ....................................................... Inventory shrinkage ..................................................... 10,600.00
30,122.82 54,600.00 $ 5,848.02 $
268
*Exercise 7-12 (20 minutes) Ending Cost of Inventory Goods Sold a.
b.
c.
Weighted-average cost ($6,600/1,320 = $5.00): $5.00 × 50 ................................................................. $6,600 – $250 ...........................................................
250
FIFO: 50 × $4.40 ................................................................. $6,600 – $220 ...........................................................
220
LIFO: 50 × $6.00 ................................................................. $6,600 – $300 ...........................................................
300
6,350
6,380
6,300
FIFO provides the lowest net income because it has the highest cost of goods sold due to decreasing unit costs. *Exercise 7-13 (20 minutes) Ending Cost of Inventory Goods Sold a.
b.
c.
FIFO: (50 × $2.86) + (100 × $2.50) ..................................... (120 × $2.00) + (250 × $2.30) + (400 × $2.50) ...........
393
LIFO: (120 × $2.00) + (30 × $2.30) ..................................... (50 × $2.86) + (500 × $2.50) + (220 × $2.30) ............
309
Weighted-average cost ($2,208/920 = $2.40): $2.40 × 150 ............................................................... $2.40 × 770 ...............................................................
360
LIFO provides the lowest net income because it has the highest cost of goods sold due to rising unit costs.
1,815
1,899
1,848
269
*Exercise 7-14 (15 minutes) Ending inventory: Units
Cost/Unit
Total Cost
Beginning inventory
80 @
$2.00 =
$160.00
March 7 purchase
22 @
2.30 =
50.60
July 28 purchase
48 @
2.50 =
120.00
150
$330.60
Cost of goods sold: Cost of goods available for sale less Ending inventory = Cost of goods sold
$2,208.00 – $330.60 = $1,877.40
*Exercise 7-15 (10 minutes) Merchandise turnover 2012: $ 643,825 ($96,400 + $86,750)/2 2011:
$ 426,650
= 7.0 times
= 4.8 times
($86,750 + $91,500)/2 Days’ sales in inventory 2012:
2011:
$ 96,400 × 365 $643,825
= 54.7 days
$ 86,750 × 365 $426,650
= 74.2 days
270
It appears that Russo has lower levels of merchandise inventory on hand which is generally favourable provided customers are not being turned away because of out-of-stock items. Chapter 8
Accounting Information Systems
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
EXERCISES
Exercise 8-1 (15 minutes) Sales Journal Date
Invoice Number
Account Debited
Accounts Receivable Dr. Sales Cr.
PR
P
Cost of Goods Sold Merchandise Inven Cr.
2011 Feb. 7
J. Eason
5704
1,150
700
12
P. Lathan
5705
320
170
25
S. Summers
5706
550
300
*Exercise 8-2 (15 minutes) SALES JOURNAL
Page 2 Invoice
Date
Account Debited
Numbe r
A/R Dr. PR
Sales Cr.
2011 Feb .
7 J. Eason
5704
1,150
12 P. Lathan
5705
320
25 S. Summers
5706
550
Exercise 8-3 (20 minutes) 641
Cash Receipts Journal
Date
Account Credited
PR
Explanation
Cash Dr.
Sales Discou nt Dr.
Accounts Receivabl e Cr.
Sales Cr.
O Ac
271
2011 Sept. 9
Notes payable
Note to bank
5,500
5
13
Dale Trent, capital
Owner investment
7,000
7
18
Sales
Cash sale
27
J. Namal
Invoice, Sept. 7
460 1,764
460 36
1,800
272
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. 642
*Exercise 8-4 (20 minutes) CASH RECEIPTS JOURNAL Account Date
Credited
Explanation
PR
Page 2
Sales
Accts.
Other
Cash
Disc.
Rec.
Sales
Accts.
Debit
Debit
Credit
Credit
Credit
2011 Sept .
9 Notes payable
Note to bank
5,500
5,500
1 Dale Trent, 3 capital
Owner investment
7,000
7,000
1 Sales 8
Cash sale
2 J. Namal 7
Invoice, Sept. 7
Fundamental Accounting Principles, Twelfth Canadian Edition
Exercise 8-5 (20 minutes)
460 1,764
460 36
1,800
273
Purchases Journal
Date
Account Credited
Date of Invoice
Terms
PR
Page 1
Accounts Payable Cr.
Merchandi se Inventory Dr.
8,100
Office Supplies Dr.
Other Accounts Dr.
2011 July
1
Angler, Inc.
Ju l
1
n/30
8,100
14 Store Supplies/ Steck Company
Ju l
14
2/10, n/30
240
17
Ju l
17
n/30
2,600
Marten Company
240 2,600
Exercise 8-6 (20 minutes) PURCHASES JOURNAL
Page 2 Accounts
Date of Date
Account Credited
Invoic e
Terms
PR
Office
Other
Payable
Purchases
Supplie s
Accounts
Credit
Debit
Debit
Debit
2011 July
1 Angler, Inc.
July 1
14 Store Supplies/Steck Company July
n/30 2/10,n/30
8,100 240
8,100 240
274
14 17 Marten Company
July 17
n/30
2,600
2,600
275
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
Exercise 8-7 (20 minutes) Cash Disbursements Journal Ch. No.
Date
Payee
Account Debited
PR
Cash Cr.
Page 1
Merchandise Inventory Cr.
Other Accounts Dr.
Accounts Payable Dr.
2011 Mar. 9
210
Narlin Corp.
Store Supplies
900
900
17
211
City Bank
Notes Payable
3,000
3,000
29
212
LeBaron
LeBaron
6,860
31
213
E. Brandon
Salaries Expense
3,400
31
214
Pace, Inc.
Pace, Inc.
5,500
140
7,000 3,400 5,500
*Exercise 8-8 (20 minutes) CASH DISBURSEMENTS JOURNAL Ch. Date
No.
Payee
Account Debited
PR
Other
Cash
Discoun t
Accts.
Payable
Credit
Credit
Debit
Debit
2011 Mar.
Page 2
Purchas e
9 21 0
Narlin Corp.
Store Supplies
900
900
1 21
City Bank
Notes Payable
3,000
3,000
Accts.
643
276
7 1 2 21 9 2
LeBaron
LeBaron
6,860
3 21 1 3
E. Brandon
Salaries Expense
3,400
3 21 1 4
Pace, Inc.
Pace, Inc.
5,500
140
7,000 3,400 5,500
277
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Exercise 8-9 (30 minutes) Part 1 – Wilson Purchasing
Purchases Journal
Date
Account Credited
Date of Invoice
Terms
PR
Page 1
Accounts Payable Cr.
Merchandi se Inventory Dr.
30,000
30,000
Office Supplies Dr.
Other Accounts Dr.
2011 May 11
Hostel Sales
May 11
3/10, n/90
Cash Disbursements Journal Ch. No.
Date
Payee
Account Debited
PR
Cash Cr.
Page 1
Merchandise Inventory Cr.
Other Accounts Dr.
Accounts Payable Dr.
2011 Fundamental Accounting Principles, Twelfth Canadian Edition
May 11
84
Express Shipping
Merchandise Inv.
20
85
Hostel Sales
Hostel Sales
335 27,9361
General Journal Date
Account Titles and Explanations
12 Accounts Payable – Hostel Sales .......................
864
Page: 1
PR
Debit
2011 May
335
1,200
Credit
28,800
278
Merchandise Inventory .......................................... To record return of merchandise.
Calculations: 1. 30,000 – 1,200 = 28,800; 28,800 x 3% = 864; 28,800 – 864 = 27,936.
1,200
279
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Exercise 8-9 (concluded) Part 2 – Hostel Sales Sales Journal Date
Invoice Number
Account Debited
PR
Page 1
Accounts Receivable Dr. Sales Cr.
Cost of Goods Sold Dr. Merchandise Inventory Cr.
30,000
20,000
2011 May 11
Wilson Purchasing
1601
Cash Receipts Journal
Date
Account Credited
PR
Explanation
Cash Dr.
Page 1
Sales Discou nt Dr.
Accounts Receivabl e Cr.
864
28,800
2011 May 21
Wilson Purchasing
Wilson Purchasing
27,93 61
General Journal Date
Account Titles and Explanations
Page: 1
PR
Debit
2011 May
12 Sales Returns and Allowances ...........................
1,200
Credit
Sales Cr.
Other Account s Cr.
Cost of Goods Sold Dr. Merchandise Inventory Cr.
645
280
Accounts Receivable – Wilson Purchasing ......
1,200
To record sales return.
12 Merchandise Inventory ............................................. Cost of Goods Sold ................................................... To record cost of merchandise returned to inventory.
Calculations: 1. 30,000 – 1,200 = 28,800; 28,800 x 3% = 864; 28,800 – 864 = 27,936.
800 800
281
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*Exercise 8-10 (30 minutes) Part 1 – Wilson Purchasing PURCHASES JOURNAL
Page 2 Accounts Date
Date
Account Credited
Invoic
o f Terms
e
PR
Office
Other
Payable
Purchases
Supplie s
Account s
Credit
Debit
Debit
Debit
30,000
30,000
2011 Ma
11 Hostel Sales y
May
3/10,n/90 1 1
CASH DISBURSEMENTS JOURNAL Fundamental Accounting Principles, Twelfth Canadian Edition
Ch. Date
No.
Payee
Account Debited
PR
Page 2
Purchas e
Other
Accts.
Cash
Discoun t
Accts.
Payable
Credit
Credit
Debit
Debit
2011 May
1 84 Express Transportation-In 1 Shipping 2 85 Hostel Sales 0
A/P – Hostel Sales
335 27,936
335 864
28,800
282
General Journal Date
Account Titles and Explanations
Page: 1
PR
Debit
Credit
2011 May
12 Accounts Payable – Hostel Sales ....................... Purchase Returns and Allowances .................... To record return of merchandise purchased.
1,200 1,200
283
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*Exercise 8-10 (concluded) Part 2 – Hostel Sales SALES JOURNAL
Page 2 Invoice
Date
Account Debited
Numbe r
A/R Dr. PR
Sales Cr.
2011 Ma y
11 Wilson Purchasing
30,000
1601
CASH RECEIPTS JOURNAL Account Date
Credited
Explanation
PR
Accts.
Cash
Disc.
Rec.
Sales
Accts.
Debit
Debit
Credit
Credit
Credit
27,936
864
28,800
2011 May
2 Wilson 1 Purchasing
Sale of May 11
General Journal Date
Account Titles and Explanations
Page: 1
PR
Debit
2011 May
Page 2
Sales
12 Sales Returns and Allowances ...........................
1,200
Credit
Other
647
284
Accounts Receivable – Wilson Purchasing ...... To record sales return.
1,200
285
Exercise 8-11 (10 minutes) The June 5 purchase would have been recorded in the Purchases Journal and the June 14 payment would have been recorded in the Cash Disbursements Journal. The error in journalizing the June 14 transaction should be discovered in the process of crossfooting the Cash Disbursements Journal at the end of the month. Exercise 8-12 (10 minutes) a.
When the schedule of accounts payable is prepared.
b.
When crossfooting the Purchases Journal.
c.
When the trial balance is prepared.
d.
When the schedule of accounts payable is prepared.
e.
When the schedule of accounts payable is prepared.
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286
Exercise 8-13 (30 minutes) Part 1 ACCOUNTS RECEIVABLE SUBLEDGER Sanders Farrell May 17
1,700 May 20
Bal.
1,200
Don Holland 500 May 10 3,880 25 680
Brad Smithers May 6 5,760
Bal. 4,560
Part 2 GENERAL LEDGER Accounts Receivable May 31
12,020 May 20
Bal.
11,520
Sales Returns and Allowances
Sales 500
May 3112,020
ay 20
M 500
Part 3 VALUE-MART GOODS Schedule of Accounts Receivable May 31, 2011 Sanders Farrell ...................................................
$ 1,200
Dan Holland ...............................................................................
4,560
Brad Smithers .....................................................
5,760
Total accounts receivable ...............................
$11,520
Accounts Receivable Controlling Account
Total debit ............................................................ Credit for return ................................................. Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
$12,020 (500)
286
287
Balance as of May 31, 2011 ............................
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$11,520
287
288
*Exercise 8-14 (35 minutes)
GENERAL LEDGER Cash 38,878
Accounts Payable 23,044
1,500
23,200
Sales Discounts 472
18,300
Accounts Receivable 26,200
Notes Payable
600
Purchases 9,000
23,200
23,600
Prepaid Insurance
Purchase Returns and Allowance
Sales
1,700
26,200
1,500
5,750
Sales Returns and Allowances
Store Equipment 3,500
1,000
Purchase Discounts
600
456
ACCOUNTS RECEIVABLE SUBLEDGER Jack Hertz 7,400
Trudy Stone 600
16,800
Dave Waylon 16,800
2,000
6,800
ACCOUNTS PAYABLE SUBLEDGER Grass Corp. 1,500
McGrew Company 10,800
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3,400
Sulter, Inc. 9,000
9,000
288
289
9,300
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290
*Exercise 8-15 (30 minutes) Part 1 ACCOUNTS RECEIVABLE SUBLEDGER Adrian Carr Jan. 8
Lisa Mack
7,076
Jan. 14
Jay Newton
23,780
Kathy Olivias
Jan. 2
4,176
Jan. 10
15,544
29
8,468
20
12,992
Part 2 Jan. 31
Accounts Receivable ........................................... Sales ............................................................ GST Payable ................................................ PST Payable ................................................
72,036
62,100 3,726 6,210
Part 3
GENERAL LEDGER Accounts Receivable Jan. 31
Sales
72,036
62,100 Jan. 31
Part 4 SKILLERN COMPANY Schedule of Accounts Receivable January 31, 2011
Adrian Carr .........................................
$ 7,076
Jay Newton ..................................................
12,644
Kathy Olivas ...............................................
28,536
Lisa Mack .....................................................
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23,780
290
291
Total accounts receivable ......................
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$72,036
291
292
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*Exercise 8-16 (20 minutes)
Page X
Sales Journal
Date
Account Debited
Invoice No.
PR
A/R Dr
PST Payable CR
GST Payable CR
COGS DR Merchandise Inventory CR
Sales Cr
2011
Aug. 5 11
Jay Smith
50
50,160
3,520
2,640
44,000
21,000
Dee Oliver
51
38,760
2,720
2,040
34,000
16,200
Cash Receipts Journal
Date
Account Credited
Explanatio n
PR
Other Account s CR
A/R CR
PST Payabl e CR
Page X
GST Payabl e CR
Sale s CR
Cash DR
Sales Disc Dr
2011 Fundamental Accounting Principles, Twelfth Canadian Edition
Aug. Jay Smith 20 21 Dee Oliver
Inv. 50
50,16 0
50,160
Inv. 51
38,76 0
38,420
Purchases Journal Date
Account Credited
Terms
PR
A/P CR
340*
Page X Merchandise Inventory DR
Other Accounts DR
GST Rec’ble DR
COGS/DR Merchandise Inventory/ CR
293
2011
Aug. 1
Arden Sheet Metal
2/10, n/30
10,600
7
JayCee Equipment
n/ 30
6,360
Date
Ch #
Account Debited
10,000
Cash Disbursements Journal Other Accounts GST Rec’ble PR DR DR
600 6,000
360
Page X A/P DR
Merchandis e Inventory CR
Cash CR
2011
Aug. 10
28
A/P – Arden Sheet Metal
*Discount on sales amount only
10,600
200
10,400
294
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*Exercise 8-17 (20 minutes) SALES JOURNAL
Date 2011 Aug.
Invoice Number
Account Debited 5 Jay Smith 11 Dee Oliver
PR
50 51
Date Account Credited Explanation 2011 Aug.20 A/R – Jay Smith Inv. 50 21 A/R – Dee Oliver Inv. 51
PR
Accts. Rec. Debit
PST Payable Credit
50,160 38,760
3,520 2,720
CASH RECEIPTS JOURNAL Accts. PST GST Rec. Payable Payable Credit Credit Credit
Other Accts. Credit
Date 2011
Date of Invoice
Account Credited 1 Arden Sheet Metal 7 JayCee Equipment
Ch. No.
Aug.10 28
Payee A/P – Arden
2,6 2,0
Page X Sales Credit
50,160 38,760 PURCHASES JOURNAL
Date 2011 Aug.
GST Payable Credit
Terms
Aug. 1 Aug. 7
Account Debited
2/10,n/30 n/30
PR
Page X Accts. Payable Credit 10,600 6,360
CASH DISBURSEMENTS JOURNAL Other GST Accts. Rec’ble PR Debit Debit
Arden Sheet Metal
Purchases Debit 10,000
Page X Accts. Payable Debit 10,600
653
Current edition
CAMOSUN COLLEGE
73050199
BAYE
MP MGRL ECON/BUS STRAT W/DD
70877386
BUCKWO LD
CDN INCOME TAX/8CE
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295
Chapter 9 EXERCISES
Internal Control and Cash
Exercise 9-1 (10 minutes) Lombard Company’s internal control system failed to require a separation of asset custody and recordkeeping. The bookkeeper should not have been allowed to sign the company’s cheques. In addition, since a loss was incurred, the company apparently had not bonded its employee. Otherwise, the loss would have been insured by the bonding company. Finally, if regular, independent reviews of the accounting records had been done, the payments of salary cheques to a nonemployee may have been discovered sooner. Exercise 9-2 (15 minutes) You have several concerns. First, there is no mechanism in the parking meters to track the input of coins (a meter reading that could be documented and subsequently verified against the collection); this means there is no verifiable means by which to reconcile the contents of each meter. Second, because of the first shortcoming, the employee emptying the contents of the meters could withhold some of the coins since the dollar value cannot be verified. Third, the canvas bag is not secure; it can be opened at any time by an unauthorized individual. Fourth, after emptying several parking meters, the contents of each canvas bag can easily exceed a thousand dollars; there is a safety risk to a lone employee carrying a canvas bag of money. To correct the situation, optimally, the parking meters should be mechanized such that the contents can be reconciled. However, a major investment in new parking meters seems unlikely, therefore, civic employees collecting coins from parking meters should operate in pairs; there is less risk of fraud if two employees are responsible for emptying the parking meters (unless there is collusion). The canvas bag used to collect the coins is also problematic. It should be redesigned so that coins can go in but cannot be removed unless done so by an authorized individual. Finally, for safety of the individuals involved and for security over the coins, full moneybags should not be stored in an unattended vehicle. Full moneybags should be transferred to a secure location immediately; arrangements could be made with an armored vehicle to rendezvous with the pair of employees regularly at specified points along the route.
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296
Exercise 9-3 (15 minutes) a. If a cash register cannot be used, the total sales value of the shirts and sunglasses given to the employee each day should be calculated. Then, the employee should sign a receipt for the merchandise and the amount of cash that he or she has been given. At the end of each day, the employee should be required to return cash plus remaining shirts and sunglasses equal to the amount taken to the stand. b.
The employee should sign a receipt for the total amount of cash he or she is given each weekend. Then, each time the employee makes a purchase, he or she should obtain a signed sales receipt for the payment. The sales receipt should list the items purchased and the prices paid. When the employee returns to the business office, the total value of the signed sales receipts plus any remaining cash should equal the amount of cash originally given to the employee. Also, the merchandise brought back by the employee should be the same as the items listed on the signed sales receipts.
Exercise 9-4 (15 minutes) The internal control problem is that the bookkeeper has physical control over the cash receipts and also has control over the accounting records. Nothing in the system prevents the bookkeeper from taking cash from the mail and using it personally. The bookkeeper might delay recording the cash receipt from a customer until more cash comes in at a later date from a second customer. Then, the new cash receipt would be deposited and recorded as a payment made by the first customer. No entry would be made in the second customer’s account until cash was received from a third customer. (This type of fraud is called ―lapping.‖) Also, the bookkeeper may pocket cash and claim that a payment was never received and apparently lost in the mail. If only one person is present when the mail is opened, that person may steal cash and claim it was never received. If possible, two people should be present. Otherwise, the honesty and integrity of the person chosen to open the mail is critical. Most importantly, the bookkeeper should not have physical control over cash.
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297
Exercise 9-5 (20 minutes) Part 1 a. Jan. 1 b.
Petty Cash ................................................................. Cash ................................................................... To establish the fund.
200.00
200.00
Eanes Co. Petty Cash Payments Report January 1 – 8, 2011
Receipts: Postage expense ..........................................................
$64.00
Merchandise inventory .............................................
19.00
Store supplies ...............................................................
36.50
Jim Eanes, Withdrawals ............................................
53.00
Total receipts ..........................................................................................................
Fund total....................................................................
$200.0 0
Less: Cash remaining ...............................................
27.50
$172.50
Equals: Cash required to replenish petty cash .........
172.50
Cash over/(short) ................................................................
$
Jan.
8
Part 2 Jan. 8
Postage Expense ....................................................... Merchandise Inventory ............................................... Store Supplies Expense* ........................................... Jim Eanes, Withdrawals ............................................. Cash ................................................................... To reimburse the fund.
64.00 19.00 36.50 53.00
Postage Expense ....................................................... Merchandise Inventory ............................................... Store Supplies Expense* ........................................... Jim Eanes, Withdrawals ............................................. Petty Cash ................................................................. Cash ...................................................................
64.00 19.00 36.50 53.00 300.00
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-0-
172.50
472.50 297
298
To reimburse the fund and increase it by $300. Analysis Component If the January 8 entry to reimburse the fund was not recorded, net income would be overstated. * Either Store Supplies Expense (an expense) or Store Supplies (an asset) could be debited. However, if supplies are being purchased through Petty Cash it is likely that they are for immediate use which justifies using an expense account over an asset.
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299
Exercise 9-6 (20 minutes) a. Sept.
9
b.
Petty Cash ................................................................. Cash ................................................................... To establish the fund.
400.00
400.00
Brady Company Petty Cash Payments Report September 9 – 30, 2011
Receipts:
Merchandise inventory ......................................
$ 32.4 5
Office supplies .............................................................
113.55
Repairs expense..........................................................
87.60
Total receipts ..............................................................
$233.60)
Fund total...................................................................
$400.0 0
Less: Cash remaining ..............................................
146.40
Equals: Cash required to replenish petty cash ........
253.60)
Cash over/(short) ...............................................................
($ 20.00 )
Sept. 30
Merchandise Inventory ............................................... Office Supplies Expense*........................................... Repairs Expense........................................................ Cash Over and Short ................................................. Petty Cash .......................................................... Cash ................................................................... To reimburse the fund and decrease it by $100.
32.45 113.55 87.60 20.00
100.00 153.60
Analysis component: There are several things that could be done. The Marketing Manager should review the prior month’s petty cash journal entries to determine if the shortage is an anomaly or a recurring event. Hopefully it is an anomaly but, Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
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300
regardless, the manager will need to question the Petty Cash Custodian about the $20 cash shortage recorded in September. It is important to recognize that honest errors do occur. It is also possible that the Petty Cash Custodian requires training to help him manage the petty cash fund. If it is determined that the error was based on dishonesty, appropriate action will have to be taken (which normally results in the dismissal of the employee as a minimum).
* Either Office Supplies Expense (an expense) or Office Supplies (an asset) could be debited. However, if supplies are being purchased through Petty Cash it is likely that they are for immediate use which justifies using an expense account over an asset.
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301
Exercise 9-7 (20 minutes) a. Oct. 31 Cleaning Expense ....................................................... Postage Expense ........................................................ Delivery Expense ........................................................ Cash Over and Short ......................................... Cash .................................................................. To reimburse the fund.
120.00 79.00 60.00
b. Nov. 30 Computer Repair Expense .......................................... Entertainment Expense ............................................... Cash Over and Short................................................... Cash ................................................................... To reimburse the fund.
75.00 156.00 2.00
c. Dec. 31 Gas Expense............................................................... Office Supplies Expense* ............................................ Entertainment Expense ............................................... Petty Cash................................................................... Cash ................................................................... To reimburse and increase the fund.
80.00 140.00 62.00 100.00
4.00 255.00
233.00
382.00
* Either Office Supplies Expense (an expense) or Office Supplies (an asset) could be debited. However, if supplies are being purchased through Petty Cash it is likely that they are for immediate use which justifies using an expense account over an asset.
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302
Exercise 9-8 (20 minutes) Oct.
1
Cash .......................................................................... Debit Card Expense ................................................... Service Revenue ................................................ To record sale of services less debit card expense; 0.5% x 105,000 = 525.
104,475 525
7
Cash .......................................................................... Service Revenue ................................................ To record sale of services provided for cash.
37,000
8
Cash .......................................................................... Credit Card Expense.................................................. Service Revenue ................................................ To record sale of services less credit card expense; 2% x 61,000 = 1,220.
59,780 1,220
10
Accounts Receivable – Edson CHC ........................... Service Revenue ................................................ To record sale of services.
84,000
25
Cash .......................................................................... Sales Discounts ......................................................... Accounts Receivable – Edson CHC ................... To record collection of Oct. 10 credit sale; 2% x 84,000 = 3,680.
80,320 3,680
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105,000
37,000
61,000
84,000
84,000
303
Exercise 9-9 (30 minutes) Jan. 15
Cash .......................................................................... Sales .................................................................. To record sale of merchandise to cash customers.
56,000
15
Cost of Goods Sold .................................................... Merchandise Inventory ....................................... To record cost of sales.
36,400
17
Accounts Receivable ................................................. Sales .................................................................. To record sale of merchandise on terms 2/10, n30.
15,800
17
Cost of Goods Sold .................................................... Merchandise Inventory ....................................... To record cost of sales.
12,000
20
Cash .......................................................................... Credit Card Expense.................................................. Sales .................................................................. To record sale of merchandise less credit card expense; 114,000 x 2% = 2,280.
111,720 2,280
20
Cost of Goods Sold .................................................... Merchandise Inventory ....................................... To record cost of sales.
74,100
25
Cash .......................................................................... Debit Card Expense ................................................... Sales .................................................................. To record sale of merchandise less debit card expense; 0.5% x 72,000 = 360.
71,640 360
Cost of Goods Sold .................................................... Merchandise Inventory ....................................... To record cost of sales.
46,800
25
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303
56,000
36,400
15,800
12,000
114,000
74,100
72,000
46,800
304
Exercise 9-9 (concluded) Analysis component Cash sales would be preferable, however, often it is not convenient for customers. The inconvenience of cash might prevent customers from making purchases if that was the only means of payment accepted by LenCon. Credit sales allow customers to purchase on impulse. However, two disadvantages: receipt of cash by LenCon is delayed and credit sales require administrative time to monitor the timely collection from credit customers. Debit cards have the advantage of allowing customers to make impulse purchases but only if the cash balance is available in their bank account. Debit cards are also comparable to cash (no subsequent collection required) but the bank does charge a fee for this service although it is normally significantly less than the fee charged by banks for credit card transactions. Bank credit cards have the advantages of cash being collected by LenCon immediately (positive effect on cash flow) and customers are limited only to their credit card limit (not their bank account balance); customers are buying on credit but the risk of collection is transferred to the credit card company. The disadvantage of credit cards is the fee charged by the administering bank. LenCon will likely accept all forms of payment to enhance sales and in so doing recognize the costs and risks of each.
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305
Exercise 9-10 (25 minutes) 1. PELZER HOLDINGS Bank Reconciliation July 31, 2011
Bank statement balance ...................
$9,848
Book balance........................
$9,740
Add: Outstanding deposit........................
572
Bank error (Peltza cheque) ..........
560 $10,98 0
Deduct:
Deduct:
Outstanding cheques:
NSF — Jim Anderson ..........
240
#14: $ 600 #54:
140 ....................................
1,480
Adjusted bank balance......................
$9,500
2. July 31
Adjusted book balance ........ $9,500
Accounts Receivable – Jim Anderson ..................
240
Cash ............................................................................
240
To reinstate customer account.
Analysis component If the journal entry in (2) is not recorded, net income, liabilities, and owner’s equity would not be affected. Assets would be increased and decreased by the same amount causing a net change of zero.
Exercise 9-11 (25 minutes)
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306
MEDLINE SERVICE CO. Bank Reconciliation July 31, 2011 Bank statement balance ...................................
$10,332
Add: ..................................................... Deposit of July 31 ..................
Book balance of cash ....................................
$11,352
Add: 2,724
Error on Ch. No. 919 ........
9
$13,056 Deduct:............................................... Outstanding cheques ...........
$11,361 Deduct:
1,713
Bank service charge ........
18
Adjusted bank balance................. $11,343
Adjusted book balance ............
$11,343
Exercise 9-11 (concluded) b. July
31
Cash .......................................................................... Utilities Expense ................................................. To correct error.
9
31
Bank Service Charges Expense ................................ Cash ................................................................... To record bank service charges.
18
Analysis component If the journal entries in part (a) were not recorded, net income, assets, and owner’s equity would each be overstated by a net amount of $9 ($18 - $9 = $9); liabilities are not affected by the entries in (a).
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9
18
307
Exercise 9-12 (20 minutes) Bank Balance 1. Interest earned on the account. 2. Deposit made on September 30 after the bank was closed. 3. Cheques outstanding on August 31 that cleared the bank in September. 4. NSF cheque from customer returned on September 15 but not recorded by the company. 5. Cheques written and mailed to payees on September 30. 6. Deposit made on September 5 that was processed on September 8. 7. Bank service charge. 8. Cheques written and mailed to payees on October 5. 9. Cheque written by another depositor but charged against the company's account. 10. Principal and interest collected by the bank but not recorded by the company. 11. Special charge for collection of note in No. 10 on company's behalf. 12. Cheque written against the account and cleared by the bank; erroneously omitted by the bookkeeper.
Book Balance Must Add Deduct Add Deduct Adjust x Dr.
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Not Shown on the Reconciliation
x x x
Cr.
x
Cr.
x x x x x
Dr. x
Cr.
x
Cr.
307
308
*Exercise 9-13 (15 minutes) Case X
Case Y
Case Z
Cash ...........................................................
$ 800
$ 910
$1,100
Short-term investments.....................
-0-
-0-
500
Accounts receivable ............................
-0-
990
800
Quick assets ...........................................
$ 800
$1,900
$2,400
Current liabilities .................................
$2,200
$1,100
$3,650
Acid-test ratio ........................................
0.36
1.73
0.66
Case Y exhibits the superior ability to meet short-term obligations as they come due. The acid-test ratio of 1.73 exceeds the common benchmark of 1.0. Cases X and Z fall short of the 1.0 benchmark.
Chapter 9 EXERCISES
Internal Control and Cash
Exercise 9-1 (10 minutes) Lombard Company’s internal control system failed to require a separation of asset custody and recordkeeping. The bookkeeper should not have been allowed to sign the company’s cheques. In addition, since a loss was incurred, the company apparently had not bonded its employee. Otherwise, the loss would have been insured by the bonding company. Finally, if regular, independent reviews of the accounting records had been done, the payments of salary cheques to a nonemployee may have been discovered sooner. Exercise 9-2 (15 minutes) You have several concerns. First, there is no mechanism in the parking meters to track the input of coins (a meter reading that could be documented and subsequently verified against the collection); this means there is no verifiable means by which to reconcile the contents of each meter. Second, because of the first shortcoming, the employee emptying the contents of the meters could withhold some of the coins Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
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since the dollar value cannot be verified. Third, the canvas bag is not secure; it can be opened at any time by an unauthorized individual. Fourth, after emptying several parking meters, the contents of each canvas bag can easily exceed a thousand dollars; there is a safety risk to a lone employee carrying a canvas bag of money. To correct the situation, optimally, the parking meters should be mechanized such that the contents can be reconciled. However, a major investment in new parking meters seems unlikely, therefore, civic employees collecting coins from parking meters should operate in pairs; there is less risk of fraud if two employees are responsible for emptying the parking meters (unless there is collusion). The canvas bag used to collect the coins is also problematic. It should be redesigned so that coins can go in but cannot be removed unless done so by an authorized individual. Finally, for safety of the individuals involved and for security over the coins, full moneybags should not be stored in an unattended vehicle. Full moneybags should be transferred to a secure location immediately; arrangements could be made with an armored vehicle to rendezvous with the pair of employees regularly at specified points along the route.
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Exercise 9-3 (15 minutes) a. If a cash register cannot be used, the total sales value of the shirts and sunglasses given to the employee each day should be calculated. Then, the employee should sign a receipt for the merchandise and the amount of cash that he or she has been given. At the end of each day, the employee should be required to return cash plus remaining shirts and sunglasses equal to the amount taken to the stand. b.
The employee should sign a receipt for the total amount of cash he or she is given each weekend. Then, each time the employee makes a purchase, he or she should obtain a signed sales receipt for the payment. The sales receipt should list the items purchased and the prices paid. When the employee returns to the business office, the total value of the signed sales receipts plus any remaining cash should equal the amount of cash originally given to the employee. Also, the merchandise brought back by the employee should be the same as the items listed on the signed sales receipts.
Exercise 9-4 (15 minutes) The internal control problem is that the bookkeeper has physical control over the cash receipts and also has control over the accounting records. Nothing in the system prevents the bookkeeper from taking cash from the mail and using it personally. The bookkeeper might delay recording the cash receipt from a customer until more cash comes in at a later date from a second customer. Then, the new cash receipt would be deposited and recorded as a payment made by the first customer. No entry would be made in the second customer’s account until cash was received from a third customer. (This type of fraud is called ―lapping.‖) Also, the bookkeeper may pocket cash and claim that a payment was never received and apparently lost in the mail. If only one person is present when the mail is opened, that person may steal cash and claim it was never received. If possible, two people should be present. Otherwise, the honesty and integrity of the person chosen to open the mail is critical. Most importantly, the bookkeeper should not have physical control over cash.
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Exercise 9-5 (20 minutes) Part 1 a. Jan. 1 b.
Petty Cash ................................................................. Cash ................................................................... To establish the fund.
200.00
200.00
Eanes Co. Petty Cash Payments Report January 1 – 8, 2011
Receipts: Postage expense ..........................................................
$64.00
Merchandise inventory .............................................
19.00
Store supplies ...............................................................
36.50
Jim Eanes, Withdrawals ............................................
53.00
Total receipts ..........................................................................................................
Fund total....................................................................
$200.0 0
Less: Cash remaining ...............................................
27.50
$172.50
Equals: Cash required to replenish petty cash .........
172.50
Cash over/(short) ................................................................
$
Jan.
8
Part 2 Jan. 8
Postage Expense ....................................................... Merchandise Inventory ............................................... Store Supplies Expense* ........................................... Jim Eanes, Withdrawals ............................................. Cash ................................................................... To reimburse the fund.
64.00 19.00 36.50 53.00
Postage Expense ....................................................... Merchandise Inventory ............................................... Store Supplies Expense* ........................................... Jim Eanes, Withdrawals ............................................. Petty Cash ................................................................. Cash ...................................................................
64.00 19.00 36.50 53.00 300.00
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-0-
172.50
472.50 311
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To reimburse the fund and increase it by $300. Analysis Component If the January 8 entry to reimburse the fund was not recorded, net income would be overstated. * Either Store Supplies Expense (an expense) or Store Supplies (an asset) could be debited. However, if supplies are being purchased through Petty Cash it is likely that they are for immediate use which justifies using an expense account over an asset.
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Exercise 9-6 (20 minutes) a. Sept.
9
b.
Petty Cash ................................................................. Cash ................................................................... To establish the fund.
400.00
400.00
Brady Company Petty Cash Payments Report September 9 – 30, 2011
Receipts:
Merchandise inventory ......................................
$ 32.4 5
Office supplies .............................................................
113.55
Repairs expense..........................................................
87.60
Total receipts ..............................................................
$233.60)
Fund total...................................................................
$400.0 0
Less: Cash remaining ..............................................
146.40
Equals: Cash required to replenish petty cash ........
253.60)
Cash over/(short) ...............................................................
($ 20.00 )
Sept. 30
Merchandise Inventory ............................................... Office Supplies Expense*........................................... Repairs Expense........................................................ Cash Over and Short ................................................. Petty Cash .......................................................... Cash ................................................................... To reimburse the fund and decrease it by $100.
32.45 113.55 87.60 20.00
100.00 153.60
Analysis component: There are several things that could be done. The Marketing Manager should review the prior month’s petty cash journal entries to determine if the shortage is an anomaly or a recurring event. Hopefully it is an anomaly but, Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
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regardless, the manager will need to question the Petty Cash Custodian about the $20 cash shortage recorded in September. It is important to recognize that honest errors do occur. It is also possible that the Petty Cash Custodian requires training to help him manage the petty cash fund. If it is determined that the error was based on dishonesty, appropriate action will have to be taken (which normally results in the dismissal of the employee as a minimum).
* Either Office Supplies Expense (an expense) or Office Supplies (an asset) could be debited. However, if supplies are being purchased through Petty Cash it is likely that they are for immediate use which justifies using an expense account over an asset.
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Exercise 9-7 (20 minutes) a. Oct. 31 Cleaning Expense ....................................................... Postage Expense ........................................................ Delivery Expense ........................................................ Cash Over and Short ......................................... Cash .................................................................. To reimburse the fund.
120.00 79.00 60.00
b. Nov. 30 Computer Repair Expense .......................................... Entertainment Expense ............................................... Cash Over and Short................................................... Cash ................................................................... To reimburse the fund.
75.00 156.00 2.00
c. Dec. 31 Gas Expense............................................................... Office Supplies Expense* ............................................ Entertainment Expense ............................................... Petty Cash................................................................... Cash ................................................................... To reimburse and increase the fund.
80.00 140.00 62.00 100.00
4.00 255.00
233.00
382.00
* Either Office Supplies Expense (an expense) or Office Supplies (an asset) could be debited. However, if supplies are being purchased through Petty Cash it is likely that they are for immediate use which justifies using an expense account over an asset.
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Exercise 9-8 (20 minutes) Oct.
1
Cash .......................................................................... Debit Card Expense ................................................... Service Revenue ................................................ To record sale of services less debit card expense; 0.5% x 105,000 = 525.
104,475 525
7
Cash .......................................................................... Service Revenue ................................................ To record sale of services provided for cash.
37,000
8
Cash .......................................................................... Credit Card Expense.................................................. Service Revenue ................................................ To record sale of services less credit card expense; 2% x 61,000 = 1,220.
59,780 1,220
10
Accounts Receivable – Edson CHC ........................... Service Revenue ................................................ To record sale of services.
84,000
25
Cash .......................................................................... Sales Discounts ......................................................... Accounts Receivable – Edson CHC ................... To record collection of Oct. 10 credit sale; 2% x 84,000 = 3,680.
80,320 3,680
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105,000
37,000
61,000
84,000
84,000
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Exercise 9-9 (30 minutes) Jan. 15
Cash .......................................................................... Sales .................................................................. To record sale of merchandise to cash customers.
56,000
15
Cost of Goods Sold .................................................... Merchandise Inventory ....................................... To record cost of sales.
36,400
17
Accounts Receivable ................................................. Sales .................................................................. To record sale of merchandise on terms 2/10, n30.
15,800
17
Cost of Goods Sold .................................................... Merchandise Inventory ....................................... To record cost of sales.
12,000
20
Cash .......................................................................... Credit Card Expense.................................................. Sales .................................................................. To record sale of merchandise less credit card expense; 114,000 x 2% = 2,280.
111,720 2,280
20
Cost of Goods Sold .................................................... Merchandise Inventory ....................................... To record cost of sales.
74,100
25
Cash .......................................................................... Debit Card Expense ................................................... Sales .................................................................. To record sale of merchandise less debit card expense; 0.5% x 72,000 = 360.
71,640 360
Cost of Goods Sold .................................................... Merchandise Inventory ....................................... To record cost of sales.
46,800
25
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56,000
36,400
15,800
12,000
114,000
74,100
72,000
46,800
318
Exercise 9-9 (concluded) Analysis component Cash sales would be preferable, however, often it is not convenient for customers. The inconvenience of cash might prevent customers from making purchases if that was the only means of payment accepted by LenCon. Credit sales allow customers to purchase on impulse. However, two disadvantages: receipt of cash by LenCon is delayed and credit sales require administrative time to monitor the timely collection from credit customers. Debit cards have the advantage of allowing customers to make impulse purchases but only if the cash balance is available in their bank account. Debit cards are also comparable to cash (no subsequent collection required) but the bank does charge a fee for this service although it is normally significantly less than the fee charged by banks for credit card transactions. Bank credit cards have the advantages of cash being collected by LenCon immediately (positive effect on cash flow) and customers are limited only to their credit card limit (not their bank account balance); customers are buying on credit but the risk of collection is transferred to the credit card company. The disadvantage of credit cards is the fee charged by the administering bank. LenCon will likely accept all forms of payment to enhance sales and in so doing recognize the costs and risks of each.
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Exercise 9-10 (25 minutes) 1. PELZER HOLDINGS Bank Reconciliation July 31, 2011
Bank statement balance ...................
$9,848
Book balance........................
$9,740
Add: Outstanding deposit........................
572
Bank error (Peltza cheque) ..........
560 $10,98 0
Deduct:
Deduct:
Outstanding cheques:
NSF — Jim Anderson ..........
240
#14: $ 600 #54:
140 ....................................
1,480
Adjusted bank balance......................
$9,500
2. July 31
Adjusted book balance ........ $9,500
Accounts Receivable – Jim Anderson ..................
240
Cash ............................................................................
240
To reinstate customer account.
Analysis component If the journal entry in (2) is not recorded, net income, liabilities, and owner’s equity would not be affected. Assets would be increased and decreased by the same amount causing a net change of zero.
Exercise 9-11 (25 minutes)
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MEDLINE SERVICE CO. Bank Reconciliation July 31, 2011 Bank statement balance ...................................
$10,332
Add: ..................................................... Deposit of July 31 ..................
Book balance of cash ....................................
$11,352
Add: 2,724
Error on Ch. No. 919 ........
9
$13,056 Deduct:............................................... Outstanding cheques ...........
$11,361 Deduct:
1,713
Bank service charge ........
18
Adjusted bank balance................. $11,343
Adjusted book balance ............
$11,343
Exercise 9-11 (concluded) b. July
31
Cash .......................................................................... Utilities Expense ................................................. To correct error.
9
31
Bank Service Charges Expense ................................ Cash ................................................................... To record bank service charges.
18
Analysis component If the journal entries in part (a) were not recorded, net income, assets, and owner’s equity would each be overstated by a net amount of $9 ($18 - $9 = $9); liabilities are not affected by the entries in (a).
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9
18
321
Exercise 9-12 (20 minutes) Bank Balance 1. Interest earned on the account. 2. Deposit made on September 30 after the bank was closed. 3. Cheques outstanding on August 31 that cleared the bank in September. 4. NSF cheque from customer returned on September 15 but not recorded by the company. 5. Cheques written and mailed to payees on September 30. 6. Deposit made on September 5 that was processed on September 8. 7. Bank service charge. 8. Cheques written and mailed to payees on October 5. 9. Cheque written by another depositor but charged against the company's account. 10. Principal and interest collected by the bank but not recorded by the company. 11. Special charge for collection of note in No. 10 on company's behalf. 12. Cheque written against the account and cleared by the bank; erroneously omitted by the bookkeeper.
Book Balance Must Add Deduct Add Deduct Adjust x Dr.
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Not Shown on the Reconciliation
x x x
Cr.
x
Cr.
x x x x x
Dr. x
Cr.
x
Cr.
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*Exercise 9-13 (15 minutes) Case X
Case Y
Case Z
Cash ...........................................................
$ 800
$ 910
$1,100
Short-term investments.....................
-0-
-0-
500
Accounts receivable ............................
-0-
990
800
Quick assets ...........................................
$ 800
$1,900
$2,400
Current liabilities .................................
$2,200
$1,100
$3,650
Acid-test ratio ........................................
0.36
1.73
0.66
Case Y exhibits the superior ability to meet short-term obligations as they come due. The acid-test ratio of 1.73 exceeds the common benchmark of 1.0. Cases X and Z fall short of the 1.0 benchmark.
Chapter 10 aaExercises
Receivables
Exercise 10-1 (20 minutes) Apr. 6
Cash .................................................................... Credit Card Expense ($9,200 .04) .................. Sales ............................................................
8,832.00 368.00
6
COGS .................................................................. Merchandise Inventory...............................
5,300.00
10
Accounts Receivable—Colonial ....................... Sales ............................................................
310.00
10
COGS .................................................................. Merchandise Inventory...............................
160.00
17
No entry required.
28
Cash ....................................................................
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9,200.00 5,300.00 310.00 160.00
5,370.40 322
323
Credit Card Expense ($5,480 × .02)................... Accounts Receivable—Colonial ................
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5,480.00
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Exercise 10-2 (25 minutes) 1. GENERAL LEDGER
Accounts Receivable Nov. 3 8,834 Nov. 19
Bal.
Sales Returns and Allowances
Sales 378
Nov. 3 8,834
8 2,500
8 2,500
11 1,466
11 1,466
28 5,212
28 5,212
17,634
18,012
Nov. 19
378
ACCOUNTS RECEIVABLE SUBLEDGER
ABC Shop Nov. 3 8,834
Colt Enterprises Nov. 8
2,500
28 5,212 Bal.
Red McKenzie Nov. 11 1,466 Bal.
Nov. 19
1,088
14,046
2. Subledger proof: ABC Shop ................................................................... Colt Enterprises ......................................................... Red McKenzie ............................................................ Balance of the Accounts Receivable account .........
$14,046 2,500 1,088 $17,634
Exercise 10-3 (15 minutes) a.Oct. 31
Allowance for Doubtful Accounts..................... Accounts Receivable—Gwen Rowe ..........
1,000
b. Dec. 9
Accounts Receivable—Gwen Rowe ................. Allowance for Doubtful Accounts .............
200
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1,000 200
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378
325
9
Cash .................................................................... Accounts Receivable—Gwen Rowe ..........
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200
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Exercise 10-4 (20 minutes) Dec. 31
Bad Debt Expense ............................................. Allowance for Doubtful Accounts ............. Expense = .005 × $1,750,000 = $8,750.
8,750
Feb. 1
Allowance for Doubtful Accounts..................... Accounts Receivable—Catherine Hicks ...
1,800
June 5
Accounts Receivable—Catherine Hicks .......... Allowance for Doubtful Accounts .............
1,800
5
Cash .................................................................... Accounts Receivable—Catherine Hicks ...
1,800
8,750
1,800 1,800 1,800
Exercise 10-5 (15 minutes) a.Dec. 31
Bad Debt Expense ............................................. Allowance for Doubtful Accounts ......... Accounts Receivable
3,615
Allowance for Doubtful Accounts 2,745 ?
Bal. 159,000 × 4% $ 6,360
b.Dec. 31
6,360
Bad Debt Expense ............................................. Allowance for Doubtful Accounts ......... Accounts Receivable
= 3,615 Adjustment Required Adjusted Balance
10,356
10,356
3,996 ?
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Unadjusted balance
Allowance for Doubtful Accounts Unadjusted balance
Bal. 159,000 × 4% $ 6,360
3,615
6,360
= 10,356 Adjustment Required Balance
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Exercise 10-6 (15 minutes) a) $345,000 b) c) d) e)
$356,000 $2,900 $170 $2,550
Exercise 10-7 (15 minutes) LISTEL Partial Balance Sheet
March 31, 2011 Assets Current assets: Cash..........................................................................................
$ 29,000
Accounts receivable...........................................................
$102,000
Less: Allowance for doubtful accounts ..................
2,100
99,900
Notes receivable, due November 30, 2011...............
17,000
Merchandise inventory ....................................................
65,000
Supplies ..................................................................................
4,500
Total current assets ...........................................................
$215,400
Note: Bad Debt Expense is an income statement account and is therefore not listed on the balance sheet. Notes Receivable due May 1, 2013, Building and Accumulated Amortization, Building are asset accounts shown on the balance sheet but they are not current assets.
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Exercise 10-8 (30 minutes) a. 2011 Dec. 31 Bad Debt Expense .......................................................
7,314
Allowance for Doubtful Accounts .......................................
7,314
To record estimate for uncollectible accounts; 492,500 – 4,900 = 487,600 x 1.5% = 7,314.
b. 2012
Accounts Receivable ...................................................
620,000
Sales ..............................................................................................
620,000
To record credit sales during 2012.
Cost of Goods Sold ..........................................................................
406,500
Merchandise Inventory .........................................................
406,500
To record cost of sales during 2012.
Cash ......................................................................................................
491,300
Sales Discounts ................................................................................
6,200
Accounts Receivable ............................................
497,500
To record collections less sales discounts.
Allowance for Doubtful Accounts ..............................
12,450
Accounts Receivable ..............................................................
12,450
To record the write-off of uncollectible accounts.
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c. 2012
Dec. 31 Bad Debt Expense ........................................................
9,207
Allowance for Doubtful Accounts ........................................
9,207
To record estimate for uncollectible accounts; 620,000 – 6,200 = 613,800 x 1.5% = 9,207.
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Exercise 10-8 (concluded) d.
Assets Current assets: Accounts receivable1 ...................................................................................
$180,050
Less: Allowance for doubtful accounts2..............................................
4,971
$175,079
OR $175,079
Accounts receivable (net) .................................................................................................
Calculations: 1.
2. Accounts Receivable
Bal. Dec 31/11
70,000
620,000
497,50 0
2012 sales
Allowance for Doubtful Accounts 2012 collections
900
2012 write-offs
Unadj.Bal. Dec 31/11
Adjustment 7,314
Dec 31/11
12,450 Bal. Dec 31/12
180,050 2012 writeoffs 12,45 0
8,214 Adj. Bal. Dec 31/11
Adjustment 9,207 Dec 31/12 4,971 Adj. Bal. Dec 31/12
Analysis component:
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The main advantage of the income statement approach is its simplicity. Like the balance sheet approach, it satisfies the generally accepted accounting principles of matching and conservatism. The main disadvantage is that it does not compensate for over or under estimations from year to year because it is not focused on the element that is uncollectible, namely, the accounts receivable.
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Exercise 10-9 (30 minutes) a. 2011 Dec. 31 Bad Debt Expense .....................................................
500
Allowance for Doubtful Accounts ..................................
500
To record estimate for uncollectible accounts; 70,000 x 2% = 1,400; 1,400 – 900 = 500.
b. 2012
Accounts Receivable ...............................................
620,000
Sales .........................................................................................
620,000
To record credit sales during 2012.
Cost of Goods Sold ..................................................
406,500
Merchandise Inventory ....................................................
406,500
To record cost of sales during 2012.
Cash ..........................................................................
491,300
Sales Discounts ...........................................................................
6,200
Accounts Receivable ........................................
497,500
To record collections less sales discounts.
Allowance for Doubtful Accounts ..........................
12,450
Accounts Receivable .........................................................
12,450
To record the write-off of uncollectible accounts.
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c. 2012 Dec. 31 Bad Debt Expense ...................................................
14,651
Allowance for Doubtful Accounts ..................................
14,651
To record estimate for uncollectible accounts; 180,050 x 2% = 3,601; 3,601 – 1,400 + 12,450 = 14,651.
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Exercise 10-9 (concluded) d. Assets Current assets:
Accounts receivable ..........................................................
$180,050
Less: Allowance for doubtful accounts ..........................................
3,601
$176,449
OR $176,449
Accounts receivable (net) ............................................................................................
Calculations: Accounts Receivable Bal. Dec 31/11
70,000
620,000
Allowance for Doubtful Accounts
2012 collection 497,50 s 0
900
2012 sales
500
2012 write-offs
Adjustment Dec 31/11
12,450 Bal. Dec 31/12
Unadj. Bal. Dec 31/11
180,050
1,400 2012 writeoffs 12,45 0
Adj. Bal. Dec 31/11
14,651 Adjustment Dec 31/12 3,601
Adj. Bal. Dec 31/12
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The main advantage of the balance sheet approach is that it adjusts the allowance for doubtful accounts to the estimated amount of uncollectibles. Like the income statement approach, it satisfies the generally accepted accounting principles of matching and conservatism. The main disadvantage is that it does require more effort in terms of calculations.
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Exercise 10-10 (30 minutes) a.
2011 Dec. 31 Bad Debt Expense ...........................................................
2,250
Allowance for Doubtful Accounts..............................
2,250
To record estimate for uncollectible accounts; (95,000 x 1% = 950) + (35,000 x 4% = 1,400) + (8,000 x 10% = 800) + (2,000 x 60% = 1,200) = 4,350; 4,350 – 2,100 = 2,250.
b. 2012 Dec. 31 Bad Debt Expense ...........................................................
39,010
Allowance for Doubtful Accounts ............................................
39,010
To record estimate for uncollectible accounts; (215,000 x 1% = 2,150) + (95,000 x 4% = 3,800) + (35,100 x 10% = 3,510) + (15,000 x 60% = 9,000) =
18,460; 18,460 – 4,350 + 24,900 = 39,010. c. Assets Current assets:
Accounts receivable .................................................................. $360,100 Less: Allowance for doubtful accounts ....................................................
18,460
$341,640
OR
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$341,640
Accounts receivable (net) ......................................................................................................
Calculations: Accounts Receivable Bal. Dec 31/11
2012 sales
140,000
1,240,0 00
995,0 00
Allowance for Doubtful Accounts 2012 collections
2,100
2012 write-offs
2,250
Unadj.Bal. Dec 31/11
Adjustment Dec 31/11
24,90 0 Bal. Dec 31/12
360,100
4,350 Adj. Bal. Dec 31/11 2012 write- 24,90 offs 0
39,010 Adjustment Dec 31/12 18,460 Adj. Bal. Dec 31/12
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Exercise 10-10 (concluded) Analysis component One of the ways to apply the balance sheet approach is to use an aging analysis of outstanding receivables. The main advantage of the aging analysis is that it adjusts the allowance for doubtful accounts to the estimated amount of uncollectible receivables based on a detailed analysis that considers the risk associated with the age of a receivable. Like the income statement approach, it satisfies the generally accepted accounting principles of matching and conservatism. The main disadvantage is that it does require more effort in terms of calculations. However, computerization of the accounting information system has negated that disadvantage. Exercise 10-11 (15 minutes) May 3
Bad Debt Expense ............................................. Accounts Receivable – Wilma Benz.......... To write-off an uncollectible receivable using the direct write-off method.
1,100
1,100
Analysis component: Using 2% of credit sales, bad debt expense would be $5,600 (280,000 × 2% = 5,600) for 2011 thereby decreasing net income by $4,500 more than the direct write-off method. Using 4% of outstanding accounts receivable would result in a bad debt expense of $2,940 (46,000 × 4% = 1,840 + 1,100 = 2,940) thereby decreasing net income by $1,840 more than the direct write-off method.
Exercise 10-12 (20 minutes) Mar. 21
Notes Receivable ............................................... Accounts Receivable—Bradley Brooks .... To record 6-month, 10% note to replace past-due account.
6,200.00
Sept. 21
Accounts Receivable—Bradley Brooks ........... Interest Revenue......................................... Notes Receivable ........................................ To record dishonoured note; $6,200 × 0 .10 × 6/12 = $310.00.
6,510.00
Dec. 31
Allowance for Doubtful Accounts..................... Accounts Receivable—Bradley Brooks .... To record write-off of Brooks’ account.
6,510.00
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6,200.00
310.00 6,200.00
6,510.00
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339
Exercise 10-13 (15 minutes) Oct. 31
Notes Receivable—Leann Grimes .................... Accounts Receivable—Leann Grimes ...... To record 6-month, 8% note to replace past-due account.
5,000.00
Dec. 31
Interest Receivable ............................................ Interest Revenue......................................... To record accrued interest; $5,000 × .08 × 2/12 = $66.67.
66.67
Apr. 30 Cash .................................................................... Receivable 66.67 To record collection of note and interest; $5,000 × .08 × 4/12 = $133.33.
5,200.00
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5,000.00
66.67
339
340
Exercise 10-14 (25 minutes) 2011 Dec. 16
Notes Receivable ............................................... Accounts Receivable—Carmel Karuthers ...... To record 60-day, 7% note to replace past-due account.
17,200.00
31
Interest Receivable ............................................ Interest Revenue......................................... To record accrued interest; $17,200 × 0.07 × 15/365 = $49.48.
49.48
31
Interest Revenue ................................................ Income Summary........................................ To record the closing of the Interest Revenue account.
49.48
Cash .................................................................... Interest Revenue......................................... Interest Receivable ..................................... Notes Receivable ........................................ To record collection of note plus interest; $17,200 x 0 .07 x 60/365 = 197.92; 197.92 – 49.48 = 148.44.
17,397.92
2012 Feb. 14
Mar. 2
Notes Receivable ...................................................... Accounts Receivable—ATW Company ........ To record 90-day, 8% note to replace past-due account.
49.48
49.48
148.44 49.48 17,200.00
8,000.00
17
Notes Receivable ............................................... Accounts Receivable—Leroy Johnson ......... To record 30-day, 9% note to replace past-due account.
3,200.00
May 31
Cash .................................................................... Interest Revenue......................................... Notes Receivable ........................................ To record collection of note plus interest; $8,000 × 0.08 × 90/365 = $157.81.
8,157.81
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17,200.00
8,000.00
3,200.00
157.81 8,000.00
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341
*Exercise 10-15 (20 minutes) Aug. 2
Accounts Receivable ......................................... Sales ............................................................ To record sales on credit.
6,295.00
2
Cost of Goods Sold ........................................... Merchandise Inventory ................................. To record cost of sales.
3,150.00
7
Cash .................................................................... Factoring Fee Expense ...................................... Accounts Receivable .................................... To record sale of accounts receivable; $18,770 × .015.
18,488.45 281.55
15
Cash .................................................................... Accounts Receivable .................................... To record collection from credit customers.
3,436.00
25
Cash .................................................................... Notes Payable ............................................. To record note; pledged $14,000 of accounts receivable as security for the loan.
10,000.00
6,295.00
3,150.00
18,770.00
3,436.00
10,000.00
Note: Accounts receivable in the amount of $14,000 are pledged as security for a $10,000 note payable to Fidelity Bank.
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*Exercise 10-16 (20 minutes) Jan. 20
Note Receivable ................................................. Accounts Receivable – Steve Soetart ....... Received note in settlement of account.
170,000.00
Feb. 19
Cash .................................................................... Interest Revenue......................................... Notes Receivable ........................................ Discounted a note receivable.
170,487.58
Principal of Note ................................................ $170,000.00 Add: Interest from Note ($170,000 × 9% × 90/365) Maturity Value .................................................... $173,772.60 Less: Bank Discount ($173,772.60 × 11.5% × 60/365) Proceeds............................................................. $170,487.58
170,000.00
487.58 170,000.00
3,772.60 3,285.02
*Exercise 10-17 (15 minutes) Part 1
Accounts Receivable Turnover
$7,280
= 13.43 times
($598 + $486)/2
Days’ Sales Uncollected
$598 x 365 = 29.98 days $7,280
Part 2 WestCon is not collecting its receivables as quickly as the industry average which is generally unfavourable. WestCon has more days of uncollected sales (or receivables) than the industry average, also unfavourable.
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Chapter 11 EXERCISES
Payroll Liabilities
Exercise 11-1 (15 minutes) Regular pay (172 hours @ $12.50) ........................... Overtime premium pay (12 hours @ $6.25) ............. Gross pay .................................................................. EI deduction ............................................................. CPP deduction........................................................... Income tax deduction ($151.00 + $201.30) .............. Total deductions ....................................................... Net pay .......................................................................
$ 41.61 95.70 352.30
$2,150.00 75.00 $2,225.00
489.61 $1,735.39
Exercise 11-2 (30 minutes) Deductions
Employee
Gross
EI
Pay
Premium
Income Taxes
Health
CPP*
Total Insurance Deductions
Net Pay
Hellena Chea
720.00
13.461
133.55
32.315
24.00
203.32
516.68
Joseph Lim
610.00
11.412
104.65
26.866
24.00
166.92
443.08
Dino Patelli
830.00
15.523
169.70
37.757
36.00
258.97
571.03
Sharl Qulnata
1,700.00
31.794
486.90
80.828
24.00
623.51
1,076.49
Totals
3,860.00
72.18
894.80
177.74
108.00
1,252.72
2,607.28
*$3,500 exemption ÷ 52 weeks = $67.31 exempt per week
1. $720 × 1.87% = $13.46
5. ($720 – $67.31) × 4.95% = $32.31
2. $610 × 1.87% = $11.41
6. ($610 – $67.31) × 4.95% = $26.86
3. $830 × 1.87% = $15.52
7. ($830 – $67.31) × 4.95% = $37.75
4. $1,700 × 1.87% = $31.79
8. ($1,700 – $67.31) × 4.95% = $80.82
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344
May
5
Office Salaries Expense............................................ Employees’ Income Taxes Payable ........... CPP Payable ............................................... Employees’ Health Insurance Payable ..... EI Payable ................................................... Salaries Payable .........................................
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3,860.00
894.80 177.74 108.00 72.18 2,607.28
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345
Exercise 11-3 (10 minutes) Deductions Employee
Gross Pay
EI
Pay
Income United
Premium Taxes
Total
Way
CPP
Distribution
Net Pay
Deductions
Office Salaries
Sales Salaries
Akerley, D.
1,900.00
35.53
421.65
80.00
87.39
624.57 1,275.43 1,900.00
Nesbitt, M.
1,260.00
23.56
218.60
50.00
55.71
347.87
912.13
1,260.00
Trent, F.
1,680.00
31.42
348.35
40.00
76.50
496.27 1,183.73
1,680.00
Vacon, M.
3,000.00
56.10
815.00 300.00 141.84
1,312.94 1,687.06
3,000.00
Totals
7,840.00
146.61 1,803.60 470.00 361.44
2,781.65 5,058.35 1,900.00 5,940.00
Exercise 11-4 (25 minutes) Deductions Gross
EI
Distribution
Canada
Income United Total Pay Premiu Savings Office Sales m Taxes Bonds CPP Way Deductions Net Pay Salaries Salaries
Employee
Pay
Crimson, L.
1,995.0 0
37.31 276.30 150.00 84.32 99.75
Long, M.
2,040.0 0
38.15 306.95
102.0 -0- 86.54 0
1,506.3 533.64 6
2,040.00
Morris, P.
2,000.0 0
37.40 295.70
100.0 -0- 84.56 0
1,482.3 517.66 4
2,000.00
Peterson, B.
2,280.0 0
42.64 305.75 200.00 98.42
1,519.1 9
2,280.00
Totals
8,315.0 1,184.7 353.8 415.7 0 155.50 0 350.00 4 5
114.0 0
647.68
760.81
1,347.3 2 1,995.00
5,855.2 2,459.79 1 1,995.00 6,320.00
Exercise 11-5 (25 minutes) Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
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346
Deductions
Employee
Gross Pay
EI Premiu Income m Taxes
Payment
Distribution
United Total Office CPP* Way Deductions Net Pay Salaries
Salaries
Crimson, L. 1,995.00
37.31
295.70 84.32
Long, M.
2,040.00
38.15
306.95 86.54 102.00
533.64 1,506.36
2,040.00
Morris, P.
2,000.00
37.40
295.70 84.56 100.00
517.66 1,482.34
2,000.00
Peterson, B. 2,350.00
43.95
380.50 101.89 117.50
843.84 1,506.16
2,350.00
Totals
99.75
Sales
8,385.00 156.81 1,278.85 357.31 419.25
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667.08 1,327.92 1,995.00
2,562.22 5,822.78 1,995.00
346
6,390.00
347
Exercise 11-6 (15 minutes) Monthly salary ........................................... CPP deducted ........................................... EI deducted ............................................... Income tax withheld .................................. Salary, net of deductions ......................... .................................................................... Monthly contribution ................................ Feb. 28
$2,050.00
$ 87.04 38.34 308.80 ×
0.02
434.18 $1,615.82 32.32
Salaries Expense ................................................................................................ 2,050.00 EI Payable .......................................................................................................
38.34
CPP Payable....................................................................................................
87.04
Employees’ Income Taxes Payable .......................................................
308.80
United Way Payable ....................................................................................
32.32
Salaries Payable ............................................................................................ 1,583.50
Exercise 11-7 (15 minutes) Mar. 24
Salaries Expense ................................................................................................ 65,950.00 EI Payable ........................................................................................................
1,233.27
CPP Payable ....................................................................................................
3,097.93
Employees’ Income Taxes Payable........................................................
28,439.95
Medical Insurance Payable .......................................................................
1,150.00
United Way Payable ....................................................................................
1,319.00
Salaries Payable ............................................................................................
30,709.85
Exercise 11-8 (10 minutes) Mar. 24
EI Expense (1,233.27 × 1.4) .......................................................................... 1,726.58 CPP Expense ........................................................................................................ 3,097.93 EI Payable ........................................................................................................
1,726.58
CPP Payable ....................................................................................................
3,097.93
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348
Exercise 11-9 (10 minutes) Apr. 15
EI Payable (1,233.27 + 1,726.58) ................................................................ 2,959.85 CPP Payable (3,097.93 x 2) ............................................................................ 6,195.86 Employees’ Income Taxes Payable ............................................................. 28,439.95 Cash ...................................................................................................................
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37,595.66
348
349
Exercise 11-10 (15 minutes) 1. May 5
2.
EI Expense............................................................ CPP Expense ........................................................ EI Payable ($81.06 × 1.4) .............................. CPP Payable .................................................
101.05 177.74
101.05 177.74
5Benefits Expense....................................................... 494.00 Employees’ Health Insurance Payable ....... Employees’ Retirement Program Payable ..
108.00 386.00
Exercise 11-11 (20 minutes) Retirement Fund Health CPP Contribution Doherty
EI Contribution
Contributions Insurance
($36,000 – 3,500) × 4.95% = $1,608.75$36,000 × 1.87% =
Fane ......
1,910.70
729.30
6,100.00
1,440.00
Kahan...
1,910.70
729.30
5,900.00
1,440.00
Martin .. ($37,000 – 3,500) × 4.95% = 1,658.25$37,000 × 1.87% = Poon......
1,910.70
Totals ...
$8,999.10
691.90
729.30
4,800.00
3,700.00 1,44 1,440.00
$3,553.00$24,100.00 $7,200.00
Payroll taxes and fringe benefits as a percentage of salaries: $8,999.10 + ($3,553.00 × 1.4) + $24,100 + $7,200 = 18.79% $241,000 Exercise 11-12 (20 minutes) Apr. 30 Salaries Expense ($2,080 × 12)...................................................
24,960.00
EI Payable ($38.90 × 12) ..........................................................
466.80
CPP Payable ($88.52 × 12) ......................................................
1,062.24
Employees’ Income Taxes Payable (315.70 × 12) ..........
3,788.40
Salaries Payable ...........................................................................
19,642.56
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349
350
30
EI Expense ($466.80 × 1.4) ..........................................................
653.52
CPP Expense .......................................................................................
1,062.24
Benefits Expense – Retirement Program ................................
1,996.80
Benefits Expense – Medical Insurance ($50 × 12) ..............
600.00
EI Payable .......................................................................................
653.52
CPP Payable ...................................................................................
1,062.24
Retirement Program Payable .................................................
1,996.80
Medical Insurance Payable ......................................................
600.00
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351
Exercise 11-13 (30 minutes) Jan. 31
Benefits Expense ....................................................... Estimated Vacation Payable ..............................
22,507
22,507
$ 96,000 × (2/50) = $ 3,840 224,0001 × (4/48) = 18,667 $320,000 $22,507 1. 320,000 x 70% = 224,00
Chapter 8
Accounting Information Systems
Questions 1. As a purchasing agent, Greg Timko will make daily use of the purchases journal and the inventory and accounts payable subledgers. He might discuss with personnel from other areas of the store the other journals and subledgers as his area impacts them or vice versa: sales journal, cash disbursements journal, and cash receipts journal along with the accounts receivable subledger. 2. Four types of transactions recorded in separate special journals are: (a) sales on credit, (b) purchases on credit, (c) cash receipts, and (d) cash disbursements. 3. Daily recording and posting of credit sales and cash receipts from customers provides up-to-date information used in decisions about granting credit to customers. Also, up-to-date account balances are needed if customers inquire about the amount of their balances. 4. Both kinds of credits should not be placed in the same column because the sum of the credits to the customer accounts must be posted to the Accounts Receivable controlling account. Placing these credits in a separate column makes it possible to post the column total to the controlling account. 5. The double posting does not cause the trial balance to be out of balance because only one credit is posted to the General Ledger. 6. The initial and page number of the journal from which the amount was posted is entered in the Posting Reference column of the ledger account.
QUICK STUDY
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351
352
Quick Study 8-1 1. 2. 3. 4.
P AR AR AP
Quick Study 8-2 Input (I) or Output (O) 1.
I
2.
I
3.
O
4.
O
5.
I
6.
O
7.
O
8.
I
Quick Study 8-3 a.
Sales Journal
b.
Purchases Journal
c.
Cash Disbursements Journal
d.
Cash Disbursements Journal
e.
Purchases Journal
f.
Cash Receipts Journal
g.
Cash Receipts Journal
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353
Quick Study 8-4 Nov. 12
Automobiles ............................................... Capital, Jesse Cooke .......................... The owner contributed an automobile to the business.
15,000
19
Sales Returns and Allowances ................... Accounts Receivable—R. Wyder ........ Customer returned merchandise.
150
19
Merchandise Inventory ................................ Cost of goods sold ............................... Merchandise returned to inventory.
95
28
Accounts Payable—The Ringdol Company 170 Merchandise Inventory ....................... Returned defective merchandise.
15,000
150
95
170
Quick Study 8-5 Debit (DR), Credit (CR), or No Effect (NE) 1. 2. 3. 4. 5. 6. 7.
DR NE NE CR NE CR NE
Quick Study 8-6 Debit (DR),
Credit (CR), or No Effect (NE) 1. 2. 3. 4. 5. 6. 7.
CR NE CR NE DR DR NE
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354
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
Quick Study 8-7
Sales Journal
Page 1
Accounts Receivable Dr. Sales Cr.
Cost of Goods Sold Dr. Merchandise Inventory Cr.
1103
3,000
2,040
10 Willis Company
1104
10,800
7,344
25 Ellton Kingston
1105
7,400
5,032
Date
Account Debited
Invoice Number
PR
2011 Mar. 3 T. Edson
Quick Study 8-8
Cash Receipts Journal
Date
Account Credited
PR
Explanation
Sales Discount Cash Dr. Dr.
Page 1
Accounts Receivable Cr.
2011 Mar. 18
T. Edson
Invoice #1103
2,940
60
3,000
Sales Cr.
Other Accounts Cr.
Cost of Goods Sold Dr. Merchandise Inventory Cr.
639
355
30
Willis Company
Invoice #1104
31
ABC Company
Cash sale
10,800 6,200
10,800 6,200
4,216
356
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. 640
Quick Study 8-9 Purchases Journal
Date
Account Credited
Date of Invoice
Terms
PR
Page 1
Accounts Payable Cr.
Merchandise Inventory Dr.
Office Supplies Dr.
Other Accounts Dr.
2011 Mar. 2 Tex Company
Mar
2
3/10, n20
4,800
4,800
12 Littleton
12
2/15, n30
14,000
14,000
13 Worsley
13
2/15, n45
9,400
9,400
Quick Study 8-10 Fundamental Accounting Principles, Twelfth Canadian Edition
Cash Disbursements Journal Date
Ch. No.
Payee
Account Debited
PR
Cash Cr.
Page 1
Merchandise Inventory Cr.
Other Accounts Dr.
Accounts Payable Dr.
2011 Mar. 14
101
Tex Company
Tex Company
27
102
Littleton
Littleton
4,800 13,720
4,800 280
14,000
357
31
103
Thorn Real Estate
Rent Expense
6,500
6,500
358
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EXERCISES Exercise 8-1 (15 minutes)
Sales Journal Date
Account Debited
Invoice Number
PR
Page 1
Accounts Receivable Dr. Sales Cr.
Cost of Goods Sold Dr. Merchandise Inventory Cr.
2011 Feb. 7
J. Eason
5704
1,150
700
12
P. Lathan
5705
320
170
25
S. Summers
5706
550
300
*Exercise 8-2 (15 minutes) SALES JOURNAL
Page 2 Invoice
Date
Account Debited
Numbe r
A/R Dr. PR
Sales Cr.
2011 Feb .
7 J. Eason
5704
1,150
12 P. Lathan
5705
320
25 S. Summers
5706
550
Exercise 8-3 (20 minutes) 641
359
Cash Receipts Journal
Date
Account Credited
PR
Explanation
Cash Dr.
Sales Discou nt Dr.
Page 1
Accounts Receivabl e Cr.
Sales Cr.
Other Account s Cr.
Cost of Goods Sold Dr. Merchandise Inventory Cr.
2011 Sept. 9
Notes payable
Note to bank
5,500
5,500
13
Dale Trent, capital
Owner investment
7,000
7,000
18
Sales
Cash sale
27
J. Namal
Invoice, Sept. 7
460 1,764
460 36
1,800
280
360
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*Exercise 8-4 (20 minutes) CASH RECEIPTS JOURNAL Account Date
Credited
Explanation
PR
Page 2
Sales
Accts.
Other
Cash
Disc.
Rec.
Sales
Accts.
Debit
Debit
Credit
Credit
Credit
2011 Sept .
9 Notes payable
Note to bank
5,500
5,500
1 Dale Trent, 3 capital
Owner investment
7,000
7,000
1 Sales 8
Cash sale
2 J. Namal 7
Invoice, Sept. 7
Fundamental Accounting Principles, Twelfth Canadian Edition
Exercise 8-5 (20 minutes)
460 1,764
460 36
1,800
361
Purchases Journal
Date
Account Credited
Date of Invoice
Terms
PR
Page 1
Accounts Payable Cr.
Merchandi se Inventory Dr.
8,100
Office Supplies Dr.
Other Accounts Dr.
2011 July
1
Angler, Inc.
Ju l
1
n/30
8,100
14 Store Supplies/ Steck Company
Ju l
14
2/10, n/30
240
17
Ju l
17
n/30
2,600
Marten Company
240 2,600
Exercise 8-6 (20 minutes) PURCHASES JOURNAL
Page 2 Accounts
Date of Date
Account Credited
Invoic e
Terms
PR
Office
Other
Payable
Purchases
Supplie s
Accounts
Credit
Debit
Debit
Debit
2011 July
1 Angler, Inc.
July 1
14 Store Supplies/Steck Company July
n/30 2/10,n/30
8,100 240
8,100 240
362
14 17 Marten Company
July 17
n/30
2,600
2,600
363
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
Exercise 8-7 (20 minutes) Cash Disbursements Journal Ch. No.
Date
Payee
Account Debited
PR
Cash Cr.
Page 1
Merchandise Inventory Cr.
Other Accounts Dr.
Accounts Payable Dr.
2011 Mar. 9
210
Narlin Corp.
Store Supplies
900
900
17
211
City Bank
Notes Payable
3,000
3,000
29
212
LeBaron
LeBaron
6,860
31
213
E. Brandon
Salaries Expense
3,400
31
214
Pace, Inc.
Pace, Inc.
5,500
140
7,000 3,400 5,500
*Exercise 8-8 (20 minutes) CASH DISBURSEMENTS JOURNAL Ch. Date
No.
Payee
Account Debited
PR
Other
Cash
Discoun t
Accts.
Payable
Credit
Credit
Debit
Debit
2011 Mar.
Page 2
Purchas e
9 21 0
Narlin Corp.
Store Supplies
900
900
1 21
City Bank
Notes Payable
3,000
3,000
Accts.
643
364
7 1 2 21 9 2
LeBaron
LeBaron
6,860
3 21 1 3
E. Brandon
Salaries Expense
3,400
3 21 1 4
Pace, Inc.
Pace, Inc.
5,500
140
7,000 3,400 5,500
365
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. 644
Exercise 8-9 (30 minutes) Part 1 – Wilson Purchasing
Purchases Journal
Date
Account Credited
Date of Invoice
Terms
PR
Page 1
Accounts Payable Cr.
Merchandi se Inventory Dr.
30,000
30,000
Office Supplies Dr.
Other Accounts Dr.
2011 May 11
Hostel Sales
May 11
3/10, n/90
Cash Disbursements Journal Ch. No.
Date
Payee
Account Debited
PR
Cash Cr.
Page 1
Merchandise Inventory Cr.
Other Accounts Dr.
Accounts Payable Dr.
2011 Fundamental Accounting Principles, Twelfth Canadian Edition
May 11
84
Express Shipping
Merchandise Inv.
20
85
Hostel Sales
Hostel Sales
335 27,9361
General Journal Date
Account Titles and Explanations
12 Accounts Payable – Hostel Sales .......................
864
Page: 1
PR
Debit
2011 May
335
1,200
Credit
28,800
366
Merchandise Inventory .......................................... To record return of merchandise.
Calculations: 1. 30,000 – 1,200 = 28,800; 28,800 x 3% = 864; 28,800 – 864 = 27,936.
1,200
367
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
Exercise 8-9 (concluded) Part 2 – Hostel Sales Sales Journal Date
Invoice Number
Account Debited
PR
Page 1
Accounts Receivable Dr. Sales Cr.
Cost of Goods Sold Dr. Merchandise Inventory Cr.
30,000
20,000
2011 May 11
Wilson Purchasing
1601
Cash Receipts Journal
Date
Account Credited
PR
Explanation
Cash Dr.
Page 1
Sales Discou nt Dr.
Accounts Receivabl e Cr.
864
28,800
2011 May 21
Wilson Purchasing
Wilson Purchasing
27,93 61
General Journal Date
Account Titles and Explanations
Page: 1
PR
Debit
2011 May
12 Sales Returns and Allowances ...........................
1,200
Credit
Sales Cr.
Other Account s Cr.
Cost of Goods Sold Dr. Merchandise Inventory Cr.
645
368
Accounts Receivable – Wilson Purchasing ......
1,200
To record sales return.
12 Merchandise Inventory ............................................. Cost of Goods Sold ................................................... To record cost of merchandise returned to inventory.
Calculations: 1. 30,000 – 1,200 = 28,800; 28,800 x 3% = 864; 28,800 – 864 = 27,936.
800 800
369
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. 646
*Exercise 8-10 (30 minutes) Part 1 – Wilson Purchasing PURCHASES JOURNAL
Page 2 Accounts Date
Date
Account Credited
Invoic
o f Terms
e
PR
Office
Other
Payable
Purchases
Supplie s
Account s
Credit
Debit
Debit
Debit
30,000
30,000
2011 Ma
11 Hostel Sales y
May
3/10,n/90 1 1
CASH DISBURSEMENTS JOURNAL Fundamental Accounting Principles, Twelfth Canadian Edition
Ch. Date
No.
Payee
Account Debited
PR
Page 2
Purchas e
Other
Accts.
Cash
Discoun t
Accts.
Payable
Credit
Credit
Debit
Debit
2011 May
1 84 Express Transportation-In 1 Shipping 2 85 Hostel Sales 0
A/P – Hostel Sales
335 27,936
335 864
28,800
370
General Journal Date
Account Titles and Explanations
Page: 1
PR
Debit
Credit
2011 May
12 Accounts Payable – Hostel Sales ....................... Purchase Returns and Allowances .................... To record return of merchandise purchased.
1,200 1,200
371
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*Exercise 8-10 (concluded) Part 2 – Hostel Sales SALES JOURNAL
Page 2 Invoice
Date
Account Debited
Numbe r
A/R Dr. PR
Sales Cr.
2011 Ma y
11 Wilson Purchasing
30,000
1601
CASH RECEIPTS JOURNAL Account Date
Credited
Explanation
PR
Accts.
Cash
Disc.
Rec.
Sales
Accts.
Debit
Debit
Credit
Credit
Credit
27,936
864
28,800
2011 May
2 Wilson 1 Purchasing
Sale of May 11
General Journal Date
Account Titles and Explanations
Page: 1
PR
Debit
2011 May
Page 2
Sales
12 Sales Returns and Allowances ...........................
1,200
Credit
Other
647
372
Accounts Receivable – Wilson Purchasing ...... To record sales return.
1,200
373
Exercise 8-11 (10 minutes) The June 5 purchase would have been recorded in the Purchases Journal and the June 14 payment would have been recorded in the Cash Disbursements Journal. The error in journalizing the June 14 transaction should be discovered in the process of crossfooting the Cash Disbursements Journal at the end of the month. Exercise 8-12 (10 minutes) a.
When the schedule of accounts payable is prepared.
b.
When crossfooting the Purchases Journal.
c.
When the trial balance is prepared.
d.
When the schedule of accounts payable is prepared.
e.
When the schedule of accounts payable is prepared.
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373
374
Exercise 8-13 (30 minutes) Part 1 ACCOUNTS RECEIVABLE SUBLEDGER Sanders Farrell May 17
1,700 May 20
Bal.
1,200
Don Holland 500 May 10 3,880 25 680
Brad Smithers May 6 5,760
Bal. 4,560
Part 2 GENERAL LEDGER Accounts Receivable May 31
12,020 May 20
Bal.
11,520
Sales Returns and Allowances
Sales 500
May 3112,020
ay 20
M 500
Part 3 VALUE-MART GOODS Schedule of Accounts Receivable May 31, 2011 Sanders Farrell ...................................................
$ 1,200
Dan Holland ...............................................................................
4,560
Brad Smithers .....................................................
5,760
Total accounts receivable ...............................
$11,520
Accounts Receivable Controlling Account
Total debit ............................................................ Credit for return ................................................. Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
$12,020 (500)
374
375
Balance as of May 31, 2011 ............................
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
$11,520
375
376
*Exercise 8-14 (35 minutes)
GENERAL LEDGER Cash 38,878
Accounts Payable 23,044
1,500
23,200
Sales Discounts 472
18,300
Accounts Receivable 26,200
Notes Payable
600
Purchases 9,000
23,200
23,600
Prepaid Insurance
Purchase Returns and Allowance
Sales
1,700
26,200
1,500
5,750
Sales Returns and Allowances
Store Equipment 3,500
1,000
Purchase Discounts
600
456
ACCOUNTS RECEIVABLE SUBLEDGER Jack Hertz 7,400
Trudy Stone 600
16,800
Dave Waylon 16,800
2,000
6,800
ACCOUNTS PAYABLE SUBLEDGER Grass Corp. 1,500
McGrew Company 10,800
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
3,400
Sulter, Inc. 9,000
9,000
376
377
9,300
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377
378
*Exercise 8-15 (30 minutes) Part 1 ACCOUNTS RECEIVABLE SUBLEDGER Adrian Carr Jan. 8
Lisa Mack
7,076
Jan. 14
Jay Newton
23,780
Kathy Olivias
Jan. 2
4,176
Jan. 10
15,544
29
8,468
20
12,992
Part 2 Jan. 31
Accounts Receivable ........................................... Sales ............................................................ GST Payable ................................................ PST Payable ................................................
72,036
62,100 3,726 6,210
Part 3
GENERAL LEDGER Accounts Receivable Jan. 31
Sales
72,036
62,100 Jan. 31
Part 4 SKILLERN COMPANY Schedule of Accounts Receivable January 31, 2011
Adrian Carr .........................................
$ 7,076
Jay Newton ..................................................
12,644
Kathy Olivas ...............................................
28,536
Lisa Mack .....................................................
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
23,780
378
379
Total accounts receivable ......................
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
$72,036
379
380
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*Exercise 8-16 (20 minutes)
Page X
Sales Journal
Date
Account Debited
Invoice No.
PR
A/R Dr
PST Payable CR
GST Payable CR
COGS DR Merchandise Inventory CR
Sales Cr
2011
Aug. 5 11
Jay Smith
50
50,160
3,520
2,640
44,000
21,000
Dee Oliver
51
38,760
2,720
2,040
34,000
16,200
Cash Receipts Journal
Date
Account Credited
Explanatio n
PR
Other Account s CR
A/R CR
PST Payabl e CR
Page X
GST Payabl e CR
Sale s CR
Cash DR
Sales Disc Dr
2011 Fundamental Accounting Principles, Twelfth Canadian Edition
Aug. Jay Smith 20 21 Dee Oliver
Inv. 50
50,16 0
50,160
Inv. 51
38,76 0
38,420
Purchases Journal Date
Account Credited
Terms
PR
A/P CR
340*
Page X Merchandise Inventory DR
Other Accounts DR
GST Rec’ble DR
COGS/DR Merchandise Inventory/ CR
381
2011
Aug. 1
Arden Sheet Metal
2/10, n/30
10,600
7
JayCee Equipment
n/ 30
6,360
Date
Ch #
Account Debited
10,000
Cash Disbursements Journal Other Accounts GST Rec’ble PR DR DR
600 6,000
360
Page X A/P DR
Merchandis e Inventory CR
Cash CR
2011
Aug. 10
28
A/P – Arden Sheet Metal
*Discount on sales amount only
10,600
200
10,400
382
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
*Exercise 8-17 (20 minutes) SALES JOURNAL
Date 2011 Aug.
Invoice Number
Account Debited 5 Jay Smith 11 Dee Oliver
PR
50 51
Date Account Credited Explanation 2011 Aug.20 A/R – Jay Smith Inv. 50 21 A/R – Dee Oliver Inv. 51
PR
Other Accts. Credit
Page X Accts. Rec. Debit
PST Payable Credit
50,160 38,760
3,520 2,720
CASH RECEIPTS JOURNAL Accts. PST GST Rec. Payable Payable Credit Credit Credit
Date 2011
Account Credited 1 Arden Sheet Metal 7 JayCee Equipment
Ch. No.
Aug.10 28
Payee A/P – Arden
Date of Invoice Aug. 1 Aug. 7
Account Debited Arden Sheet Metal
Terms 2/10,n/30 n/30
Sales Credit
2,640 2,040
44,000 34,000
Page X Sales Credit
50,160 38,760
Cash Debit
Sales Discount Debit
50,160 38,420
PURCHASES JOURNAL
Date 2011 Aug.
GST Payable Credit
PR
340
Page X Accts. Payable Credit 10,600 6,360
CASH DISBURSEMENTS JOURNAL Other GST Accts. Rec’ble PR Debit Debit
Purchases Debit
Other Accounts Debit
GST Rec’ble Debit
10,000
600 360
6,000 Page X Accts. Payable Debit 10,600
Pur. Disc. Credit 200
Cash Credit 10,400
653
383
PROBLEMS Problem 8-1A (20 minutes) Date
Special Journal
Subledger
S
AR/MI
2 Defective merchandise sold on March 1 was returned by the customer. It was scrapped.
G
AR
3 Purchased office equipment on credit.
P
AP
CR
AR
10 Received a credit memorandum from the supplier regarding defective equipment purchased on March 3.
G
AP
14 Sold merchandise for cash.
CR
MI
P
AP/MI
17 Paid the balance owing regarding the March 3 transaction.
CD
AP
18 Purchased merchandise inventory for cash.
CD
MI
21 Paid for the merchandise purchased on March 16.
CD
AP/MI
22 Sold old equipment for cash.
CR
NE
30 Paid salaries for the month of March.
CD
NE
30 Accrued utilities for the month of March.
G
A/P
30 Closed the credit balance in the income summary to capital.
G
NE
Transaction
Mar. 1 Sold merchandise on credit.
5 Received payment regarding the March 1 sale.
16 Purchased merchandise inventory on credit; terms 1/5, n/30.
Copyright © 2011 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
383
384
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
Problem 8-2A (40 minutes) Sales Journal
Date
Account Debited
Invoice No.
Page 1
COGS Dr. PR
A/R Dr. Sales Cr.
Merchandise Inventory Cr.
2011 Apr. 2 Tim Bennett
306
35,000
22,750
311
42,000
27,300
16 Wynne Walsh
312
14,000
9,100
24 Brian Kennedy
313
18,000
11,700
5 Brian Kennedy
Cash Receipts Journal
Explanatio n
Cash Dr.
Inv. 307310
15,000
12 A/R – Tim Bennett
Inv. 306
34,300
20 A/R – Kennedy
Brian
Inv. 311
42,000
42,000
27 A/R – Wynne Walsh
Inv. 312
11,000
11,000
Date
Account Credited
PR
Sales Disc Dr.
Page: 1
2011 Apr. 3 Sales (cash sales)
A/R Cr.
Sales Cr.
15,000 700
35,000
Other Accounts Cr.
COGS/Dr. Merchandi se Inventory/ Cr.
9,750
655
385
Purchases Journal Date
Account Credited
Date of Invoice
Terms
PR
Page 1
A/P Cr.
Merchandise Inventory Dr.
Office Supplies Dr.
Other Accounts Dr.
2011 Apr. 4
Wallace Brothers
Apr. 4
1/10, n/30
48,000
48,000
11
McKinley & Sons
Apr. 11
n/30
56,000
56,000
Zardon Co. —
Apr. 23
1/15, n/30
3,800
23
Equip.
3,800
386
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Problem 8-2A (concluded) Cash Disbursements Journal
Date
Ch #
Account Debited
PR
Cash Cr.
Page 1
Merchandi se Inventory Cr.
Other Accounts Dr.
A/P Dr.
2011 Apr. 9
620
Office Supplies
230
13
621
Wallace Brothers
43,3621
26
622
McKinley & Sons
56,000
30
623
Salaries
36,000
230 438
43,800 56,000 36,000
Calculation: 1. 48,000 – 4,200 = 43,800 Dr to A/P; 43,800 x 1% = 438; 43,800 – 438 = 43,362 Cr to Cash Fundamental Accounting Principles, Twelfth Canadian Edition
General Journal Date
Account Titles and Explanations
Page: 1
PR
Debit
Credit
2011 Apr.
6 Accounts Payable – Wallace Brothers ............... Merchandise Inventory ..........................................
4,200 4,200
387
To record return of defective merchandise.
19 Sales Returns and Allowances ................................. Accounts Receivable – Wynne Walsh ............... To record allowance granted regarding defective merchandise.
3,000 3,000
388
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
Problem 8-3A (40 minutes)
Note: Since posting to the General Ledger was not a requirement in this problem, posting references are shown for values posted to the subledgers only.
Part 3 Sales Journal
Date
Account Debited
Page 3
Cost of Goods Sold Dr.
Invoice No.
PR
A/R Dr. Sales Cr.
Merchandise Inventory Cr.
2011 Apr. 3 Linda Hobart
760
5 Paul Abrams
761
11 Kelly Schaefer
762
13 Linda Hobart
763
3,000
1,800
8,000
4,500
9,500
5,000
4,100
2,400
Cash Receipts Journal
Date
Account Credited
PR
Sales Disc Dr.
Explanation
Cash Dr.
Sale of Apr. 3
2,940
60
3,000
Sale of Apr. 5
7,840
160
8,000
2011 Apr. 13 Linda Hobart 14 Paul Abrams
Page: 3
A/R Cr.
Sales Cr.
Other Account s Cr.
COGS Dr. Merchandi se Inventory Cr.
657
16 Sales
Cash sales
389
50,840
50,840
28,000
390
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Problem 8-3A (continued) PURCHASES JOURNAL Date 2011 Apr. 2 3 9
Account Credited
Date of Invoice
Terms
Baskin Company Eau Claire Inc. Store Equip./Frank’s Supply
Apr 2 Apr 2 Apr 9
2/10,n/60 n/10 EOM n/10 EOM
Page 3
Accts. Payable Credit
PR
Merchandise Inventory Debit
13,300 1,380 11,125
Office Supplies Debit
13,300
1,380
CASH DISBURSEMENTS JOURNAL Ch. No.
Date 2011 Apr. 4 587 12 588 16 589
The Record Baskin Company Payroll
Account Debited
Fundamental Accounting Principles, Twelfth Canadian Edition
6
PR
Advertising Expense Baskin Company Sales Salaries Expense
GENERAL JOURNAL Account Titles and Explanations
Date 2011 Apr.
Payee
Accounts Payable—Eau Claire Inc. ........................... Office Supplies................................................... Returned office supplies.
999 13,034 9,750
PR
Debit
85
266
Page 3 Credit
85
11,125 Page 3
Merchandise Inventory Credit
Cash Credit
Other Accts. Debit
Other Accts. Debit 999 9,750
Accts. Payable Debit 13,300
391
Problem 8-3A (concluded) Parts 1, 3 ACCOUNTS RECEIVABLE SUBLEDGER Paul Abrams Explanation
Date
PR
Debit
Credit
Balance
2011 Apr.
5
S3
1 4
CR3
8,000
8,000 8,000
0
Linda Hobart Explanation
Date
PR
Debit
Credit
Balance
2011 Apr.
3
S3
1 3
CR3
1 3
S3
3,000
3,000 3,000
4,100
0 4,100
Kelly Schaefer Explanation
Date
PR
Debit
Credit
Balance
2011 Apr.
1 1
S3
9,500
9,500
Parts 2, 3 ACCOUNTS PAYABLE SUBLEDGER Frank’s Supply Date
Explanation
PR
Debit
Credit
Balance
2011 Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
391
392
Apr.
9
P3
11,125
11,125
Baskin Company Explanation
Date
PR
Debit
Credit
Balance
2011 Apr.
2
P3
1 2
CD3
13,300 13,300
13,300 0
Sprocket Company Explanation
Date
PR
Debit
Credit
Balance
Debit
Credit
Balance
2011
Eau Claire Inc. Explanation
Date
PR
2011 Apr.
3
P3
6
G3
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1,380 85
1,380 1,295
392
393
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Problem 8-4A (70 minutes) Parts 2, 3, 4 Sales Journal
Page 3
Cost of Goods Sold Dr.
Fundamental Accounting Principles, Twelfth Canadian Edition
Invoice No.
PR
Apr. 3 Linda Hobart
760
3,000
1,800
5 Paul Abrams
761
8,000
4,500
11 Kelly Schaefer
762
9,500
5,000
13 Linda Hobart
763
4,100
2,400
27 Paul Abrams
764
3,070
1,600
27 Kelly Schaefer
765
5,700
3,000
33,370
18,300
(106/413)
(502/119)
Date
Account Debited
A/R Dr. Sales Cr.
Merchandise Inventory Cr.
2011
30 Totals
Cash Receipts Journal
Date 2011
Account Credited
PR
Explanation
Cash Dr.
Sales Disc Dr.
Page: 3
A/R Cr.
Sales Cr.
Other Account s Cr.
COGS Dr. Merchandi se Inventory Cr.
394
Apr. 13 Linda Hobart
Sale of Apr. 3
2,940
60
3,000
14 Paul Abrams
Sale of Apr. 5
7,840
160
8,000
16 Sales 18
L.T. Notes Payable
20 Kelly Schaefer 23 Linda Hobart 30 Sales 30 Totals
25 1
Cash sales
50,840
Note to bank
50,000
50,840 50,000
Sale of Apr. 11
9,310
190
9,500
Sale of Apr. 13
4,018
82
4,100
Cash sales
70,975 195,923 (101)
28,000
70,975 492 (415)
24,600 (106)
121,815 (413)
37,000 50,000 (X)
65,000 (502/119)
395
Copyright © 2011 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
Problem 8-4A (continued)
PURCHASES JOURNAL Date 2011 Apr. 2 3 9 17 20 25
Account Credited
Date of Invoice
Terms
Baskin Company Eau Claire Inc. Store Equip./Frank’s Supply Sprocket Company Store Supplies/Frank’s Supply Baskin Company
Apr 2 Apr 2 Apr 9 Apr 16 Apr 19 Apr 24
2/10,n/60 n/10 EOM n/10 EOM 2/10,n/30 n/10 EOM 2/10,n/60
Page 3
Accts. Payable Credit
PR 165/ 125/
30 Totals
Merchandise Inventory Debit
13,300 1,380 11,125 12,750 730 10,375
13,300
49,660 (201)
36,425 (119)
Office Supplies Debit 1,380
12,750
Date 2011 Apr. 4 12 16 26 30 30
587 588 589 590 591
Payee The Record Baskin Company Payroll Sprocket Company Payroll Totals
Account Debited Advertising Expense Baskin Company Sales Salaries Expense Sprocket Company Sales Salaries Expense
PR 655 621 621
Cash Credit 999 13,034 9,750 12,1031 9,750 45,636 (101)
11,125 730
10,375 1,380 (124)
CASH DISBURSEMENTS JOURNAL Ch. No.
Other Accts. Debit
11,855 (X) Page 3
Merchandise Inventory Credit 266 247 513 (119)
Other Accts. Debit 999 9,750 9,750 20,499 (X)
Calculation: 1. $12,750 – $400 credit memorandum = $12,350; $12,350 x 2% = $247; $12,350 - $247 = $12,103
Accts. Payable Debit 13,300 12,350* 25,650 (201)
661
396
Problem 8-4A (continued) GENERAL JOURNAL Account Titles and Explanations
Date 2011 Apr.
PR
Page 3 Credit
Debit
6
Accounts Payable—Eau Claire Inc. ........................... Office Supplies ................................................... Returned office supplies.
201/ 124
85
23
Accounts Payable—Sprocket Company...................... Merchandise Inventory ....................................... Returned merchandise.
201/ 119
400
85
400
Parts 1, 2, 3, 4 GENERAL LEDGER Cash
Date
Explanation
Acct. No. 101
PR
Debit
Credit
Balance
2011 Mar.
3 Balance Forward 1
167,000
Apr.
3 0
CR3
3 0
CD3
195,923 45,636
Accounts Receivable
Date
Explanation
362,923 317,287
Acct. No. 106
PR
Debit
3 0
S3
33,370
3 0
CR3
Credit
Balance
2011 Apr.
24,600
Merchandise Inventory
Date
Explanation
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
33,370 8,770
Acct. No. 119
PR
Debit
Credit
Balance
396
397
2011 Mar.
3 Balance Forward 1
95,000
Apr.
2 3
G3
400
94,600
3 0
S3
18,300
76,300
3 0
CR3
65,000
11,300
3 0
P3
3 0
CD3
36,425
47,725 513
Office Supplies Date
Explanation
47,212
Acct. No. 124 PR
Debit
Credit
Balance
2011 Apr.
3
P3
6
G3
1,380
1,380 85
1,295
Problem 8-4A (continued) Store Supplies Explanation
Date
Acct. No. 125
PR
Debit
Credit
Balance
2011 Apr.
2 0
P3
730
730
Acct. No. 165
Store Equipment Date
Explanation
PR
Debit
Credit
Balance
2011
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
397
398
9
Apr.
P3
11,125
11,125
Acct. No. 201
Accounts Payable Explanation
Date
PR
Debit
Credit
Balance
2011 Apr.
6
G3
85
(85)
2 3
G3
400
(485)
3 0
P3
3 0
CD3
49,660 25,650
Long-Term Notes Payable Explanation
Date
49,175 23,525
Acct. No. 251 PR
Debit
Credit
Balance
2011 Mar.
31
Apr.
18
Balance Forward
167,000 CR3
50,000
Jeff Newton, Capital Date
Explanation
217,000
Acct. No. 301 PR
Debit
Credit
Balance
2011 Mar.
3 Balance forward 1
95,000
Acct. No. 413
Sales Date
Explanation
PR
Debit
Credit
Balance
2011
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
398
399
Apr.
3 0
S3
3 0
CR3
Sales Discounts Explanation
Date
33,370
33,370
121,815
155,185
Acct. No. 415
PR
Debit
Credit
Balance
2011 Apr.
3 0
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
CR3
492
492
399
400
Problem 8-4A (continued) Acct. No. 502
Cost of Goods Sold Explanation
Date
PR
Debit
Credit
Balance
3 0
S3
18,300
18,300
3 0
CR3
65,000
83,300
2011 Apr.
Sales Salaries Expense Explanation
Date
Acct. No. 621
PR
Debit
Credit
Balance
2011 Apr.
1 6
CD3
9,750
9,750
3 0
CD3
9,750
19,500
Advertising Expense
Date
Explanation
Acct. No. 655 PR
Debit
Credit
Balance
2011 Apr.
4
CD3
999
999
ACCOUNTS RECEIVABLE SUBLEDGER Paul Abrams Explanation
Date
PR
Debit
Credit
Balance
2011 Apr.
5
S3
1
CR3
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
8,000
8,000 8,000
0
400
401
4 2 7
S3
3,070
3,070
Linda Hobart Explanation
Date
PR
Debit
Credit
Balance
2011 Apr.
3
S3
1 3
CR3
1 3
S3
2 3
CR3
3,000
3,000 3,000
4,100
0 4,100
4,100
0
Kelly Schaefer Explanation
Date
PR
Debit
Credit
Balance
2011 Apr.
1 1
S3
2 0
CR3
2 7
S3
9,500
9,500 9,500
5,700
0 5,700
Problem 8-4A (continued) ACCOUNTS PAYABLE SUBLEDGER Frank’s Supply Date
Explanation
PR
Debit
Credit
Balance
2011
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
401
402
Apr.
9
P3
11,125
11,125
20
P3
730
11,855
Baskin Company Explanation
Date
PR
Debit
Credit
Balance
2011 Apr.
2
P3
1 2
CD3
2 5
P3
13,300 13,300
13,300 0
10,375
10,375
Sprocket Company Explanation
Date
PR
Debit
Credit
Balance
2011 Apr.
1 7
P3
2 3
G3
2 6
CD3
12,750
12,750
400
12,350
12,350
0
Eau Claire Inc. Explanation
Date
PR
Debit
Credit
Balance
2011 Apr.
3
P3 G3
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
1,380 85
1,380 1,295
402
403
Problem 8-4A (continued) Part 5 NEWTON COMPANY Schedule of Accounts Receivable April 30, 2011
Paul Abrams .............................................
$3,070
Kelly Schaefer...........................................
5,700
Total accounts receivable ...................
$8,770
NEWTON COMPANY Schedule of Accounts Payable April 30, 2011
Frank’s Supply ........................................... Baskin Company ........................................ Eau Claire Inc. ........................................... Total accounts payable ..............................
$11,855 10,375 1,295 $23,525
NEWTON COMPANY Trial Balance April 30, 2011
Account .................. Debit Credit Cash .......................................................... $317,287 Accounts receivable .................................... 8,770 Merchandise inventory ................................ 47,212 Office supplies ........................................... 1,295 Store supplies ............................................ 730 Store equipment ........................................ 11,125 Accounts payable ...................................... Long-term notes payable ........................... Jeff Newton, capital .................................... Sales........................................................... Sales discounts........................................... 492 Cost of goods sold ...................................... 83,300 Sales salaries expense .............................. 19,500 Advertising expense .................................. 999 Totals ......................................................... $490,710
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
$ 23,525 217,000 95,000 155,185
$490,710
403
404
Problem 8-4A (concluded) Analysis component: To find the error(s), first re-add the account balances on the schedule of accounts receivable to confirm that the addition was correct. trace the balances listed on the schedule of accounts receivable back to the subsidiary accounts to confirm that they were listed correctly on the schedule. recalculate the balance of each subsidiary account to confirm that the additions and subtractions were correct. trace the postings from each subsidiary account and from the controlling account back to the appropriate journals. Since the sales and cash receipts journals were footed and crossfooted before posting, the previous steps should disclose the error.
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
404
405
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. 668
Problem 8-5A (120 minutes) Parts 1, 2, 3 SALES JOURNAL
Date
Invoice Number
Account Debited
Page 3
PR
A/R. Dr. Sales Cr.
Cost of Goods Sold Dr. Merchandise Inventory Cr.
2011 Oct.
Fundamental Accounting Principles, Twelfth Canadian Edition
Marge Craig
913
3,300
1,600
12
Vickie Foresman
914
3,650
1,900
15
Amy Ihrig
915
3,100
1,700
16
Vickie Foresman
916
7,700
3,900
24
Bill Grigsby
917
1,200
700
31
Totals
18,950
9,800
(106/413 )
(502/119)
6
CASH RECEIPTS JOURNAL Date 2011 Oct. 2
Account Credited Bill Grigsby
Explanation Invoice Nov 23
PR
Cash Debit 4,116
Sales Discoun t Debit
Acct. Rec. Credit
84
4,200
Sales Credit
Page 3 Other Cost of Goods Sold Dr. Accts Merchandise Inventory . Cr. Credit
406
15 Sales 15 Marge Craig 22 Vickie Foresman 25 Amy Ihrig
Cash sales Invoice Dec 6 Invoice Dec 12 Invoice Dec 15 29 Office Supplies Sold supplies 31 Sales Cash sales 31 Totals
38,830 2,401 3,577
49 73
2,548
52
124
50 29,600 81,122 )
(101
2,450* 3,650 2,600**
258 12,900 (415)
38,830
(106)
* $3,300 – $850 return = $2,450 ** $3,100 – $500 allowance = $2,600
29,600 68,430 (413)
21,400
50 50
16,300 37,700
(X)
(502/119)
407
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
Problem 8-5A (continued)
PURCHASES JOURNAL Date
Account Credited
2011 Oct. 2 Shore Company 5 Brown Supply Co.
Date of Invoice Oct 2 Oct 3
15 Shore Company
Oct 15
15 Sunshine Company
Oct 15
17 Brown Supply Co.
Oct 16
21 Store Equip./Brown Supply Co. 26 Sunshine Company
Oct 21
31 Totals
Oct 25
Terms 2/10, n/60 n/10 EOM 2/10, n/60 2/10, n/60 n/10 EOM n/10 EOM 2/10, n/60
PR
Merchandis Accounts e Payable Inventory Credit Debit
3,200
3,200
1,300
1,300
3,990
3,990
2,650
2,650
615
165/
6,700
8,100
8,100
26,555
19,240 (119 )
(201)
Page 2 Office Supplies Debit
Other Accts. Debit
615 6,700
4)
615 (12
6,700 (X)
669
408
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. 670
Problem 8-5A (continued) CASH DISBURSEMENTS JOURNAL Date
Ch. Payee No.
2011 Oct. 2 619 Omni Realty Co. 6 620 Fireside Company 12 621 Shore Company 15 622 Jamie Green 23 623 Sunshine Company 24 624 Shore Company 30 625 Ken Shaw 31 626 Jamie Green
Fundamental Accounting Principles, Twelfth Canadian Edition
31 627 Countrywide Elec. 31 Totals
Merchandis e Inventory. Credit
Other Accts. Debit
Page 4 Accts. Payable Debit.
Account Debited
PR
Cash Credit
Rent Expense Fireside Company
640
2,250 3,724
Shore Company Sales Salaries Expense Sunshine Company
621
3,136 2,020
64
2,597
53
2,650
Shore Company Ken Shaw, Withdrawals Sales Salaries Expense Utilities Expense
302
2,891 2,500
59
2,950*
621
2,020
2,020
690
710
710
21,848 (101) * $3,990 – $1,040 return = $2,950
76
252 (119)
2,250
2,020
2,500
9,500 (X)
3,800 3,200
12,600 (201 )
409
Problem 8-5A (continued) Date 201 1 Oct. 4
GENERAL JOURNAL Account Titles and Explanations
PR
Debit
Accounts Payable—Fireside Company .................. Merchandise Inventory ................................... Returned merchandise to supplier.
201/ 119
460
Sales Returns and Allowances .............................. Accounts Receivable—Marge Craig ............... Merchandise Inventory........................................... Cost of Goods Sold......................................... Customer Marge Craig returned merchandise that was returned to merchandise inventory.
414 106/ 119 502
850
17 Accounts Payable—Shore Company ..................... Merchandise Inventory ................................... Returned merchandise.
201/ 119
1,040
18 Accounts Payable—Brown Supply Co. ................. Office Supplies ............................................... Returned office supplies.
201/ 124
40
20 Sales Returns and Allowances .............................. Accounts Receivable—Amy Ihrig .................... Customer Amy Ihrig returned defective merchandise.
414 106/
500
9
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
430
Page 2 Credit
460
850 430
1,040
40
500
409
410
Problem 8-5A (continued) ACCOUNTS RECEIVABLE SUBLEDGER Date 2011 Oct. 6 9 15
Explanation
Date 2011 Oct. 12 16 22
Explanation
Date 2011 Sept 23 Oct. 2 24 Date 2011 Oct. 15 20 25
Marge Craig PR S3 G2 CR3 Vickie Foresman PR S3 S3 CR3
Explanation
Bill Grigsby PR S2 CR3 S3
Explanation
Amy Ihrig PR
Debit 3,300
Debit 3,650 7,700
Debit 4,200 1,200 Debit
S3 G2 CR3
3,100
Credit 850 2,450
Balance 3,300 2,450 0
Credit
Balance
3,650
3,650 11,350 7,700
Credit
Balance
4,200
Credit 500 2,600
4,200 0 1,200 Balance 3,100 2,600 0
Part 2 ACCOUNTS PAYABLE SUBLEDGER
Date 2011 Sept 28 Oct. 4 6
Fireside Company Explanation PR
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
P1 G2 CD4
Debit 460 3, 800
Credit 4,260
Balance 4,260 3,800 0
410
411
Problem 8-5A (continued) Part 2 Date 2011 Oct. 5 17 18 21 Date 2011 Oct. 15 23 26
Date 2011 Oct. 2 12 15 17 24
Brown Supply Company Explanation PR Debit P2 P2 G2 P2
Date 2011 Sept 30 Balance Oct. 9 20 31 31
40
Sunshine Company Explanation PR Debit P2 CD4 P2
Explanation
Shore Company PR P2 CD4 P2 G2 CD4
Parts 2, 3
Date 2011 Sept 30 Balance Oct. 31 31
Credit
2,650
Debit 3,200 1,040 2,950
1,300 615 6,700 Credit 2,650 8,100
Credit 3,200 3,990
Balance 1,300 1,915 1,875 8,575 Balance 2,650 0 8,100
Balance 3,200 0 3,990 2,950 0
GENERAL LEDGER
Explanation
Cash
PR CR3 CD4
Accounts Receivable Explanation PR
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
G2 G2 S3 CR3
Debit 81,122
Debit
18,950
Acct. No. 101 Credit Balance
21,848
5,361 86,483 64,635
Acct. No. 106 Credit Balance 850 500 12,900
4,200 3,350 2,850 21,800 8,900
411
412
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
412
413
Problem 8-5A (continued) Parts 2, 3 Date 2011 Sept 30 Balance Oct. 4 9 17 31 31 31 31 Date 2011 Sept 30 Balance Oct. 18 29 31 Date 2011 Oct. 30 Balance Date 2011 Sept 30 Balance Oct. 21
Merchandise Inventory Explanation PR G2 G2 G2 S3 P2 CR3 CD4 Office Supplies Explanation PR G2 CR3 P2 Store Supplies Explanation PR
Debit
430 19,240
Debit
615 Debit
Acct. No. 119 Credit Balance 460 1,040 9,800 37,700 252
66,970 66,510 66,940 65,900 56,100 75,340 37,640 37,388
Acct. No. 124 Credit Balance 40 50
607 567 517 1,132
Acct. No. 125 Credit Balance 346
Store Equipment Explanation PR P2
Debit 6,700
Accumulated Amortization, Store Equipment Explanation PR Debit
Date 2011 Oct. 30 Balance
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
Acct. No. 165 Credit Balance 42,129 48,829 Acct. No. 166 Credit Balance 9,153
413
414
Problem 8-5A (continued) Parts 2, 3 Date 2011 Sept 30 Balance Oct. 4 17 18 31 31 Date 2011 Oct. 30 Balance Date 2011 Oct. 30 Date 2011 Oct. 31 31 Date 2011 Oct. 9 20 Date 2011 Oct. 31
Accounts Payable Explanation PR G2 G2 G2 P2 CD4 Ken Shaw, Capital Explanation PR
Debit 460 1,040 40 12,600 Debit
Acct. No. 201 Credit Balance
26,555
4,260 3,800 2,760 2,720 29,275 16,675
Acct. No. 301 Credit Balance 106,200
Ken Shaw, Withdrawals Explanation PR CD4 Explanation
Sales
PR
Debit 2,500 Debit
S3 CR3
Sales Discounts Explanation PR
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
CR3
2,500 Acct. No. 413 Credit Balance 18,950 68,430
Sales Returns and Allowances Explanation PR Debit G2 G2
Acct. No. 302 Credit Balance
850 500 Debit 258
18,950 87,380
Acct. No. 414 Credit Balance 850 1,350 Acct. No. 415 Credit Balance 258
414
415
Problem 8-5A (continued) Parts 2, 3 Date 2011 Oct. 9 31 31 Date 2011 Oct. 15 31 Date 2011 Oct. 2 Date 2011 Oct. 31
Cost of Goods Sold Explanation PR G2 S3 CR3 Sales Salaries Expense Explanation PR CD4 CD4 Rent Expense Explanation PR CD4 Utilities Expense Explanation PR
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
CD4
Debit 9,800 37,700 Debit 2,020 2,020 Debit 2,250 Debit 710
Acct. No. 502 Credit Balance 430
(430) 9,370 47,070
Acct. No. 621 Credit Balance 2,020 4,040 Acct. No. 640 Credit Balance 2,250 Acct. No. 690 Credit Balance 710
415
416
Problem 8-5A (concluded) Part 4 SASKAN ENTERPRISES Trial Balance October 31, 2011 Account Cash ................................................................................... Accounts receivable ............................................................ Merchandise inventory ........................................................ Office supplies .................................................................... Store supplies ..................................................................... Store equipment.................................................................. Accumulated amortization, store equipment........................................................................ Accounts payable................................................................ Ken Shaw, capital ............................................................... Ken Shaw, withdrawals ....................................................... Sales ................................................................................... Sales returns and allowances ............................................. Sales discounts ................................................................... Cost of goods sold .............................................................. Sales salaries expense ....................................................... Rent expense ...................................................................... Utilities expense .................................................................. Totals ..................................................................................
Debit $ 64,635 8,900 37,388 1,132 346 48,829
2,500
Credit
$ 9,153 16,675 106,200 87,380
1,350 258 47,070 4,040 2,250 710 $219,408 $219,408
SASKAN ENTERPRISES Schedule of Accounts Receivable October 31, 2011 Vickie Foresman ............................................. Bill Grigsby ..................................................... Total accounts receivable ...............................
$7,700 1,200 $8,900
SASKAN ENTERPRISES Schedule of Accounts Payable October 31, 2011 Brown Supply Company ................................. Sunshine Company ........................................ Total accounts payable ................................... Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
$ 8,575 8,100 $16,675
416
417
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Problem 8-6A (30 minutes) Page 1
Sales Journal
Date
Account Debited
Invoice No.
A/R Dr.
COGS Dr.
Sales Cr.
PR
PR
Merchandise Inventory Cr.
2011 Jan. 7 G. Little
103
500
160
19 B. Moore
104
375
130
24 C. Woudstra
105
375
135
29 D. Isla
106
800
302
Fundamental Accounting Principles, Twelfth Canadian Edition
Purchases Journal
Date
Page 1 Merchandise Inventory
Account Credited
Date of Invoice
Terms
Curtis & Sons
Jan. 3
n/30
450
450
Jan. 20
n/30
330
330
PR
A/P Cr.
PR
Dr.
Office Supplies Dr.
2011 Jan. 3 20 NOTE:
Norton Industries
An additional PR column has been added to facilitate the referencing of inventory entries into the
Other Accounts Dr.
418
inventory subledger.
419
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
Problem 8-6A (concluded) Inventory Subledger Record — FIFO perpetual
Date
PR
Purchases
Units Jan. 1
Unit Cost
Sales (at cost) Total Unit Cost s
Unit Cost
Inventory Balance
Total Cost
Units
Unit Cost
Total Cost
Beginning inventory 25 @ $8.0 = $200 0
25 @ $ 8.0 = $ 20 0 0 25 @ $ 8.0 = $ 20 0 0
3 P1 7 S1
50 @ $9.0 = $450 0
50 @ 20 @ $ 8.00 =
$ 160
9.00 =
450
5 @ $ 8.0 = $ 4 0 0 50 @
9.00 = 450
19 S1
5 @ $ 8.00 = 10 @
9.00 =
$ 40 90
40 @ $ 9.0 = $ 36 0 0 40 @ $ 9.0 = $ 36 0 0
679
420
20 P1
30 @ $11. = $330 00
24 S1
30 @ 11.00 = 15 @ $ 9.00 =
$ 135
25 @ $ 9.0 = $ 22 0 5 30 @ 11.00 =
29 S1
25 @
=
$ 225
7 @ 11.00 =
77
330
330
$ 9.00
Total
105
$980
Cost of goods available for sale =
82 Cost of goods sold
$727 +
23 @ $11.0 = $ 25 0 3 23
$253 Ending inventory
Note: An additional PR column has been added to the Inventory Subledger Record to facilitate referencing of inventory entries.
421
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. 680
*Problem 8-7A (40 minutes)
Note: Since posting to the General Ledger was not a requirement in this problem, posting references are shown for values posted to the subledgers only.
SALES JOURNAL
Page 3 Invoice
Date
Account Debited
A/R Dr.
Fundamental Accounting Principles, Twelfth Canadian Edition
Numbe r
PR
Sales Cr.
3 Linda Hobart
760
3,000
5 Paul Abrams
761
8,000
11 Kelly Schaefer
762
9,500
13 Linda Hobart
763
4,100
2011 Apr .
CASH RECEIPTS JOURNAL Account Date
Credited
Accts.
Cash
Disc.
Rec.
Sales
Accts.
Credit
Credit
Explanation
PR
Debit
Debit
Credit
Sale of Apr. 3
2,940
60
3,000
2011 Apr.
1 Linda Hobart
Page 3
Sales
Other
422
3 1 Paul Abrams 4
Sale of Apr. 5
1 Sales 6
Cash sales
7,840
160
8,000
50,840
50,840
PURCHASES JOURNAL
Page 3 Accounts
Date of Date
Account Credited
Invoic e
Terms
Office
Other
Payable
Purchases
Supplie s
Accounts
PR
Credit
Debit
Debit
Debit
13,300
2011 Apr.
2 Baskin Company
Apr. 2
2/10,n/60
13,300
3 Eau Claire Inc.
Apr. 2
n/10 EOM
1,380
9 Store Equip./Frank’s Supply
Apr. 9
n/10 EOM
11,125
1,380 11,125
423 Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
*Problem 8-7A (continued)
CASH DISBURSEMENTS JOURNAL Ch. Date
No.
Payee
Account Debited
PR
Page 3
Purchas e
Other
Accts.
Cash
Discoun t
Accts.
Payable
Credit
Credit
Debit
Debit
2011 Apr.
4 587
The Record
Advertising Expense
1 588 2
Baskin Company
Baskin Company
1 589 6
Payroll
Sales Salaries Expense
999
13,034 9,750
999 266
13,300 9,750
681
424
*Problem 8-7A (continued)
Date 2011 Apr.
GENERAL JOURNAL Account Titles and Explanations 6
PR
Accounts Payable – Eau Claire Inc. .................. Office Supplies ............................................ Returned office supplies.
Debit 85
Page 3 Credit 85
ACCOUNTS RECEIVABLE SUBLEDGER Paul Abrams Explanation
Date
PR
Debit
Credit
Balance
2011 Apr.
5
S3
1 4
CR3
8,000
8,000 8,000
0
Linda Hobart Explanation
Date
PR
Debit
Credit
Balance
2011 Apr.
3
S3
1 3
CR3
1 3
S3
3,000
3,000 3,000
4,100
0 4,100
Kelly Schaefer Explanation
Date
PR
Debit
Credit
Balance
2011 Apr.
1 1
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
S3
9,500
9,500
424
425
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
425
426
*Problem 8-7A (concluded) Parts 2, 3 ACCOUNTS PAYABLE SUBLEDGER Frank’s Supply Date
Explanation
PR
Debit
Credit
Balance
2011 Apr.
9
P3
11,125
11,125
Baskin Company Explanation
Date
PR
Debit
Credit
Balance
2011 Apr.
2
P3
1 2
CD3
13,300 13,300
13,300 0
Sprocket Company Explanation
Date
PR
Debit
Credit
Balance
Debit
Credit
Balance
2011
Eau Claire Inc. Explanation
Date
PR
2011 Apr.
3
P3
6
G3
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
1,380 85
1,380 1,295
426
427
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. 684
*Problem 8-8A (70 minutes) SALES JOURNAL
Page 3 Invoice
Date
Account Debited
A/R Dr.
Numbe r
PR
Sales Cr.
3 Linda Hobart
760
3,000
5 Paul Abrams
761
8,000
11 Kelly Schaefer
762
9,500
13 Linda Hobart
763
4,100
27 Paul Abrams
764
3,070
27 Kelly Schaefer
765
5,700
2011 Apr .
Fundamental Accounting Principles, Twelfth Canadian Edition
33,370
30 Totals
(106/413)
CASH RECEIPTS JOURNAL Account Date 2011
Credited
Explanation
PR
Page 3
Sales
Accts.
Other
Cash
Disc.
Rec.
Sales
Accts.
Debit
Debit
Credit
Credit
Credit
428
Apr.
1 Linda Hobart 3
Sale of Apr. 3
2,940
60
3,000
1 Paul Abrams 4
Sale of Apr. 5
7,840
160
8,000
1 Sales 6
Cash sales
1 L.T. Notes 8 Payable
Note to bank
2 Kelly Schaefer 0
50,840
50,840
25 1
50,000
Sale of Apr. 11
9,310
190
9,500
2 Linda Hobart 3
Sale of Apr. 13
4,018
82
4,100
3 Sales 0
Cash sales
3 Totals 0
50,000
70,975
70,975
195,92 3
492
24,600
121,81 5
50,000
(101)
(415)
(106)
(413)
(X)
429
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
*Problem 8-8A (continued) PURCHASES JOURNAL
Page 3 Accounts
Date of Date
Account Credited
Invoic e
Terms
Office
Other
Payable
Purchases
Supplie s
Accounts
PR
Credit
Debit
Debit
Debit
13,300
2011 Apr.
2 Baskin Company
Apr. 2
2/10,n/60
13,300
3 Eau Claire Inc.
Apr. 2
n/10 EOM
1,380
9 Store Equip./Frank’s Supply
Apr. 9
n/10 EOM
165/
11,125
17 Sprocket Company
Apr. 16
2/10,n30
12,750
20 Store Supplies/Frank’s Supply
Apr. 19
n/10 EOM
25 Baskin Company
Apr. 24
2/10,n/6 0
30 Totals
125/
1,380 11,125 12,750
730
730
10,375
10,375
49,660
36,425
1,380
11,855
(201)
(505)
(124)
(X)
685
CASH DISBURSEMENTS
430
JOURNAL
Ch. Date
No.
Payee
Account Debited
Purchas e
Page 3
Other
Accts.
Cash
Discoun t
Accts.
Payable
PR
Credit
Credit
Debit
Debit
655
999
2011 Apr.
4 587
The Record
Advertising Expense
1 588 2
Baskin Company
Baskin Company
1 589 6
Payroll
Sales Salaries Expense
2 590 6
Sprocket Company
Sprocket Company
3 591 0
Payroll
Sales Salaries Expense
3 0
Totals
13,034
621
9,750
12,103
621
9,750 45,636 (101)
*$12,750 - $400 credit memorandum = $12,350.
999 266
13,300 9,750
247
12,350* 9,750
513 (506)
20,499
25,650
(X)
(201)
431
*Problem 8-8A (continued) GENERAL JOURNAL Account Titles and Explanations
Date 2011 Apr.
PR
Page 3 Credit
Debit
6
Accounts Payable—Eau Claire Inc. ........................... Office Supplies ................................................... Returned office supplies.
201/ 124
85
23
Accounts Payable—Sprocket Company ..................... Purchase Returns and Allowances ..................... Returned merchandise.
201/ 507
400
85
400
Parts 1, 2, 3, 4 GENERAL LEDGER Cash
Date
Explanation
Acct. No. 101
PR
Debit
Credit
Balance
2011 Mar.
3 Balance Forward 1
167,000
Apr.
3 0
CR3
3 0
CD3
195,923 45,636
Accounts Receivable
Date
Explanation
362,923 317,287
Acct. No. 106
PR
Debit
3 0
S3
33,370
3 0
CR3
Credit
Balance
2011 Apr.
24,600
Merchandise Inventory
Date
Explanation
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
33,370 8,770
Acct. No. 119
PR
Debit
Credit
Balance
431
432
2011 Mar.
3 Balance Forward 1
95,000
Office Supplies Date
Explanation
Acct. No. 124 PR
Debit
Credit
Balance
2011 Apr.
3
P3
6
G3
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
1,380
1,380 85
1,295
432
433
*Problem 8-8A (continued) Store Supplies Explanation
Date
Acct. No. 125
PR
Debit
Credit
Balance
2011 Apr.
2 0
P3
730
730
Acct. No. 165
Store Equipment Explanation
Date
PR
Debit
P3
11,125
Credit
Balance
2011 9
Apr.
11,125
Acct. No. 201
Accounts Payable Explanation
Date
PR
Debit
Credit
Balance
2011 Apr.
6
G3
85
(85)
2 3
G3
400
(485)
3 0
P3
3 0
CD3
49,660 25,650
Long-Term Notes Payable Explanation
Date
49,175 23,525
Acct. No. 251 PR
Debit
Credit
Balance
2011 Mar.
31
Apr.
18
Balance Forward
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
167,000 CR3
50,000
217,000
433
434
Jeff Newton, Capital Explanation
Date
Acct. No. 301 PR
Debit
Credit
Balance
2011 Mar.
3 Balance forward 1
95,000
Acct. No. 413
Sales Explanation
Date
PR
Debit
Credit
Balance
2011 Apr.
3 0
S3
3 0
CR3
Sales Discounts Explanation
Date
33,370
33,370
121,815
155,185
Acct. No. 415
PR
Debit
Credit
Balance
2011 Apr.
3 0
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
CR3
492
492
434
435
*Problem 8-8A (continued) Acct. No. 505
Purchases Explanation
Date
PR
Debit
P3
36,425
Credit
Balance
2011 Apr.
3 0
Acct. No. 506
Purchase Discounts Explanation
Date
36,425
PR
Debit
Credit
Balance
2011 Apr.
3 0
CD3
513
Acct. No. 507
Purchase Returns and Allowances Explanation
Date
PR
513
Debit
Credit
Balance
2011 Apr.
3 0
G3
Sales Salaries Expense Explanation
Date
400
400
Acct. No. 621
PR
Debit
Credit
Balance
2011 Apr.
1 6
CD3
9,750
9,750
3 0
CD3
9,750
19,500
Advertising Expense
Date
Explanation
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
Acct. No. 655 PR
Debit
Credit
Balance
435
436
2011 Apr.
4
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
CD3
999
999
436
437
*Problem 8-8A (continued) ACCOUNTS RECEIVABLE SUBLEDGER Paul Abrams Explanation
Date
PR
Debit
Credit
Balance
2011 Apr.
5
S3
1 4
CR3
2 7
S3
8,000
8,000 8,000
3,070
0 3,070
Linda Hobart Explanation
Date
PR
Debit
Credit
Balance
2011 Apr.
3
S3
1 3
CR3
1 3
S3
2 3
CR3
3,000
3,000 3,000
4,100
0 4,100
4,100
0
Kelly Schaefer Explanation
Date
PR
Debit
Credit
Balance
2011 Apr.
1 1
S3
2 0
CR3
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
9,500
9,500 9,500
0
437
438
2 7
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
S3
5,700
5,700
438
439
*Problem 8-8A (continued) ACCOUNTS PAYABLE SUBLEDGER Frank’s Supply Date
Explanation
PR
Debit
Credit
Balance
2011 Apr.
9
P3
11,125
11,125
20
P3
730
11,855
Baskin Company Explanation
Date
PR
Debit
Credit
Balance
2011 Apr.
2
P3
1 2
CD3
2 5
P3
13,300 13,300
13,300 0
10,375
10,375
Sprocket Company Explanation
Date
PR
Debit
Credit
Balance
2011 Apr.
1 7
P3
2 3
G3
2 6
CD3
12,750
12,750
400
12,350
12,350
0
Eau Claire Inc. Date
Explanation
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
PR
Debit
Credit
Balance
439
440
2011 Apr.
3
P3 G3
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
1,380 85
1,380 1,295
440
441
*Problem 8-8A (concluded) Part 5 NEWTON COMPANY
Schedule of Accounts Receivable April 30, 2011
Paul Abrams .................................................................................
$3,070
Kelly Schaefer ...............................................................................
5,700
Total accounts receivable ........................................................
$8,770
NEWTON COMPANY Schedule of Accounts Payable April 30, 2011
Frank’s Supply ........................................... Baskin Company ........................................ Eau Claire Inc. ........................................... Total accounts payable ..............................
$11,855 10,375 1,295 $23,525
NEWTON COMPANY Trial Balance April 30, 2011
Account .................. Debit Credit Cash .......................................................... $317,287 Accounts receivable.................................... 8,770 Merchandise inventory ................................ 95,000 Office supplies ........................................... 1,295 Store supplies ............................................ 730 Store equipment ........................................ 11,125 Accounts payable ...................................... Long-term notes payable ........................... Jeff Newton, capital .................................... Sales .......................................................... Sales discounts .......................................... 492 Purchases................................................... 36,425 Purchase discounts .................................... Purchase returns and allowances ............... Sales salaries expense .............................. 19,500 Advertising expense .................................. 999 Totals ......................................................... $491,623 Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
$ 23,525 217,000 95,000 155,185 513 400 $491,623 441
442
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
442
443
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. 692
*Problem 8-9A - Perpetual (100 minutes) Part 4 SALES JOURNAL
Date 201 1 Mar.
Account Debited 2 3 10 27 28 31
Leroy Hackett Sam Snickers Marjorie Coble Marjorie Coble Sam Snickers Totals
Invoice Number
PR
854 855 856 857 858
Accts. Rec. Debit
PST Payable Credit
18,328.00 10,672.00 5,336.00 16,135.60 6,165.40 56,637.00 (106)
Page 2
GST Payable Credit
1,580.00 920.00 460.00 1,391.00 531.50 4,882.50 (224)
948.00 552.00 276.00 834.60 318.90 2,929.50 (225)
Sales Credit
15,800.00 1,027 9,200.00 5,980 4,600.00 2,990 13,910.00 9,040 5,315.00 3,455 48,825.00 22,492 (413) (502/119)
CASH RECEIPTS JOURNAL Fundamental Accounting Principles, Twelfth Canadian Edition
Date 2011 Mar 6 12 13 15 20 31 31
Account Credited L.T. Notes Pay. Leroy Hackett Sam Snickers Sales Marjorie Coble Sales Totals
Explanation Note to bank Invoice, Mar 2 Invoice, Mar 3 Cash sales Invoice, Mar 10 Cash sales
PR
Cash Debit
251 72,000.00 18,012.00 10,488.00 191,028.80 5,244.00 202,524.40 499,297.20 (101)
Sales Discount Debit
Accts. Rec. Credit
COGS Dr./ MI Cr.
Page 2 Sales Credit
Other Accts. Credit
PST Payable Credit
GST Payable Credit
COGS Dr./ MI Cr.
72,000.00 316.00 18,328.00 184.00 10,672.00 164,680.00 92.00
16,468.00
9,880.80
107,042
5,336.00
174,590.00 17,459.00 10,475.40 113,480 592.00 34,336.00 339,270.00 72,000.00 33,927.00 20,356.20 220,522 (415) (106) (413) () (224) (225) (502/119)
444
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
*Problem 8-9A - Perpetual (continued)
PURCHASES JOURNAL Date 2011 Mar.
Date of Invoice
Account Credited 3 5 9 14 16 31
Office Supplies/Arndt Company Defore Industries Office Equip./Jett Supply The Welch Company Store Supplies/Arndt Company Totals
Mar 3 Mar 3 Mar 9 Mar 13 Mar 16
Terms
PR
Accts. Payable Credit
n/10 EOM 124/ 1,187.20 2/10, n/30 45,156.00 n/10 EOM 163/ 22,101.00 2/10, n/30 33,522.50 n/10 EOM 125/ 1,770.20 103,736.90 (201)
Merch. Inventory Debit 42,600.00 31,625.00 74,225.00 (119)
Page 2 Other GST Accounts Rec’ble Debit Debit 1,120.00 20,850.00 1,670.00 23,640.00 (X)
CASH DISBURSEMENTS JOURNAL Date 2011
Ch. No.
Cash Credit
Account Debited
PR
Defore Industries1
Defore Industries
44,304.0 0
15 41 7
Payroll
Sales Salaries Expense
621
15,900.0 0
23 41 8
The Welch Co. 2
The Welch Company
30,368.0 0
31 41 9
Payroll
Sales Salaries Expense
Mar. 41 13 6
Payee
621
15,900.0 0
67.20 2,556.00 1,251.00 1,897.50 100.20 5,871.90 (108) Page 2
Merch. Inv. Credit
Other Accts. Debit
852.00
GST Rec’ble Debit
Accts. Payable Debit 45,156.0 0
15,900.0 0 584.00
30,952.0 0 15,900.0 0
693
445
31
Totals
106,472. 00 (101)
1. 42,600 x 2% = 852 discount 2. 31,625 – 2,425 = 29,200; 29,200 x 2% = 584 discount
1,436.00 31,800.0 0 (119)
(X)
76,108.0 0 (201)
446
*Problem 8-9A - Perpetual (continued) GENERAL JOURNAL Account Title and Explanations
Date
PR
Debit
Mar. 17 Accounts Payable—The Welch Company ....... GST Payable ............................................. Merchandise Inventory .............................. Returned merchandise.
201/ 225 119
2,570.50
19 Accounts Payable—Jett Supply ........................ GST Payable ............................................. Office Equipment ....................................... Returned office equipment.
201/ 225 163
667.80
2011
Page 2 Credit 145.50 2,425.00
37.80 630.00
Parts 2 and 4 ACCOUNTS RECEIVABLE SUBLEDGER
Marjorie Coble Date
Explanation
PR
Debit
10
S2
5,336.00
20
CR2
27
S2
Credit
Balance
2011 Mar.
5,336.00 5,336.00
16,135.60
0.00 16,135.6 0
Leroy Hackett Date
Explanation
PR
Debit
Credit
Balance
2011 Mar.
2
S2
12
CR2
18,328.00
18,328.0 0 18,328.00
0.00
Sam Snickers
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
446
447
Date
Explanation
PR
Debit
Credit
Balance
2011 Mar.
3
S2
13
CR2
28
S2
10,672.00
10,672.0 0 10,672.00
6,165.40
0.00 6,165.40
Parts 3 and 4 ACCOUNTS PAYABLE SUBLEDGER
Arndt Company Date
Explanation
PR
Debit
Credit
Balance
2011
Mar.
3
P2
1,187.20
1,187.20
16
P2
1,770.20
2,957.40
*Problem 8-9A - Perpetual (continued) Defore Industries Date
Explanation
PR
Debit
Credit
Balance
45,156.00
45,156.00
2011 Mar.
5
P2
13
CD3
45,156.00
0.00
Jett Supply Date
Explanation
PR
Debit
Credit
Balance
2011 Mar.
9
P2
19
G2
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
22,101.00 667.80
22,101.00 21,433.20
447
448
The Welch Company Date
Explanation
PR
Debit
Credit
Balance
2011 Mar.
14
P2
17
G2
23
CD3
33,522.50
33,522.50
2,570.50
30,952.00
30,952.00
0.00
Parts 1 and 4 GENERAL LEDGER
Cash Explanation
Date
Acct. No. 101 PR
Debit
31
CR2
499,297.20
31
CD3
Credit
Balance
2011 Mar.
499,297.2 0 106,472.0 0
Accounts Receivable Explanation
Date
PR
392,825.2 0
Acct. No. 106 Debit
Credit
Balance
2011 Mar.
31
S2
31
CR2
56,637.00
56,637.00 34,336.00
GST Receivable Explanation
Date
22,301.00
Acct. No. 108
PR
Debit
P2
5,871.90
Credit
Balance
2011 Mar.
31
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
5,871.90
448
449
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
449
450
*Problem 8-9A - Perpetual (continued) Merchandise Inventory Explanation
Date
PR
Acct. No. 119 Debit
Credit
Balance
2011 Mar.
1 Beginning balance
250,000.0 0
17
G2
2,425.00
247,575.0 0
31
S2
22,492.00
225,083.0 0
31
CR2
220,522.0 0
4,561.00
31
P2
31
CD3
74,225.00
78,786.00 1,436.00
Acct. No. 124
Office Supplies Date
Explanation
77,350.00
PR
Debit
P2
1,120.00
Credit
Balance
2011 Mar.
31
1,120.00
Store Supplies Date
Explanation
Acct. No. 125
PR
Debit
P2
1,670.00
Credit
Balance
2011 Mar.
16
Acct. No. 163
Office Equipment Date
Explanation
1,670.00
PR
Debit
Credit
Balance
2011
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
450
451
Mar.
9
P2
19
G2
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
20,850.00
20,850.00 630.00
20,220.00
451
452
*Problem 8-9A - Perpetual (continued) Accounts Payable
Date
Explanation
Acct. No. 201 PR
Debit
Credit
Balance
2011
Mar.
17
G2
2,570.50
(2,570.50)
19
G2
667.80
(3,238.30)
31
P2
31
CD3
103,736.9 0 76,108.00
Explanation
24,390.60
Acct. No. 224
PST Payable Date
100,498.6 0
PR
Debit
Credit
Balance
2011 Mar.
31
S2
31
CR2
Explanation
4,882.50
33,927.00
38,809.50
Acct. No. 225
GST Payable Date
4,882.50
PR
Debit
Credit
Balance
2011 Mar.
17
G2
145.50
145.50
19
G2
37.80
183.30
31
S2
2,929.50
3,112.80
31
CR2
20,356.20
23,469.00
Acct. No. 251
Long-Term Notes Payable Date
Explanation
PR
Debit
Credit
Balance
2011
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
452
453
Mar.
6
CR2
72,000.00
Acct. No. 301
George Bledsoe, Capital Date
Explanation
PR
72,000.00
Debit
Credit
Balance
2011 Mar.
1 Beginning balance
250,000.0 0
Acct. No. 413
Sales Date
Explanation
PR
Debit
Credit
Balance
2011 Mar.
31
S2
48,825.00
48,825.00
31
CR2
339,270.0 0
388,095.0 0
Acct. No. 415
Sales Discounts Date
Explanation
PR
Debit
Credit
Balance
2011 Mar.
31
CR2
592.00
592.00
*Problem 8-9A - Perpetual (continued) Acct. No. 502
Cost of Goods Sold Date
Explanation
PR
Debit
Credit
Balance
31
S2
22,492.00
22,492.00
31
CR2
220,522.0 0
243,014.0 0
2011 Mar.
Sales Salaries Expense Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
Acct. No. 621
453
454
Date
Explanation
PR
Debit
Credit
Balance
15
CD3
15,900.00
15,900.00
31
CD3
15,900.00
31,800.00
2011 Mar.
Part 5
THE BLEDSOE COMPANY Trial Balance March 31, 2011
Account
Debit
Cash .............................................................
$392,825.20
Accounts receivable ..............................
22,301.00
GST receivable .........................................
5,871.90
Merchandise inventory.........................
77,350.00
Office supplies..........................................
1,120.00
Store supplies ..........................................
1,670.00
Office equipment ....................................
20,220.00
Credit
Accounts payable ...................................
$ 24,390.60
PST payable ..............................................
38,809.50
GST payable .............................................
23,469.00
Long-term notes payable ....................
72,000.00
George Bledsoe, capital .......................
250,000.00
Sales ............................................................
388,095.00
Sales discounts ........................................
592.00
Cost of goods sold ..................................
243,014.00
Sales salaries expense ...........................
31,800.00
Totals .......................................................... Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
$796,764.10 $796,764.10 454
455
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
455
456
*Problem 8-9A - Perpetual (concluded)
THE BLEDSOE COMPANY Schedule of Accounts Receivable March 31, 2011
Marjorie Coble ......................................
$16,135.60
Sam Snickers. .........................................
6,165.40
Total accounts receivable ................
$22,301.00
THE BLEDSOE COMPANY Schedule of Accounts Payable March 31, 2011
Arndt Company ....................................
$ 2,957.40
Jett Supply...............................................
21,433.20
Total accounts payable .....................
$24,390.60
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
456
457
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. 700
*Problem 8-9A - Periodic (100 minutes) Part 4 SALES JOURNAL
Date 2011 Mar.
Account Debited 2 3 10 27 28 31
Leroy Hackett Sam Snickers Marjorie Coble Marjorie Coble Sam Snickers Totals
Invoice Number
PR
854 855 856 857 858
Accts. Rec. Debit 18,328.00 10,672.00 5,336.00 16,135.60 6,165.40 56,637.00 (106)
PST Payable Credit 1,580.00 920.00 460.00 1,391.00 531.50 4,882.50 (224)
GST Payable Credit 948.00 552.00 276.00 834.60 318.90 2,929.50 (225)
Page 2
Sales Credit 15,800.00 9,200.00 4,600.00 13,910.00 5,315.00 48,825.00 (413)
CASH RECEIPTS JOURNAL
Fundamental Accounting Principles, Twelfth Canadian Edition
Date 2011 Mar. 6 12 13 15 20 31 31
Account Credited L.T. Notes Pay. Leroy Hackett Sam Snickers Sales Marjorie Coble Sales Totals
Explanation
PR
Cash Debit
Note to bank 251 72,000.00 Invoice, Mar 2 18,012.00 Invoice, Mar 3 10,488.00 Cash sales 191,028.80 Invoice, Mar 10 5,244.00 Cash sales 202,524.40 499,297.20 (101)
Sales Discount Debit
Accts. Rec. Credit
Page 2 Sales Credit
Other Accts. Credit
PST Payable Credit
GST Payable Credit
72,000.00 316.00 184.00
18,328.00 10,672.00
92.00
5,336.00
592.00 (415)
164,680.00
16,468.00
9,880.80
174,590.00 34,336.00 339,270.00 (106) (413)
17,459.00 33,927.00 (224)
10,475.40 20,356.20 (225)
72,000.00 ()
458
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
*Problem 8-9A - Periodic (continued)
PURCHASES JOURNAL Date 2011 Mar.
Date of Invoice
Account 3 5 9 14 16 31
Office Supplies/Arndt Company Defore Industries Office Equip./Jett Supply The Welch Company Store Supplies/Arndt Company Totals
Mar 3 Mar 3 Mar 9 Mar 13 Mar 16
Terms
PR
Accts. Payable Credit
Purchases Debit
n/10 EOM 124/ 1,187.20 2/10, n/30 45,156.00 n/10 EOM 163/ 22,101.00 2/10, n/30 33,522.50 n/10 EOM 125/ 1,770.20 103,736.90 (201)
Page 2 Other GST Accounts Rec’ble Debit Debit
42,600.00 31,625.00 74,225.00 (505)
1,120.00 20,850.00 1,670.00 23,640.00 (X)
CASH DISBURSEMENTS JOURNAL Ch. No.
Payee
Mar. 41 13 6
Defore Industries
Defore Industries
15 41 7
Payroll
Sales Salaries Expense
23 41 8
The Welch Co.
The Welch Company
31 41 9
Payroll
Sales Salaries Expense
31
Totals
Date 2011
Account Debited
PR
Cash Credit
44,304.00
621
15,900.00
30,368.00
621
Page 3
Pur. Disc. Credit
Other Accts. Debit
852.00
GST Rec’ble Debit
Accts. Payable Debit 45,156. 00
15,900.00 584.00
30,952. 00 15,900.00
15,900.00 106,472.0
67.20 2,556.00 1,251.00 1,897.50 100.20 5,871.90 (108)
1,436.00
31,800.00
76,108.
701
459
0 (101)
00 (507)
(X)
(201)
460
*Problem 8-9A - Periodic (continued) GENERAL JOURNAL Account Title and Explanations
Date
PR
Debit
Mar. 17 Accounts Payable—The Welch Company ....... GST Payable ............................................. Purchases Returns and Allowances .......... Returned merchandise.
201/ 225 506
2,570.50
19 Accounts Payable—Jett Supply ........................ GST Payable ............................................. Office Equipment ....................................... Returned office equipment.
201/ 225 163
667.80
2011
Page 2 Credit 145.50 2,425.00
37.80 630.00
Parts 2 and 4 ACCOUNTS RECEIVABLE SUBLEDGER
Marjorie Coble Date
Explanation
PR
Debit
10
S2
5,336.00
20
CR2
27
S2
Credit
Balance
2011 Mar.
5,336.00 5,336.00
16,135.60
0.00 16,135.6 0
Leroy Hackett Date
Explanation
PR
Debit
Credit
Balance
2011 Mar.
2
S2
12
CR2
18,328.00
18,328.0 0 18,328.00
0.00
Sam Snickers
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
460
461
Date
Explanation
PR
Debit
Credit
Balance
2011 Mar.
3
S2
13
CR2
28
S2
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
10,672.00
10,672.0 0 10,672.00
6,165.40
0.00 6,165.40
461
462
*Problem 8-9A - Periodic (continued) Parts 3 and 4 ACCOUNTS PAYABLE SUBLEDGER
Arndt Company Date
Explanation
PR
Debit
Credit
Balance
2011
Mar.
3
P2
1,187.20
1,187.20
16
P2
1,770.20
2,957.40
Defore Industries Date
Explanation
PR
Debit
Credit
Balance
45,156.00
45,156.00
2011 Mar.
5
P2
13
CD3
45,156.00
0.00
Jett Supply Date
Explanation
PR
Debit
Credit
Balance
2011 Mar.
9
P2
19
G2
22,101.00 667.80
22,101.00 21,433.20
The Welch Company Date
Explanation
PR
Debit
Credit
Balance
2011 Mar.
14
P2
17
G2
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
33,522.50 2,570.50
33,522.50 30,952.00
462
463
23
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
CD3
30,952.00
0.00
463
464
*Problem 8-9A - Periodic (continued) Parts 1 and 4 GENERAL LEDGER
Cash Explanation
Date
Acct. No. 101 PR
Debit
31
CR2
499,297.20
31
CD3
Credit
Balance
2011 Mar.
499,297.2 0 106,472.0 0
Accounts Receivable Explanation
Date
PR
392,825.2 0
Acct. No. 106 Debit
Credit
Balance
2011 Mar.
31
S2
31
CR2
56,637.00
56,637.00 34,336.00
GST Receivable Explanation
Date
22,301.00
Acct. No. 108
PR
Debit
P2
5,871.90
Credit
Balance
2011 Mar.
31
5,871.90
Merchandise Inventory Date
Explanation
PR
Acct. No. 119 Debit
Credit
Balance
2011 Mar.
1 Beginning balance
Office Supplies Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
250,000.0 0
Acct. No. 124
464
465
Date
Explanation
PR
Debit
P2
1,120.00
Credit
Balance
2011 Mar.
31
1,120.00
Store Supplies Date
Explanation
Acct. No. 125
PR
Debit
P2
1,670.00
Credit
Balance
2011 Mar.
16
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
1,670.00
465
466
*Problem 8-9A - Periodic (continued) Acct. No. 163
Office Equipment Date
Explanation
PR
Debit
Credit
Balance
2011 Mar.
9
P2
19
G2
20,850.00 630.00
Accounts Payable
Date
Explanation
20,850.00 20,220.00
Acct. No. 201 PR
Debit
Credit
Balance
2011
Mar.
17
G2
2,570.50
(2,570.50)
19
G2
667.80
(3,238.30)
31
P2
31
CD3
103,736.9 0 76,108.00
Explanation
24,390.60
Acct. No. 224
PST Payable Date
100,498.6 0
PR
Debit
Credit
Balance
2011 Mar.
31
S2
31
CR2
Explanation
4,882.50
33,927.00
38,809.50
Acct. No. 225
GST Payable Date
4,882.50
PR
Debit
Credit
Balance
2011 Mar.
17
G2
145.50
145.50
19
G2
37.80
183.30
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466
467
31
S2
31
CR2
Explanation
PR
3,112.80
20,356.20
23,469.00
Acct. No. 251
Long-Term Notes Payable Date
2,929.50
Debit
Credit
Balance
72,000.00
72,000.00
2011 Mar.
6
CR2
Acct. No. 301
George Bledsoe, Capital Date
Explanation
PR
Debit
Credit
Balance
2011 Mar.
1 Beginning balance
250,000.0 0
Acct. No. 413
Sales Date
Explanation
PR
Debit
Credit
Balance
2011 Mar.
31
S2
48,825.00
48,825.00
31
CR2
339,270.0 0
388,095.0 0
*Problem 8-9A - Periodic (continued) Acct. No. 415
Sales Discounts Date
Explanation
PR
Debit
Credit
Balance
2011 Mar.
31
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
CR2
592.00
592.00
467
468
Acct. No. 505
Purchases Date
Explanation
PR
Debit
P2
74,225.00
Credit
Balance
2011 Mar.
31
74,225.00
Acct. No. 506
Purchases Returns and Allowances Date
Explanation
PR
Debit
Credit
Balance
2011 Mar.
17
G2
2,425.00
Acct. No. 507
Purchases Discounts Date
Explanation
PR
2,425.00
Debit
Credit
Balance
2011 Mar.
31
CD2
1,436.00
Acct. No. 621
Sales Salaries Expense Date
Explanation
1,436.00
PR
Debit
Credit
Balance
15
CD2
15,900.00
15,900.00
31
CD2
15,900.00
31,800.00
2011 Mar.
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468
469
*Problem 8-9A - Periodic (concluded) Part 5
THE BLEDSOE COMPANY Trial Balance March 31, 2011
Account
Debit
Cash .............................................................
$392,825.20
Accounts receivable ..............................
22,301.00
GST receivable ........................................
5,871.90
Merchandise inventory ........................
250,000.00
Office supplies..........................................
1,120.00
Store supplies ..........................................
1,670.00
Office equipment ....................................
20,220.00
Credit
Accounts payable ...................................
$ 24,390.60
PST payable ..............................................
38,809.50
GST payable .............................................
23,469.00
Long-term notes payable ....................
72,000.00
George Bledsoe, capital .......................
250,000.00
Sales ............................................................
388,095.00
Sales discounts ........................................
592.00
Purchases .................................................
74,225.00
Purchases returns and allowances...
2,425.00
Purchases discounts ..............................
1,436.00
Sales salaries expense ........................... Totals ..........................................................
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
31,800.00 $800,625.10 $800,625.10
469
470
THE BLEDSOE COMPANY Schedule of Accounts Receivable March 31, 2011
Marjorie Coble ......................................
$16,135.60
Sam Snickers. .........................................
6,165.40
Total accounts receivable ................
$22,301.00
THE BLEDSOE COMPANY Schedule of Accounts Payable March 31, 2011
Arndt Company ....................................
$ 2,957.40
Jett Supply...............................................
21,433.20
Total accounts payable .....................
$24,390.60
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470
471
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*Problem 8-10A (30 minutes) Page X
Sales Journal
Date
Account Debited
Invoice No.
PR
A/R Dr.
PST Payable Cr.
GST Payable Cr.
COGS Dr. Sales Cr
Merchandise Inventory Cr.
2011 Oct K-Company 12
106
6,840
480
360
6,000
4,200
17 CanCor
107
7,980
560
420
7,000
4,600
30 Delton Hardware
108
4,560
320
240
4,000
2,900
Page X
Cash Receipts Journal Fundamental Accounting Principles, Twelfth Canadian Edition
Date
Account Credited
Explanatio n
PR
Cash Dr.
Sales Disc Dr
A/R Cr.
COGS/Dr. Merchandis Other PST GST e Accounts Payable Payabl Inventory/ Sales Cr. Cr. Cr. e Cr. Cr.
2011 Oct 9 Sales
Inv #105
1,368
24 CanCor
7,910
26 K-Company
6,840
1,200 70
7,980 6,840
96
72
740
472
Purchases Journal Date
Account Credited
Terms
PR
Merchandi Other se Accounts Dr. Inventory Dr.
A/P Cr.
Page X GST Rec’ble Dr.
2011 Oct 1
Lexor Suppliers
2/10,n /30
4,240
4,000
240
27
Milton Suppliers
n/30
8,480
8,000
480
Page X
Cash Disbursements Journal Date
Ch #
Account Debited
PR
Cash Cr.
Merchandise Inventory Cr.
Other Accounts Dr.
GST Rec’ble Dr.
A/P Dr.
2011 Oct 5
13
Merchandise inventory
2,120
10
14
Lexor Suppliers
4,160
2,000 80
120 4,240
473 Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
*Problem 8-11A (30 minutes)
SALES JOURNAL
Date 2011 Oct.
Date
PR
PST Payable Credit
GST Payable Credit
Sales Credit
12 K-Company
106
6,840
480
360
6,000
17 CanCor
107
7,980
560
420
7,000
30 Delton Hardware
108
4,560
320
240
4,000
Date Account Credited 2011 Oct. 9 Sales 24 CanCor 26 K-Company
Date 2011 Oct.
Invoice Number
Account Debited
Page X Accts. Rec. Debit
Explanation Inv #105
Page X GST Payable Credit
96
Sales Credit 72
1,200
7,980 6,840
Account Credited 1 Lexor Suppliers 27 Milton Suppliers
Ch. No.
PR
Other Accts. Credit
CASH RECEIPTS JOURNAL Accts. PST Rec. Payable Credit Credit
Payee
Date of Invoice Oct. 1 Oct. 27
PURCHASES JOURNAL Accts. Payable Terms PR Credit 2/10,n/30 n/30
4,240 8,480
CASH DISBURSEMENTS JOURNAL Pur. Cash Disc. Account Debited PR Credit Credit
Cash Debit
Sales Discount Debit
1,368 7,910 6,840
70
Page X Purchases Debit
Other Accounts Debit
4,000 8,000 Page X Other Accts. Debit
GST Rec’ble Debit 240 480
GST Rec’ble Debit
Accts. Payable Debit
709
474
2011 Oct. 5 13 10 14
Cash purchase
Purchases
2,120
Lexor Suppliers
Lexor Suppliers
4,160
2,000 80
120 4,240
475
ALTERNATE PROBLEMS Problem 8-1B (20 minutes) Date
Transaction
May 1 The owner invested an automobile into the business.
Special Journal
Subledger
G
NE
CR
MI
3 Purchased merchandise inventory on credit, 1/5, n/30.
P
AP/MI
4 Sold merchandise on credit; terms 2/15, n30.
S
AR/MI
5 The customer of May 4 returned defective merchandise; the merchandise was scrapped.
G
AR
6 Regarding the May 3 purchase, received a credit memorandum from the supplier
G
AP/MI
CD
NE
17 Purchased office supplies on credit; terms n/30.
P
AP
19 Paid for the balance owing regarding the May 3 purchase.
CD
AP
22 Received payment regarding the May 4 sale.
CR
AR
25 Borrowed money from bank.
CR
NE
29 Purchased merchandise inventory paying cash.
CD
MI
30 Accrued interest revenue.
G
NE
30 Closed all revenue accounts to the income summary.
G
NE
2 Sold merchandise and received cash.
granting an allowance.
15 Paid mid-month salaries.
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
475
476
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
Problem 8-2B (40 minutes) Sales Journal Date
Account Debited
Invoice No.
Page: S1 PR
A/R Dr.
COGS Dr.
Sales Cr.
Merchandise Inventory Cr.
2011 347
102,000
51,000
348
8,200
5,700
18 Lars Wilson
349
6,000
4,900
25 Nathan Blythe
350
28,000
14,500
June 5 Martha Stohart 6 Carol Larson
Cash Receipts Journal
Date
Account Credited
PR
Explanatio n
Cash Dr.
Sales Disc Dr
Page: CR1
A/R Cr.
2011 June A/R – 12 Larson 24 A/R – Stohart
Carol
Inv. 348
8,036
Martha
Inv. 347
102,000
164
8,200 102,000
Sales Cr.
Other Accounts Cr.
COGS/Dr. Merchandi se Inventory/ Cr.
711
477
27 A/R – Lars Wilson
Inv. 349
120
5,880
6,000
Purchases Journal Date
Account Credited
Date of Invoice
Terms
P R
Page: P1
A/P Cr.
Merchandise Inventory Dr.
Office Supplies Dr.
Other Accounts Dr.
2011 Exeter Equip./Equipment Whitby Co. 4
June 1
8
Suppliers Unlimited
June 1
n30
45,000
June 4
1/5, n15
85,000
June 8
2/10, n30
1,800
45,000 85,000 1,800
478
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. 712
Problem 8-2B (concluded)
Cash Disbursements Date
Ch #
Account Debited
PR
Page: CD1
Cash Cr.
Merchandis e Inventory Cr.
Other Accounts Dr.
A/P Dr.
2011 June 11
101
Whitby Co.*
80,200
14
102
Salaries Expense
15,000
28
103
Exeter Equipment
45,000
29
104
Salaries Expense
15,000
80,200 15,000 45,000 15,000
*85,000 – 4,800 = 80,200
General Journal Fundamental Accounting Principles, Twelfth Canadian Edition
Date
Account Titles and Explanations
Page: G1 PR
Debit
Credit
2011 June
7 Accounts Payable – Whitby Co. .........................
4,800
Merchandise Inventory ...............................
4,800
To record allowance received for damages that occurred during delivery.
26 Sales Returns and Allowances ...........................
2,800
479
Accounts Receivable – Nathan Blythe....
2,800
To record unsatisfactory goods returned by customer.
26 Merchandise Inventory ....................................... Cost of Goods Sold......................................... Goods returned to inventory.
2,200 2,200
480
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
Problem 8-3B (40 minutes) Note: Since posting to the General Ledger was not a requirement in this problem, posting references are shown for values posted to the subledgers only.
Part 3 Date 2011 July 5 6 13 14
Date
Account Debited
SALES JOURNAL Invoice Number PR
Karen Harden Paul Kane Kelly Grody Karen Harden
Account Credited
2011 Jul 15 Karen y Harden 15 Sales
918 919 920 921
A/R Dr. Sales. Cr. 18,400 7,500 8,350 4,100
CASH RECEIPTS JOURNAL Sales Cash Discoun Explanation Debit t Debit PR Sale of Jul 5
Cash sales
Date Account Credited 2011 July 1 Beech Company
18,032
Page 3 Cost of Goods Sold Dr. Merchandise Inventory Cr.
368
10,200 4,100 4,600 2,300 Accts. Rec. Credit
Other Accts. Credit
Sales Credit
121,370
PURCHASES JOURNAL Accounts Merchandis Date of Payable e Inventory Invoice Terms PR Credit Debit 2/10, n/60
Cost of Goods Sold Dr. Merchandise Inventory Cr.
18,400
121,370
Jun 30
Page 3
6,300
6,300
66,700 Office Supplie s Debit
Page 3 Other Accts. Debit
713
481
7 Blackwater Inc. /Store Supp. 9 Poppe’s Supply /Store Equip.
Jul 7 Jul 8
n/10 EOM n/10 EOM
1,050
1,050
37,710
37,710
482
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Problem 8-3B (continued)
CASH DISBURSEMENTS JOURNAL Ch. No. Payee
Date 201 1
Jul y
Date 2011 July
3 300 The Weekly Journal 10 301 Beech Company 15 302 Payroll
Account Debited
Cash Credit
Advertising Expense Beech Company Sales Salaries Expens
GENERAL JOURNAL Account Titles and Explanations 8
PR
Fundamental Accounting Principles, Twelfth Canadian Edition
Accounts Payable—Blackwater Inc. ............ Store Supplies ........................................ Returned supplies to supplier.
Merchandis e Inventory Credit
575
201/ 125
Page 3 Accts. Payable Debit
575
6,174 30,620
PR
Other Accts. Debit
126
Debit 150
30,620
Page 3 Credit 150
6,300
483
Problem 8-3B (continued) Parts 1, 2, 3 ACCOUNTS RECEIVABLE SUBLEDGER
Date 2011 July 5 14 15 Date 2011 July 13 Date 2011 July 6
Explanation
Karen Harden PR S3 S3 CR3
Explanation
Kelly Grody PR S3
Explanation
Paul Kane PR
Copyright © 2011 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
S3
Debit 18,400 4,100
Debit
Credit
18,400 Credit
8,350 Debit 7,500
Balance 18,400 22,500 4,100 Balance 8,350
Credit
Balance 7,500
483
484
Problem 8-3B (concluded) ACCOUNTS PAYABLE SUBLEDGER
Date
Explanation
Beech Company PR
Debit
Credit
Balance
2011
July
1 10
Date
P3 CD3 Explanation
Blackwater Inc. PR
6,300 Debit
6,300
Credit
6,300 0 Balance
2011
July
7 8
Date 2011 July 9 Date 2011
P3 G3 Poppe’s Supply Explanation PR
150 Debit
P3 Sprague Company Explanation PR
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
1,050
Credit 37,710
Debit
Credit
1,050 900 Balance 37,710 Balance
484
485
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Problem 8-4B (70 minutes) Parts 2, 3, 4
Date 2011 July 5 6 13 14 29 30 31
Date
Account Debited
SALES JOURNAL Invoice P Number R
Karen Harden Paul Kane Kelly Grody Karen Harden Paul Kane Kelly Grody Totals
Account Credited
2011 Jul 15 y 15 16 21
Karen Harden Sales Paul Kane L.T. Notes Pay 23 Kelly Grody 24 Karen Harden 31 Sales
918 919 920 921 922 923
A/R Dr. Sales. Cr. 18,400 7,500 8,350 4,100 28,090 15,750 82,190 (106/413)
CASH RECEIPTS JOURNAL Sales Cash Discoun Explanation Debit t Debit PR Sale of Jul 5
Cash sales Sale of Jul 6 Note to bank 251 Sale of Jul 13 Sale of Jul 14 Cash sales
18,032
Page 3 Cost of Goods Sold Dr. Merchandise Inventory Cr.
368
10,200 4,100 4,600 2,300 15,500 8,700 45,400 (502/119) Accts. Rec. Credit
Page 3 Cost of Goods Sold Dr. Merchandise Inventory Cr.
18,400
121,370 7,350 20,000
150
7,500
8,183
167
8,350
4,018
82
4,100
79,020
Sales Credit
Other Accts. Credit
121,370
66,700 20,000
79,020
43,500
717
486
31 Totals
257,973 (101)
767 (415)
38,350 (106)
200,390 20,000 (413) (X)
110,200 (502/119)
487
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. 718
Problem 8-4B (continued)
Date 2011 July
Account Credited 1 Beech Company
PURCHASES JOURNAL Accounts Merchandis Date of Payable e Inventory Invoice Terms PR Credit Debit Jun 30
7 Blackwater Inc. /Store Supp. 9 Poppe’s Supply /Store Equip. 17 Sprague Company
Jul 7
20 Poppe’s Supply
Jul 19
26 Beech Company
Jul 26
31 Totals
Jul 8 Jul 17
2/10, n/60 n/10 EOM n/10 EOM 2/10, n/60 n/10 EOM 2/10, n/30
6,300
125/
1,050
1,050
165/
37,710
37,710
8,200
750
9,770
9,770
63,780
24,270
Fundamental Accounting Principles, Twelfth Canadian Edition
CASH DISBURSEMENTS JOURNAL
201 1
Jul y
Ch. No. Payee
3 300 The Weekly Journal 10 301 Beech Company 15 302 Payroll
Page 3 Other Accts. Debit
(201)
Date
Office Supplie s Debit
Cash Credit
Account Debited
PR
Advertising Expense
655
575
Beech Company Sales Salaries Expens 621
6,174 30,620
6,300
8,200 750
(119)
Merchandis e Inventory Credit
750 (124)
Other Accts. Debit
38,760 (X)
Page 3 Accts. Payable Debit
575 126
30,620
6,300
27 303 Sprague Company 31 304 Payroll 31
Totals
Sprague Company Sales Salaries Expense
e
488
5,684
621
30,620 73,673 (101)
* $8,200 – $2,400 return = $5,800
116
5,800* 30,620
242 (119)
61,815 (X)
12,100 (201)
489
Problem 8-4B (continued) Date 2011 July
GENERAL JOURNAL Account Titles and Explanations 8
PR
Debit
Accounts Payable—Blackwater Inc. ............ Store Supplies ....................................... Returned supplies to supplier.
201/ 125
150
24 Accounts Payable—Sprague Company ........ Merchandise Inventory........................... Returned defective inventory to merchandise supplier.
201/ 119
2,400
Page 3 Credit 150
2,400
Parts 1, 2, 3, 4 GENERAL LEDGER Cash Explanation
Date
Acct. No. 101 PR
Debit
Credit
Balance
2011
Balance Forward
June
3 0
95,000
July
3 1
CR3
3 1
CD3
257,973
352,973 73,673
Accounts Receivable Date
Explanation
PR
279,300
Acct. No. 106 Debit
Credit
Balance
2011 July
3 1
S3
3 1
CR3
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
82,190
82,190 38,350
43,840
489
490
Merchandise Inventory Date
Explanation
PR
Acct. No. 119 Debit
Credit
Balance
2011 Jun.
3 0
Balance Forward
167,000
Jul.
2 4
G3
2,400
164,600
3 1
S3
45,400
119,200
3 1
CR3
110,200
9,000
3 1
P3
3 1
CD3
24,270
33,270 242
Acct. No. 124
Office Supplies Explanation
Date
PR
33,028
Debit
Credit
Balance
2011 July
3 1
P3
750
750
Problem 8-4B (continued) Acct. No. 125
Store Supplies Explanation
Date
PR
Debit
Credit
Balance
2011 July
7
P3
8
G3
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
1,050
1,050 150
900
490
491
Acct. No. 165
Store Equipment Explanation
Date
PR
Debit
Credit
Balance
2011 July
9
P3
37,710
37,710
Accounts Payable Date
Explanation
PR
Acct. No. 201 Debit
Credit
Balance
2011 July
8
G3
24
G3
31
P3
31
CD3
150
(150)
2,400
(2,550) 63,780
12,100
49,130
Acct. No. 251
Long-Term Notes Payable Explanation
Date
PR
61,230
Debit
Credit
Balance
2011 June
3 0
July
2 1
Balance Forward
167,000 CR3
20,000
Gene Eldridge, Capital Explanation
Date
PR
187,000
Acct. No. 301
Debit
Credit
Balance
2011 Jun.
3 0
Balance Forward
95,000
Sales
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
Acct. No. 413
491
492
Explanation
Date
PR
Debit
Credit
Balance
2011 July
3 1
S3
3 1
CR3
82,190
82,190
200,390
282,580
Acct. No. 415
Sales Discounts
Date
Explanation
PR
Debit
Credit
Balance
2011 July
3 1
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
CR3
767
767
492
493
Problem 8-4B (continued) Cost of Goods Sold Explanation
Date
Acct. No. 502
PR
Debit
Credit
Balance
2011 July
3 1
S3
3 1
CR3
Sales Salaries Expense Explanation PR
Date
45,400
45,400
110,200
155,600
Debit
Acct. No. 621 Credit Balance
2011
July
15 31
CD3 CD3 Advertising Expense Explanation PR
Date
30,620 30,620 Debit
30,620 61,240 Acct. No. 655 Credit Balance
2011
July
3
CD3
575
575
ACCOUNTS RECEIVABLE SUBLEDGER
Date 2011 July 5 14 15 24
Explanation
Karen Harden PR S3 S3 CR3 CR3
Date 2011 July 13 23 30
Explanation
Date 2011
Explanation
Kelly Grody PR S3 CR3 S3 Paul Kane PR
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
Debit 18,400 4,100
Debit 8,350 15,750 Debit
Credit
18,400 4,100 Credit 8,350
Credit
Balance 18,400 22,500 4,100 0 Balance 8,350 0 15,750 Balance
493
494
July
6 16 29
S3 CR3 S3
7,500 28,090
7,500
7,500 0 28,090
Problem 8-4B (continued) ACCOUNTS PAYABLE SUBLEDGER
Date
Explanation
Beech Company PR
Debit
Credit
Balance
2011
July
1 10 26
P3 CD3 P3 Blackwater Inc. Explanation PR
Date
6,300
Debit
6,300 9,770 Credit
6,300 0 9,770 Balance
2011
July
7 8
Date 2011 July 9 20 Date 2011 July 17 24 27
P3 G3 Poppe’s Supply Explanation PR
150 Debit
P3 P3 Sprague Company Explanation PR
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
P3 G3 CD3
1,050
Credit 37,710 750
Debit 2,400 5,800
Credit 8,200
1,050 900 Balance 37,710 38,460 Balance 8,200 5,800 0
494
495
Problem 8-4B (continued) Part 5 ELDRIDGE INDUSTRIES Trial Balance July 31, 2011 Account
Debit
Credit
Cash ....................................................................................... $279,300 Accounts receivable ........................................................................
43,840
Merchandise inventory ..................................................................
33,028
Office supplies ...................................................................................
750
Store supplies ....................................................................................
900
Store equipment ...............................................................................
37,710
Accounts payable .............................................................................
$ 49,130
Long-term notes payable ..............................................................
187,000
Gene Eldridge, capital.....................................................................
95,000
Sales ......................................................................................................
282,580
Sales discounts ..................................................................................
767
Cost of goods sold.............................................................................
155,600
Sales salaries expense ....................................................................
61,240
Advertising expense .......................................................................
575
Totals ..................................................................................... $613,710 $613,710 ELDRIDGE INDUSTRIES Schedule of Accounts Receivable July 31, 2011 Kelly Grody.............................................................................. Paul Kane................................................................................ Total accounts receivable ........................................................ Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
$15,750 28,090 $43,840 495
496
ELDRIDGE INDUSTRIES Schedule of Accounts Payable July 31, 2011
Beech Company ....................................................................
$ 9,770
Blackwater Inc. ................................................................................
900
Poppe’s Supply ..................................................................................
38,460
Total accounts payable ..................................................................
$49,130
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
496
497
Problem 8-4B (concluded) Analysis component: To find the error(s),
re-add the account balances on the schedule of accounts payable to confirm that the addition was correct. trace the balances listed on the schedule of accounts payable back to the subsidiary accounts to confirm that they were listed correctly on the schedule. recalculate the balance of each subsidiary account to confirm that the additions and subtractions were correct. trace the postings from each subsidiary account and from the controlling account back to the appropriate journals.
Since the purchases and cash disbursements journals were footed and crossfooted before posting, the previous steps should disclose the error.
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497
498
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Problem 8-5B (120 minutes) Parts 1, 2, 3 Date
Account Debited
2011 Oct. 6 12 15 16 21 31
Marge Craig Heather Flatt Amy Izon Heather Flatt Jan Wildman Totals
Account Credited
Date 2011 Oct. 2 Jan Wildman 15 Sales 15 Marge Craig 22 Heather Flatt 25 Amy Izon 28 Store Supplies 31 Sales
Explanation
SALES JOURNAL Invoice P Number R 913 914 915 916 917
Page 3 Cost of Goods Sold Dr. Merchandise Inventory Cr.
3,300 3,650 3,100 4,290 5,520 19,860 (106/413)
1,800 2,000 1,700 2,460 3,000 10,960 (502/119)
CASH RECEIPTS JOURNAL Sales Discoun Acct. Cash t Rec. PR Debit Debit Credit
Invoice Nov 23 Cash sales Invoice, Dec 6 Invoice, Dec 12 Invoice, Dec 15 Sold supplies 125 Cash sales
A/R Dr. Sales. Cr.
4,116
84
Page 3 Sales Credit
4,200*
38,830 2,401 3,577
49 73
2,450* 3,650**
2,842
58
2,900**
38,830
58 66,128
Other Cost of Goods Sold Dr. Acct. Merchandise Inventory Credit Cr.
21,400
58 66,128
36,400
725
499
31 Totals
117,952 (101)
264 13,200* * (415) (106)
* $3,300 – $850 return = $2,450 ** $3,100 – $200 return = $2,900
104,958
58
57,800
(413)
(X)
(502/119)
500
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Problem 8-5B (continued)
Date
Account Credited
2011 Oct. 2 Walters Company
PURCHASES JOURNAL Accounts Merchandis Date of Payable e Invoice Terms PR Credit Inventory Debit Oct 2
Fundamental Accounting Principles, Twelfth Canadian Edition
5 Green Supply Co.
Oct 3
15 Walters Company
Oct 15
15 Sunshine Company
Oct 15
16 Green Supply Co.
Oct 16
20 Green Supply Co. /Store Equip. 28 Sunshine Company
Oct 19
31 Totals
Oct 28
2/10, n/60 n/10 EOM 2/10, n/60 2/10, n/60 n/10 EOM n/10 EOM 2/10, n/60
3,200
3,200
1,300
1,300
3,990
3,990
2,650
2,650
765
Page 2 Other Accts. Debit
765
165/
7,475
6,030
6,030
25,410
17,170
(201)
Office Supplie s Debit
7,475
(119)
765 (124)
7,475 (X)
501
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Problem 8-5B (continued) CASH DISBURSEMENTS JOURNAL Date 201 1 Oct.
Ch. No. Payee
2 619 Omni Realty Co. 6 620 Fireside Company 12 621 Walters Company 15 622 Jamie Ford 25 623 Walters Company* 25 624 Sunshine Company 29 625 Marlee Levin 30 626 Midwest Elec. Co. 30 627 Jamie Ford. 31 Totals
*3,990 – 640 return = 3,350
Merchandis e Inventory Credit
Other Accts. Debit
Page 4 Accts. Payable Debit
Account Debited
PR
Cash Credit
Rent Expense Fireside Company
640
2,250 3,724
76
Walters Company
3,136
64
Sales Salaries Expense Walters Company
621
2,620
3,283
67
3,350
2,597
53
2,650
302
4,000
4,000
690
990
990
Sunshine Company Marlee Levin, Withdrawals Utilities Expense
2,250
3,800 3,200
2,620
Sales Salaries Expense ..................................................... 621 2,620 25,220 260 (101) (507)
2,620 12,480 (X)
13,000 (201)
727
502
Problem 8-5B (continued) GENERAL JOURNAL Account Title and Explanations
Date 201 1 Oct.
PR
Page 2 Credit
Debit
4 Accounts Payable—Fireside Company ......... Merchandise Inventory .......................... Defective merchandise returned.
201/ 119
460
9 Sales Returns and Allowances ..................... Accounts Receivable—Marge Craig ..... Returned merchandise was scrapped.
414 106/
850
18 Sales Returns and Allowances ..................... Accounts Receivable—Amy Izon ........... Returned merchandise was scrapped.
414 106/
200
19 Accounts Payable—Walters Company ......... Merchandise Inventory .......................... Returned merchandise.
201/ 119
640
20 Accounts Payable—Green Supply Co. ........ Office Supplies ...................................... Returned office supplies.
201/ 124
143
460
850
200
640
143
ACCOUNTS RECEIVABLE SUBLEDGER Marge Craig
Date
Explanation
PR
Debit
Credit
Balance
2011 Oct.
6
S3
9
G2
1 5
CR3
3,300
3,300 850
2,450
2,450
0
Heather Flatt
Date
Explanation
PR
Debit
Credit
Balance
2011
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
502
503
Oct.
1 2
S3
3,650
3,650
1 6
S3
4,290
7,940
2 2
CR3
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
3,650
4,290
503
504
Problem 8-5B (continued) Amy Izon
Date
Explanation
PR
Debit
Credit
Balance
2011 Oct.
1 5
S3
1 8
G2
2 5
CR3
Date 2011 Sept 23 Oct. 2 21 Part 2
Date 2011 Sept 28 Oct. 4 6 Date 2011 Oct. 5 16 20 20 Date 2011 Oct. 15 25
Explanation
Jan Wildman PR S2 CR3 S3
3,100
Debit 4,200 5,520
3,100 200
2,900
2,900
0
Credit 4,200
Balance 4,200 0 5,520
ACCOUNTS PAYABLE SUBLEDGER Explanation
Fireside Company PR P1 G2 CD4
Debit 460 3,800
Green Supply Company Explanation PR Debit P2 P2 P2 G2 Explanation
Sunshine Company PR
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
P2 CD4
143 Debit 2,650
Credit 4,260
Credit 1,300 765 7,475
Credit 2,650
Balance 4,260 3,800 0 Balance 1,300 2,065 9,540 9,397 Balance 2,650 0 504
505
28
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
P2
6,030
6,030
505
506
Problem 8-5B (continued) Date 2011 Oct. 2 12 15 19 25
Explanation
P2 CD4 P2 G2 CD4
Parts 2, 3
Date 2011 Sept 30 Balance Oct. 31 31 Date 2011 Sept 30 Balance Oct. 9 18 31 31 Date 2011 Sept 30 Balance Oct. 4 19 31 31 31 31 Date 2011 Sept 30 Balance Oct. 20
Walters Company PR
Debit 3,200 640 3,350
Credit 3,200 3,990
Balance 3,200 0 3,990 3,350 0
GENERAL LEDGER
Explanation
Cash
PR CR3 CD4
Accounts Receivable Explanation PR G2 G2 S3 CR3 Merchandise Inventory Explanation PR G2 G2 S3 P2 CD4 CR3 Office Supplies Explanation PR
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
G2
Debit 117,952
Debit
19,860
Debit
17,170
Debit
Acct. No. 101 Credit Balance
25,220
5,361 123,313 98,093
Acct. No. 106 Credit Balance 850 200 13,200
4,200 3,350 3,150 23,010 9,810
Acct. No. 119 Credit Balance 460 640 10,960 260 57,800
66,970 66,510 65,870 54,910 72,080 71,820 14,020
Acct. No. 124 Credit Balance 143
607 464 506
507
31 Problem 8-5B (continued) Date 2011 Sept 30 Balance Oct. 28 Date 2011 Sept 30 Balance Oct. 20 Date 2011 Sept 30 Balance Date 2011 Sept 30 Balance Oct. 4 19 20 31 31 Date 2011 Sept 30 Balance Date 2011 Oct. 29 Date 2011 Oct. 31 31
P2
Store Supplies Explanation PR
765 Debit
CR3 Store Equipment Explanation PR P2
1,229 Acct. No. 125 Credit Balance 58
Debit
Acct. No. 165 Credit Balance 42,129 49,604
7,475
Accumulated Amortization, Store Equipment Explanation PR Debit
346 288
Acct. No. 166 Credit Balance 9,153
Accounts Payable Explanation PR G2 G2 G2 P2 CD4 Marlee Levin, Capital Explanation PR
Debit 460 640 143 13,000 Debit
Acct. No. 201 Credit Balance
25,410
4,260 3,800 3,160 3,017 28,427 15,427
Acct. No. 301 Credit Balance 106,200
Marlee Levin, Withdrawals Explanation PR CD4 Explanation
Sales
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
PR S3 CR3
Debit
Acct. No. 302 Credit Balance
4,000 Debit
4,000 Acct. No. 413 Credit Balance 19,860 104,958
19,860 124,818
507
508
Problem 8-5B (continued) Date 2011 Oct. 9 18 Date 2011 Oct. 31 Date 2011 Oct. 31 31 Date 2011 Oct. 15 30 Date 2011 Oct. 2 Date 2011 Oct. 30
Sales Returns and Allowances Explanation PR Debit G2 G2 Sales Discounts Explanation PR CR3 Cost of Goods Sold Explanation PR S3 CR3 Sales Salaries Expense Explanation PR CD4 CD4 Rent Expense Explanation PR CD4 Utilities Expense Explanation PR
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
CD4
850 200 Debit 264 Debit 10,960 57,800 Debit 2,620 2,620 Debit 2,250 Debit 990
Acct. No. 414 Credit Balance 850 1,050 Acct. No. 415 Credit Balance 264 Acct. No. 502 Credit Balance 10,960 68,760 Acct. No. 621 Credit Balance 2,620 5,240 Acct. No. 640 Credit Balance 2,250 Acct. No. 690 Credit Balance 990
508
509
Problem 8-5B (concluded) Part 4 STARSHINE PRODUCTS Trial Balance October 31, 2011 Account Cash ....................................................................... Accounts receivable ............................................... Merchandise inventory ........................................... Office supplies ........................................................ Store supplies ........................................................ Store equipment ..................................................... Accumulated amortization, store equipment ........... Accounts payable ................................................... Marlee Levin, capital .............................................. Marlee Levin, withdrawals ...................................... Sales ...................................................................... Sales returns and allowances................................. Sales discounts ...................................................... Cost of goods sold.................................................. Sales salaries expense .......................................... Rent expense ......................................................... Utilities expense ..................................................... Totals .....................................................................
Debit $ 98,093 9,810 14,020 1,229 288 49,604
4,000
Credit
$ 9,153 15,427 106,200
124,818 1,050 264 68,760 5,240 2,250 990 $255,598 $255,598
STARSHINE PRODUCTS
Schedule of Accounts Receivable October 31, 2011
Heather Flatt ............................................
$4,290
Jan Wildman. ...........................
5,520
Total accounts payable ........
$9,810
STARSHINE PRODUCTS Schedule of Accounts Payable October 31, 2011
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509
510
Green Supply Company ........ Sunshine Company. ............. Total accounts payable .........
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
$ 9,397 6,030 $15,427
510
511
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Problem 8-6B (30 minutes)
Page 1
Sales Journal
Date
Account Debited
Invoice No.
PR
A/R Dr. Sales Cr.
COGS Dr. PR Merchandise Inventory Cr.
2011 213
300.00
108.00
15 J. Samuelson
214
750.00
270.00
22 V. Nels
215
600.00
200.60
30 M. Bains
216
810.00
270.81
July 9 W. Tilden
Purchases Journal Fundamental Accounting Principles, Twelfth Canadian Edition
Date
Page 1 Merchandis e Inventory
Date of Invoice
Terms
Tulsco Supply
July 4
n/30
450.00
450.00
Gentry Holdings
July 18
n/30
270.00
270.00
Account Credited
PR
A/P Cr.
PR
Dr.
2011 July 4 18
NOTE: An additional PR column has been added to facilitate the referencing of inventory entries into the
Office Supplies Dr.
Other Accounts Dr.
512
inventory subsidiary ledger.
513
Problem 8-6B (concluded) Inventory Subledger Record — Weighted-Average Perpetual Inventory Balance Date
PR
Purchases
Units
Unit Cost
Sales (at cost)
Total Cost
Unit s
Unit Cost
Total Cost
(a)
(b) (a)
Tota l Average Unit Cost/Un s it
(b)
Total Cost Inventory Balance Calculations
July 31
Beginning inventory 30
@ $12.0 = $ 0
360.0 0
30 $12.00 $ 360.0 0 30
4 P1
45
@ $10.0 = $ 0
450.0 0
45 @ 10.0 = 0 450.00 75 $10.80 $ 810.0 0
10 @ $10.8 = $ 108.00 0
9 S1
25 @ $10.8 = $ 270.00 0
30
@ $9.00 = $
270.0 0
75
$ 810.0 0
65
$ 702.0 0
65
$ 702.0 0
40
$ 432.0 0
40
$ 432.0 0
30 @ 9.00 = 270.00 70 $10.03 $ 702.0 0
22 S1
$ 810.0 0
– @ 10.8 = – 25 0 270.00 40 $10.80 $ 432.0 0
18 P1
75
– @ 10.8 = – 10 0 108.00 65 $10.80 $ 702.0 0
15 S1
$ 360.0 0
20 @ $10.0 = $ 200.60 3
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70
$ 702.0 0
70
$ 702.0 0
– @ 10.0 = – 20 3 200.60
513
514 50 $10.03 $ 501.4 0
27 @ $10.0 = $ 270.81 3
30 S1
105
$1,080.00 82
Cost of goods available for sale Cost of goods sold = +
$849.41
$ 501.4 0
50
$ 501.4 0
– @ 10.0 = – 27 3 270.81 23 $10.03 $ 230.5 9
Total
50
23
23
$ 230.5 9
$230.59 Ending inventory
Note: An additional PR column has been added to the Inventory Subledger Record to facilitate referencing of inventory entries.
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514
515 Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. 726
*Problem 8-7B (40 minutes)
Note: Since posting to the General Ledger was not a requirement in this problem, posting references are shown for values posted to the subledgers only.
SALES JOURNAL
Page 3 A/R Dr.
Invoice Date
Account Debited
Fundamental Accounting Principles, Twelfth Canadian Edition
Numbe r
PR
Sales Cr.
5 Karen Harden
918
18,400
6 Paul Kane
919
7,500
13 Kelly Grody
920
8,350
14 Karen Harden
921
4,100
2011 July
CASH RECEIPTS JOURNAL Account Date
Credited
Accts.
Cash
Disc.
Rec.
Sales
Accts.
Credit
Credit
Explanation
PR
Debit
Debit
Credit
Sale of July 5
18,032
368
18,400
2011 July
1 Karen Harden 5
Page 3 Other
Sales
1 Sales 5
516
Cash sales
121,370
121,370
PURCHASES JOURNAL Accounts Date of Date
Account Credited
Invoic e
Terms
Office
Page 3 Other
Payable
Purchases
Supplies
Accounts
PR
Credit
Debit
Debit
Debit
2011 July
1 Beech Company
Jun. 30
2/10,n/60
6,300
7 Blackwater Inc./Store Supplies
July 7
n/10 EOM
1,050
1,050
9 Poppe’s Supply/Store Equipment
July 8
n/10 EOM
37,710
37,710
6,300
517
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*Problem 8-7B (continued) CASH DISBURSEMENTS JOURNAL
Ch. Date
No.
Payee
Account Debited
PR
Purchas e
Other
Page 3 Accts.
Cash
Discoun t
Accts.
Payable
Credit
Credit
Debit
Debit
2011 July
Date 2011 July
3 300
The Weekly Journal
Advertising Expense
1 301 0
Beech Company
Beech Company
1 302 5
Payroll
Sales Salaries Expense
GENERAL JOURNAL Account Titles and Explanations 8
Accounts Payable—Blackwater Inc. ............ Store Supplies ........................................ Returned supplies to supplier.
575
6,174
575 126
30,620
PR 201/ 125
Debit 150
6,300 30,620
Page 3 Credit 150
737
518
*Problem 8-7B (concluded) ACCOUNTS RECEIVABLE SUBLEDGER
Date 2011 July 5 14 15
Explanation
Karen Harden PR S3 S3 CR3
Date 2011 July 13
Explanation
Date 2011 July 6
Explanation
Kelly Grody PR S3 Paul Kane PR S3
Debit
Credit
18,400 4,100
Debit
18,400 Credit
8,350 Debit
Balance 18,400 22,500 4,100 Balance 8,350
Credit
7,500
Balance 7,500
ACCOUNTS PAYABLE SUBLEDGER
Beech Company Explanation PR
Date
Debit
Credit
Balance
2011
July
1 10
Date
P3 CD3 Explanation
Blackwater Inc. PR
6,300 Debit
6,300
Credit
6,300 0 Balance
2011
July
7 8
Date 2011 July 9 Date 2011
P3 G3 Explanation
Poppe’s Supply PR
150 Debit
P3 Sprague Company Explanation PR
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
1,050
Credit 37,710
Debit
Credit
1,050 900 Balance 37,710 Balance
518
519
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519
520 Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
*Problem 8-8B (70 minutes) SALES JOURNAL
Page 3 Invoice
Date
Account Debited
A/R Dr.
Numbe r
PR
Sales Cr.
5 Karen Harden
918
18,400
6 Paul Kane
919
7,500
13 Kelly Grody
920
8,350
14 Karen Harden
921
4,100
29 Paul Kane
922
28,090
30 Kelly Grody
923
15,750
2011 July
82,190
Totals
(106/413)
CASH RECEIPTS JOURNAL Account Date 2011
Credited
Explanation
PR
Page 3
Sales
Accts.
Other
Cash
Disc.
Rec.
Sales
Accts.
Debit
Debit
Credit
Credit
Credit
739
July
521
1 Karen 5 Harden
Sale of July 5
1 Sales 5
Cash sales
1 Paul Kane 6
Sale of July 6
7,350
2 L.T. Notes P. 1
Note to bank
25 1
20,000
2 Kelly Grody 3
Sale of July 13
8,183
167
8,350
2 Karen 4 Harden
Sale of July 14
4,018
82
4,100
3 Sales 1
Cash sales
Totals
18,032
368
18,400
121,37 0
121,37 0 150
7,500 20,000
79,020
79,020
257,97 3
767
38,350
200,39 0
20,000
(101)
(415)
(106)
(413)
(X)
522
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*Problem 8-8B (continued)
PURCHASES JOURNAL
Page 3 Accounts
Date of Date
Account Credited
Invoic e
Terms
Office
Other
Payable
Purchase s
Supplie s
Account s
Credit
Debit
Debit
Debit
6,300
6,300
PR
2011 July
Fundamental Accounting Principles, Twelfth Canadian Edition
1 Beech Company
Jun. 30
2/10,n/60
7 Blackwater Inc./Store Supplies
July 7
n/10 EOM
125/
1,050
1,050
9 Poppe’s Supply/Store Equipment
July 8
n/10 EOM
165/
37,710
37,710
17 Sprague Company
July 17
2/10,n/6 0
8,200
20 Poppe’s Supply
July 19
n/10 EOM
750
26 Beech Company
July 26
2/10,n/3 0
9,770
9,770
63,780
24,270
750
38,760
(201)
(505)
(124)
(X)
Totals
8,200 750
523
CASH DISBURSEMENTS JOURNAL
Purchas e
Other
Cash
Discoun t
Accts.
Payable
PR
Credit
Credit
Debit
Debit
655
575
Ch. Date
No.
Payee
Account Debited
Page 3 Accts.
2011 July
3 300
The Weekly Journal
Advertising Expense
1 301 0
Beech Company
Beech Company
1 302 5
Payroll
Sales Salaries Expense
2 303 7
Sprague Company
Sprague Company
3 304 1
Payroll
Sales Salaries Expense
Totals
6,174
621
30,620
5,684
621
30,620 73,673 (101)
*$8,200 - $2,400 return = $5,800
575 126
6,300 30,620
116
5,800* 30,620
242 (506)
61,815
12,100
(X)
(201)
524
*Problem 8-8B (continued) Date 2011 July
GENERAL JOURNAL Account Titles and Explanations 8
PR
Debit
Accounts Payable—Blackwater Inc. ............ Store Supplies ....................................... Returned supplies to supplier.
201/ 125
150
24 Accounts Payable—Sprague Company ........ Purchase Returns and Allowances ........ Returned defective inventory to merchandise supplier.
201/ 507
2,400
Page 3 Credit 150
2,400
Parts 1, 2, 3, 4 GENERAL LEDGER Cash Explanation
Date
Acct. No. 101 PR
Debit
Credit
Balance
2011
Balance Forward
June
3 0
95,000
July
3 1
CR3
3 1
CD3
257,973
352,973 73,673
Accounts Receivable Date
Explanation
PR
279,300
Acct. No. 106 Debit
Credit
Balance
2011 July
3 1
S3
3 1
CR3
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82,190
82,190 38,350
43,840
524
525
Merchandise Inventory Date
Explanation
PR
Acct. No. 119 Debit
Credit
Balance
2011 Jun.
3 0
Balance Forward
167,000
Acct. No. 124
Office Supplies Explanation
Date
PR
Debit
Credit
Balance
2011 July
3 1
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
P3
750
750
525
526
*Problem 8-8B (continued) Acct. No. 125
Store Supplies Explanation
Date
PR
Debit
Credit
Balance
2011 July
7
P3
8
G3
1,050
1,050 150
Acct. No. 165
Store Equipment Explanation
Date
900
PR
Debit
Credit
Balance
2011 July
9
P3
37,710
37,710
Accounts Payable Date
Explanation
PR
Acct. No. 201 Debit
Credit
Balance
2011 July
8
G3
24
G3
31
P3
31
CD3
150
(150)
2,400
(2,550) 63,780
12,100
49,130
Acct. No. 251
Long-Term Notes Payable Explanation
Date
PR
61,230
Debit
Credit
Balance
2011 June
3 0
July
2 1
Balance Forward
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167,000 CR3
20,000
187,000
526
527
Gene Eldridge, Capital Explanation
Date
PR
Acct. No. 301
Debit
Credit
Balance
2011 Jun.
3 0
Balance Forward
95,000
Sales Explanation
Date
Acct. No. 413 PR
Debit
Credit
Balance
2011 July
3 1
S3
3 1
CR3
82,190
82,190
200,390
282,580
Acct. No. 415
Sales Discounts
Date
Explanation
PR
Debit
Credit
Balance
2011 July
3 1
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
CR3
767
767
527
528
*Problem 8-8B (continued) Purchases Explanation
Date
Acct. No. 505 PR
Debit
Credit
Balance
2011 July
3 1
P3
24,270
24,270
Purchase Discounts Explanation
Date
PR
Acct. No. 506 Debit
Credit
Balance
2011 July
3 1
CD3
242
Purchase Returns and Allowances Explanation
Date
PR
242
Acct. No. 507 Debit
Credit
Balance
2011 July
2 4
G3
Sales Salaries Expense Explanation PR
Date
2,400
Debit
2,400
Acct. No. 621 Credit Balance
2011
July
15 31
CD3 CD3 Advertising Expense Explanation PR
Date
30,620 30,620 Debit
30,620 61,240 Acct. No. 655 Credit Balance
2011
July
3
CD3
575
575
ACCOUNTS RECEIVABLE SUBLEDGER
Date 2011
Explanation
Karen Harden PR
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Debit
Credit
Balance
528
529
July
5 14 15 24
Date 2011 July 13 23 30
S3 S3 CR3 CR3 Explanation
Kelly Grody PR
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
S3 CR3 S3
18,400 4,100
Debit 8,350 15,750
18,400 4,100 Credit 8,350
18,400 22,500 4,100 0 Balance 8,350 0 15,750
529
530
*Problem 8-8B (continued) Date 2011 July 6 16 29
Explanation
Paul Kane PR S3 CR3 S3
Debit
Credit
7,500 28,090
7,500
Balance 7,500 0 28,090
ACCOUNTS PAYABLE SUBLEDGER
Date
Explanation
Beech Company PR
Debit
Credit
Balance
2011
July
1 10 26
Date
P3 CD3 P3 Explanation
Blackwater Inc. PR
6,300
Debit
6,300 9,770 Credit
6,300 0 9,770 Balance
2011
July
7 8
Date 2011 July 9 20 Date 2011 July 17 24 27
P3 G3 Explanation
Poppe’s Supply PR
150 Debit
P3 P3 Sprague Company Explanation PR
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
P3 G3 CD3
1,050
Credit 37,710 750
Debit 2,400 5,800
Credit 8,200
1,050 900 Balance 37,710 38,460 Balance 8,200 5,800 0
530
531
*Problem 8-8B (concluded) Part 5 ELDRIDGE INDUSTRIES Trial Balance July 31, 2011 Account
Debit
Cash .................................................................................
$279,300
Accounts receivable ..................................................................
43,840
Merchandise inventory ............................................................
167,000
Office supplies .............................................................................
750
Store supplies ..............................................................................
900
Store equipment .........................................................................
37,710
Credit
Accounts payable .......................................................................
$ 49,130
Long-term notes payable ........................................................
187,000
Gene Eldridge, capital ..............................................................
95,000
Sales ................................................................................................
282,580
Sales discounts............................................................................
767
Purchases......................................................................................
24,270
Purchase discounts ...................................................................
242
Purchase returns and allowances ........................................
2,400
Sales salaries expense ..............................................................
61,240
Advertising expense .................................................................
575
Totals..............................................................................................
$616,352
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
$616,352
531
532
ELDRIDGE INDUSTRIES Schedule of Accounts Receivable July 31, 2011 Kelly Grody........................................................................ Paul Kane ......................................................................... Total accounts receivable ..................................................
$15,750 28,090 $43,840
ELDRIDGE INDUSTRIES Schedule of Accounts Payable July 31, 2011
Beech Company ..............................................................
$ 9,770
Blackwater Inc. ..........................................................................
900
Poppe’s Supply ............................................................................
38,460
Total accounts payable ............................................................
$49,130
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
532
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. 746
*Problem 8-9B - Perpetual (100 minutes) Part 4 SALES JOURNAL Invoice Date
Account Debited
Page 2 COGS
Accts.
PST
GST
Rec.
Payable
Payable
Sales
Dr./
Debit
Credit
Credit
Credit
MI Cr.
7,366.00
635.00
381.00
6,350.00
4,445.00
14,500.00 1,250.00
750.00
12,500.0 0
8,750.00
Fundamental Accounting Principles, Twelfth Canadian Edition
Number
PR
8 Leroy Holmes
439
10 Sam Spear
440
15 Marjorie Cook
441
4,930.00
425.00
255.00
4,250.00
2,975.00
22 Sam Spear
442
3,010.20
259.50
155.70
2,595.00
1,800.00
24 Marjorie Cook
443
3,758.40
324.00
194.40
3,240.00
2,260.00
33,564.60 2,893.50 1,736.10
28,935.0 0
20,230.0 0
(413)
(502/119)
2011 Nov.
31 Totals
(106)
(224)
(225)
CASH RECEIPTS JOURNAL Account Date
Credited
Explanation
PR
Page 3 Other
PST
GST
Sales
Accts.
Cash
Disc.
Rec.
Sales
Accts
Payabl Payabl e e
Debit
Debit
Credit
Credit
Credit
Credit
Credit
COGS Dr./ MI Cr.
534
2011 Nov 2 L.T. Notes . Pay
Note to bank
25 1
86,250.0 0
86,250.0 0
1 Sales 5
Cash sales
31,517.2 0
1 Leroy 8 Holmes
Invoice, Nov 8
7,239.00 127.0 7,366.00 0
1 Sam Spear 9
Invoice, Nov 10
14,250.0 250.0 14,500.0 0 0 0
2 Marjorie 5 Cook
Invoice, Nov 15
4,845.00 85.00 4,930.00
3 Sales 0
Cash sales
3 Totals 0
41,415.4 8
27,170.0 0
2,717.0 1,630.2 19,000.0 0 0 0
35,703.0 0
3,570.3 2,142.1 25,000.0 0 8 0
185,516. 462.0 26,796.0 62,873.0 86,250.0 6,287.3 3,772.3 44,000.0 68 0 0 0 0 0 8 0 (101)
(415)
(106)
(413)
(X)
(224)
(225)
(502/11 9)
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
*Problem 8-9B - Perpetual (continued)
PURCHASES JOURNAL Date 2011 Nov. 1 4 5 11 16 30
Date of Invoice
Account Credited Jett Supply/Office Equip. Defore Industries Atlas Company/Store Supplies The Welch Company Atlas Company/Office Supplies Totals
Nov 1 Nov 3 Nov 5 Nov 10 Nov 16
Terms
PR
Page 2 Accts. Merchandise Other GST Payable Inventory Accounts Rec’ble Credit Debit Debit Debit
n/10 EOM 163/ 5,365.72 2/10, n/30 12,084.00 n/10 EOM 125/ 1,081.20 2/10, n/30 3,060.22 n/10 EOM 124/ 592.54 22,183.68 (201)
11,400.00 2,887.00 14,287.00 (119)
5,062.00
303.72 684.00 1,020.00 61.20 173.22 559.00 33.54 6,641.00 1,255.68 (X) (108)
CASH DISBURSEMENTS JOURNAL Ch. Date
Page 3 Merch.
Other
GST
Accts.
Cash
Inventor y
Accts.
Rec’ble
Payable
Credit
Debit
Debit
Debit
No.
Payee
Account Debited
PR
Credit
1 2
633
Defore Industries
Defore Industries
11,856.0 0
1 5
634
Payroll
Sales Salaries Expense
621
8,435.00
1
635
The Welch Co.*
The Welch Company
2011 Nov.
2,496.00
228.00
12,084.0 0 8,435.00
48.00
2,544.00
747
536
9 3 0 3 0
636
Payroll
Sales Salaries Expense
Totals
621
8,435.0 0
8,435.0 0
31,222.0 0
276.00 16,870.0 0
(101)
(119)
(X)
14,628.0 0 (201)
*2,887 – 487 = 2,400; 2,400 x 2% = 48 discount
Copyright © 2002 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
536
537
*Problem 8-9B - Perpetual (continued) GENERAL JOURNAL Account Titles and Explanations
Date 2011 Nov. 17
26
PR
Page 2 Credit
Debit
Accounts Payable—The Welch Company ........ GST Payable................................................. Merchandise Inventory ............................... Returned merchandise.
201/ 225 119
516.22
Accounts Payable—Jett Supply ........................ Office Equipment ......................................... GST Payable................................................. Returned office equipment.
201/ 163 225
977.32
29.22 487.00
922.00 55.32
ACCOUNTS RECEIVABLE SUBLEDGER
Marjorie Cook Explanation
Date
PR
Debit
Credit
Balance
15
S2
4,930.50
4,930.50
24
S2
3,758.40
8,688.40
25
CR2
2011 Nov.
4,930.00
3,758.40
Credit
Balance
Leroy Holmes Date
Explanation
PR
Debit
S2
7,366.00
2011 Nov.
8 18
CR2
7,366.00 7,366.00
0.00
Sam Spear Date
Explanation
PR
Debit
Credit
Balance
2011
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
537
538
Nov.
10
S2
19
CR2
22
S2
Parts 3 and 4
14,500.00
14,500.0 0 14,500.0 0
3,010.20
0.00 3,010.20
ACCOUNTS PAYABLE SUBLEDGER
Atlas Company Explanation
Date
PR
Debit
Credit
Balance
2011 Nov.
5
P2
1,081.20
1,081.20
16
P2
592.54
1,673.74
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
538
539
*Problem 8-9B - Perpetual (continued) Defore Industries Explanation
Date
PR
Debit
Credit
Balance
12,084.0 0
12,084.00
2011 Nov.
4
P2
12
CD2
12,084.00
PR
Debit
0.00
Jett Supply Explanation
Date
Credit
Balance
2011 Nov.
1
P2
26
G2
5,365.72 977.32
5,365.72 4,388.40
The Welch Company Explanation
Date
PR
Debit
Credit
Balance
2011 Nov.
11
P2
3,060.22
3,060.22
17
G2
516.22
2,544.00
19
CD2
2,544.00
0.00
Parts 1 and 4 GENERAL LEDGER Acct. No. 101
Cash Date
Explanation
PR
Debit
CR2
185,516.6
Credit
Balance
2011 Nov.
30
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
185,516.6
539
540
8 30
CD2
8 31,222.0 0
Acct. No. 106
Accounts Receivable Date
Explanation
154,294.6 8
PR
Debit
30
S2
33,564.60
30
CR2
Credit
Balance
2011 Nov.
GST Receivable Date
Explanation
33,564.60 26,796.0 0
6,768.60
Acct. No. 108
PR
Debit
P2
1,255.68
Credit
Balance
2011 Nov.
30
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
1,255.68
540
541
*Problem 8-9B - Perpetual (continued) Acct. No. 119
Merchandise Inventory Date
Explanation
PR
Debit
Credit
Balance
2011 Oct.
31
210,000.0 0
Nov.
17
G2
487.00
209,513.0 0
30
S2
20,230.0 0
189,283.0 0
30
CR3
44,000.0 0
145,283.0 0
30
P2
30
CD3
14,287.00
159,570.0 0 276.00
Acct. No. 124
Office Supplies Date
Explanation
159,294.0 0
PR
Debit
Credit
Balance
2011 Nov.
30
P2
559.00
559.00
Acct. No. 125
Store Supplies Date
Explanation
PR
Debit
P2
1,020.00
Credit
Balance
2011 Nov.
5
1,020.00
Acct. No. 163
Office Equipment Date
Explanation
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
PR
Debit
Credit
Balance
541
542
2011 Nov.
1
P2
26
G2
5,062.00
5,062.00 922.00
Acct. No. 201
Accounts Payable Date
Explanation
PR
4,140.00
Debit
Credit
Balance
2011 Nov.
17
G2
516.22
(516.22)
26
G2
977.32
(1,493.54)
30
P2
30
CD2
22,183.6 8 14,628.00
6,062.14
PST Payable Date
Explanation
20,690.14
Acct. No. 224 PR
Debit
Credit
Balance
2011 Nov.
30
S2
2,893.50
2,893.50
30
CR2
6,287.30
9,180.80
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
542
543
*Problem 8-9B - Perpetual (continued) Acct. No. 225
GST Payable Date
Explanation
PR
Debit
Credit
Balance
2011 Nov.
17
G2
29.22
29.22
26
G2
55.32
84.54
30
S2
1,736.10
1,820.64
30
CR2
3,772.38
5,593.02
Acct. No. 251
Long-Term Notes Payable Date
Explanation
PR
Debit
Credit
Balance
86,250.0 0
86,250.00
2011 Nov.
2
CR2
Acct. No. 301
Asha Crystal, Capital Date
Explanation
PR
Debit
Credit
Balance
2011 Oct.
31
210,000.0 0
Acct. No. 413
Sales Date
Explanation
PR
Debit
Credit
Balance
28,935.0 0
28,935.00
2011 Nov.
30
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
S2
543
544
30
CR2
62,873.0 0
Acct. No. 415
Sales Discounts Date
Explanation
91,808.00
PR
Debit
Credit
Balance
2011 Nov.
30
CR2
462.00
462.00
Acct. No. 502
Cost of Goods Sold Date
Explanation
PR
Debit
Credit
Balance
30
S2
20,230.00
20,230.00
30
CR3
44,000.00
64,230.00
PR
Debit
15
CD2
8,435.00
8,435.00
30
CD2
8,435.00
16,870.00
2011 Nov.
Sales Salaries Expense
Date
Explanation
Acct. No. 621
Credit
Balance
2011 Nov.
*Problem 8-9B - Perpetual (concluded) Part 5 CRYSTAL COMPANY Trial Balance November 30, 2011
Account ............................................... Debit Credit Cash ........................................................... $154,294.68 Accounts receivable .................................... 6,768.60 GST receivable ........................................... 1,255.68 Merchandise inventory ................................ 159,294.00 Office supplies ............................................ 559.00 Store supplies ............................................. 1,020.00 Office equipment......................................... 4,140.00 Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
544
545
Accounts payable ....................................... PST payable ............................................... GST payable ............................................... Long-term notes payable ............................ Asha Crystal, capital ................................... Sales........................................................... Sales discounts........................................... 462.00 Cost of goods sold ...................................... 64,230.00 Sales salaries expense ............................... 16,870.00 Totals .......................................................... $408,893.96
$ 6,062.14 9,180.80 5,593.02 86,250.00 210,000.00 91,808.00
$408,893.96
CRYSTAL COMPANY Schedule of Accounts Receivable November 30, 2011
Marjorie Cook ............................................
$3,758.40
Sam Spear ....................................................
3,010.20
Total accounts receivable ......................
$6,768.60
CRYSTAL COMPANY Schedule of Accounts Payable November 30, 2011
Atlas Company ...........................................
$1,673.74
Jett Supply ...................................................
4,388.40
Total accounts payable ...........................
$6,062.14
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
545
546
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
*Problem 8-9B - Periodic (100 minutes)
Part 4
SALES JOURNAL Invoice
Date
Account Debited
Page 2 Accts.
PST
GST
Rec.
Payable
Payable
Sales
Credit
Credit
Credit
Number
PR
Debit
8 Leroy Holmes
439
7,366.00
635.00
381.00
6,350.00
10 Sam Spear
440
14,500.0 1,250.00 0
750.00
12,500.0 0
15 Marjorie Cook
441
4,930.00
425.00
255.00
4,250.00
22 Sam Spear
442
3,010.20
259.50
155.70
2,595.00
24 Marjorie Cook
443
3,758.40
324.00
194.40
3,240.00
33,564.6 2,893.50 1,736.10 0
28,935.0 0
2011 Nov.
31 Totals
(106)
(224)
(225)
(413)
CASH RECEIPTS JOURNAL Account Date
Credited
Explanation
PR
Page 3
Sales
Accts.
Cash
Discoun t
Rec.
Debit
Debit
Credit
Other
PST
GST
Sales
Accts
Payable
Payabl e
Credit
Credit
Credit
Credit
753
547
2011 Nov.
2 L.T. Notes Pay
Note to bank
1 Sales 5
Cash sales
1 Leroy 8 Holmes
Invoice, Nov 8
7,239.00
127.00
7,366.0 0
1 Sam Spear 9
Invoice, Nov 10
14,250.0 0
250.00
14,500. 00
2 Marjorie 5 Cook
Invoice, Nov 15
4,845.00
85.00
4,930.0 0
3 Sales 0
Cash sales
3 Totals 0
25 1
86,250.0 0
86,250. 00
31,517.2 0
41,415.4 8
27,170. 00
2,717.0 0
1,630. 20
35,703. 00
3,570.3 0
2,142. 18
185,516. 68
462.00
26,796. 00
62,873. 00
86,250. 00
6,287.3 0
3,772. 38
(101)
(415)
(106)
(413)
(X)
(224)
(225)
548 Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. 754
*Problem 8-9B - Periodic (continued)
PURCHASES JOURNAL Date 2011 Nov. 1 4 5 11 16 30
Date of Invoice
Account Credited Jett Supply/Office Equip. Defore Industries Atlas Company/Store Supplies The Welch Company Atlas Company/Office Supplies Totals
Nov 1 Nov 3 Nov 5 Nov 10 Nov 16
Terms
PR
Accts. Payable Credit
n/10 EOM 163/ 5,365.72 2/10, n/30 12,084.00 n/10 EOM 125/ 1,081.20 2/10, n/30 3,060.22 n/10 EOM 124/ 592.54 22,183.68 (201)
Page 2 Other GST Purchases Accounts Rec’ble Debit Debit Debit 11,400.00 2,887.00 14,287.00 (505)
5,062.00
303.72 684.00 1,020.00 61.20 173.22 559.00 33.54 6,641.00 1,255.68 (X) (108)
CASH DISBURSEMENTS JOURNAL Fundamental Accounting Principles, Twelfth Canadian Edition
Ch. Date
Page 3 Pur.
Other
GST
Accts.
Cash
Disc.
Accts.
Rec’ble
Payable
Debit
Debit
Debit
No.
Payee
Account Debited
PR
Credit
Credit
1 2
633
Defore Industries
Defore Industries
11,856.0 0
228.0 0
1 5
634
Payroll
Sales Salaries Expense
621
8,435.00
1
635
The Welch Co.
The Welch Company
2011 Nov.
2,496.00
12,084.0 0 8,435.00
48.00
2,544.00
549
9 3 0 3 0
636
Payroll Totals
Sales Salaries Expense
621
8,435.0 0
8,435.0 0
31,222.0 0
276.0 0
16,870.0 0
14,628.0 0
(101)
(507)
(X)
(201)
550
*Problem 8-9B - Periodic (continued) GENERAL JOURNAL Account Titles and Explanations
Date 2011 Nov. 17
26
PR
Page 2 Credit
Debit
Accounts Payable—The Welch Company ........ GST Payable................................................. Purchases Returns and Allowances ......... Returned merchandise.
201/ 225 506
516.22
Accounts Payable—Jett Supply ........................ Office Equipment ......................................... GST Payable................................................. Returned office equipment.
201/ 163 225
977.32
29.22 487.00
922.00 55.32
Parts 2 and 4 ACCOUNTS RECEIVABLE SUBLEDGER
Marjorie Cook Explanation
Date
PR
Debit
Credit
Balance
15
S2
4,930.00
4,930.00
24
S2
3,758.40
8,688.40
25
CR3
2011 Nov.
4,930.00
3,758.40
Credit
Balance
Leroy Holmes Date
Explanation
PR
Debit
S2
7,366.00
2011 Nov.
8 18
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
CR3
7,366.00 7,366.00
0.00
550
551
Sam Spear Explanation
Date
PR
Debit
10
S2
14,500.00
19
CR3
22
S2
Credit
Balance
2011 Nov.
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
14,500.0 0 14,500.0 0
3,010.20
0.00 3,010.20
551
552
*Problem 8-9B - Periodic (continued) Parts 3 and 4
ACCOUNTS PAYABLE SUBLEDGER
Atlas Company Explanation
Date
PR
Debit
Credit
Balance
2011 Nov.
5
P2
1,081.20
1,081.20
16
P2
592.54
1,673.74
Defore Industries Explanation
Date
PR
Debit
Credit
Balance
12,084.0 0
12,084.0 0
2011 Nov.
4
P2
12
CD3
12,084.00
0.00
Jett Supply Explanation
Date
PR
Debit
Credit
Balance
5,365.72
5,365.72
2011 Nov.
1
P2
26
G2
977.32
4,388.40
The Welch Company Explanation
Date
PR
Debit
Credit
Balance
3,060.22
3,060.22
2011 Nov.
11
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
P2
552
553
17
G2
516.22
2,544.00
19
CD3
2,544.00
0.00
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
553
554
*Problem 8-9B - Periodic (continued) Parts 1 and 4 GENERAL LEDGER Acct. No. 101
Cash Date
Explanation
PR
Debit
30
CR3
185,516.6 8
30
CD3
Credit
Balance
2011 Nov.
185,516.6 8 31,222.0 0
Acct. No. 106
Accounts Receivable Date
Explanation
154,294.6 8
PR
Debit
30
S2
33,564.60
30
CR3
Credit
Balance
2011 Nov.
33,564.60 26,796.0 0
Acct. No. 108
GST Receivable Date
Explanation
6,768.60
PR
Debit
P2
1,255.68
Credit
Balance
2011 Nov.
30
1,255.68
Acct. No. 119
Merchandise Inventory Date
Explanation
PR
Debit
Credit
Balance
2011 Oct.
31 Beginning balance
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
210,000.0
554
555
0
Acct. No. 124
Office Supplies Date
Explanation
PR
Debit
Credit
Balance
2011 Nov.
30
P2
559.00
559.00
Acct. No. 125
Store Supplies Date
Explanation
PR
Debit
P2
1,020.00
Credit
Balance
2011 Nov.
5
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
1,020.00
555
556
*Problem 8-9B - Periodic (continued) Acct. No. 163
Office Equipment Date
Explanation
PR
Debit
1
P2
5,062.00
26
G2
Credit
Balance
2011 Nov.
5,062.00 922.00
Acct. No. 201
Accounts Payable Date
Explanation
PR
4,140.00
Debit
Credit
Balance
2011 Nov.
17
G2
516.22
(516.22)
26
G2
977.32
(1,493.54)
30
P2
30
CD3
22,183.6 8 14,628.00
6,062.14
PST Payable Date
Explanation
20,690.14
Acct. No. 224 PR
Debit
Credit
Balance
2011 Nov.
30
S2
2,893.50
2,893.50
30
CR3
6,287.30
9,180.80
Acct. No. 225
GST Payable Date
Explanation
PR
Debit
Credit
Balance
2011 Nov.
17
G2
29.22
29.22
26
G2
55.32
84.54
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
556
557
30
S2
1,736.10
1,820.64
30
CR3
3,772.38
5,593.02
Acct. No. 251
Long-Term Notes Payable Date
Explanation
PR
Debit
Credit
Balance
86,250.0 0
86,250.00
2011 Nov.
2
CR3
Acct. No. 301
Asha Crystal, Capital Date
Explanation
PR
Debit
Credit
Balance
2011 Oct.
31 Beginning balance
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210,000.0 0
557
558
*Problem 8-9B - Periodic (continued) Acct. No. 413
Sales Date
Explanation
PR
Debit
Credit
Balance
2011 Nov.
30
S2
28,935.0 0
28,935.00
30
CR3
62,873.0 0
91,808.00
Acct. No. 415
Sales Discounts Date
Explanation
PR
Debit
Credit
Balance
2011 Nov.
30
CR3
462.00
462.00
Acct. No. 505
Purchases Date
Explanation
PR
Debit
P2
14,287.00
Credit
Balance
2011 Nov.
30
14,287.00
Acct. No. 506
Purchases Returns and Allowances Date
Explanation
PR
Debit
Credit
Balance
2011 Nov.
17
G2
487.00
Acct. No. 507
Purchases Discounts Date
Explanation
PR
487.00
Debit
Credit
Balance
2011
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558
559
Nov.
30
CD3
276.00
Sales Salaries Expense
Date
Explanation
276.00
Acct. No. 621
PR
Debit
Credit
Balance
15
CD3
8,435.00
8,435.00
30
CD3
8,435.00
16,870.00
2011 Nov.
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559
560
*Problem 8-9B - Periodic (concluded) Part 5 CRYSTAL COMPANY Trial Balance November 30, 2011
Account ............................................... Debit Credit Cash ........................................................... $154,294.68 Accounts receivable .................................... 6,768.60 GST receivable ........................................... 1,255.68 Merchandise inventory ................................ 210,000.00 Office supplies ............................................ 559.00 Store supplies ............................................. 1,020.00 Office equipment......................................... 4,140.00 Accounts payable ....................................... PST Payable ............................................... GST Payable .............................................. Long-term notes payable ............................ Asha Crystal, capital ................................... Sales........................................................... Sales discounts........................................... 462.00 Purchases................................................... 14,287.00 Purchases returns and allowances ............. Purchases discounts ................................... Sales salaries expense ............................... 16,870.00 Totals .......................................................... $409,656.96
$ 6,062.14 9,180.80 5,593.02 86,250.00 210,000.00 91,808.00 487.00 276.00 $409,656.96
CRYSTAL COMPANY Schedule of Accounts Receivable November 30, 2011
Marjorie Cook ............................................
$3,758.40
Sam Spear ....................................................
3,010.20
Total accounts receivable ......................
$6,768.60
CRYSTAL COMPANY Schedule of Accounts Payable November 30, 2011
Atlas Company ...........................................
$1,673.74
Jett Supply ...................................................
4,388.40
Total accounts payable ...........................
$6,062.14
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560
561
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*Problem 8-10B (30 minutes) Page X
Sales Journal
Date
Account Debited
Invoic e No.
PR
A/R Dr
PST Payable CR
GST Payable
COGS DR Sales Cr
CR
Merchandise Inventory CR
2011 May 3 Ajax Holdings 30 Allendale Arena
361
6,840
480
360
6,000
3,200
363
4,218
296
222
3,700
1,900
Cash Receipts Journal
Date Account Credited Explanatio PR n
Cash DR
Sales Disc Dr
Page X
Other A/R CR Account Sales s CR CR
PST GST COGS/DR Payable Payabl Merchandise CR e CR Inventory/CR
2011 May John 1 Capital
Trenton,
9,000
12 A/R – Ajax
6,780
13 Sales 15 Bank Payable
Inv #362 Loan
2,052 5,000
9,000 60 6,840 1,800
144 5,000
108
1,100
761
562
Purchases Journal Date
Account Credited
Terms
PR
Page X Merchandise Inventory DR
A/P CR
Other Accounts DR
GST Rec’ble DR
2011 Moore Corporation/Off. Supplies London Company 16
May 7
n/30
3,392
1/15,n /30
7,632
3,200 7,200
192 432
Cash Disbursements Journal Date
Ch #
Account Debited
PR
Cash CR
May 5
83
Merchandise Inventory
1,696
30
84
A/P – Corporation
3,392
Merchandis e Inventory CR
Page X Other Accounts DR
GST Rec’ble DR
1,600
96
A/P DR
2011
Moore
3,392
563
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*Problem 8-11B (30 minutes)
SALES JOURNAL
Date 2011 May
Date 2011 May 1 12 13 15
Fundamental Accounting Principles, Twelfth Canadian Edition
Date 2011 May
3 Ajax Holdings 30 Allendale Arena
Account Credited John Trenton, Capital A/R – Ajax Sales Bank Loan Payable
Explanation
Inv #362
7 Moore Corporation/Off. Supplies
Ch. No.
Payee
PR
361 363
Account Credited
16 London Company
Date
Invoice Number
Account Debited
PR
Cash Debit 9,000 6,780 2,052 5,000
Date of Invoice
Page X Accts. Rec. Debit
PST Payable Credit
6,840 4,218
GST Payable Credit
480 296
CASH RECEIPTS JOURNAL Sales Accts. Discount Rec. Sales Debit Credit Credit
Sales Credit
360 222
6,000 3,700
Page X Other PST Accts. Payable Credit Credit
GST Payable Credit
9,000 60
6,840 1,800
144
108
5,000 PURCHASES JOURNAL Accts. Payable Terms PR Credit
Page X Purchases Debit
May 7
N/30
3,392
May 16
1/15,n/30
7,632
7,200
CASH DISBURSEMENTS JOURNAL Cash Pur. Disc. Account Debited PR Credit Credit
PageX Other Accts. Debit
Other Accounts Debit 3,200
GST Rec’ble Debit 192 432
GST Rec’ble Debit
Accts. Payable Debit
564
2011 May 5 83 30 84
Merchandise Inventory
Purchases
1,696
A/P – Moore Corporation
Lexor Suppliers
3,424
1,600
96 3,424
565
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ANALYTICAL & REVIEW PROBLEMS A&R Problem 8-1 Sales Journal
Page 1 COGS Dr.
Date
Account Debited
Invoice No.
A/R Dr. PR
Sales Cr.
PR
Merchandise Inventory Cr.
2011 210
1,125.00
465.75
18 Thorhild Co-op
211
2,250.00
1,090.50
24 Boyle Grocery
212
750.00
353.00
Oct. 9 Kitchen Club
Purchases Journal
Date
Account Credited
Date of Invoice
Page 1 Merchandise Inventory
Terms
PR
A/P CR
PR
DR
2011 Oct. 3 Arnold Brothers Oct. 3
2/10, n/30
750.00
750.00
15 Arnold Brothers Oct. 15
2/10, n/30
1,550.00
1,550.00
Office Supplies Dr.
Other Accounts DR
763
566
31 Arnold Brothers Oct. 31
2/10, n/30
600.00
600.00
Cash Disbursements Journal Date
Ch #
Payee
Account Debited
PR
Cash Cr.
Page 1 Merchandise Other Inventory Accounts Dr. PR A/P Dr. Cr.
2011
Oct. 19 101 Arnold Brothers A/P – Arnold Brothers
600.00
23 102 Arnold Brothers A/P – Arnold Brothers
1,519.00
NOTE: An additional PR column has been added to the Sales and Purchases Journals to facilitate the referencing of inventory entries into the inventory subledger.
600.00 31.00
1,550.0 0
567
A&R Problem 8-1 (concluded) General Journal
Date
Page: G1
Account Titles and Explanations
PR
Debit
Credit
2011 Oct.
4
150.00
Accounts Payable – Arnold Brothers ......................................
Merchandise Inventory .......................
150.00
To record the return of 20 units.
Inventory Subledger Record — Weighted-Average Perpetual
Inventory Balance Date
PR
Purchases
Units
Unit Cost
Sales (at cost)
Unit Total Cost s
Unit Cost
(a)
Total Cost
(b) (a)
Averag Total e Cost/ Units Unit
(b)
Total Cost Inventory Balance Calculations
Oct. 1
Beginning inventory 85 @ $5.0 = $ 0
85 $5.00 $
25.00
425.0 0 85
3 P1 100 @ $7.5 = $ 0
100 @ 7.5 = 0
50.00 185 $6.35 $ 1,175.0 0
4 G1
–20 @ $7.5 = 0 $
– 150.00
9 S1
75 @ $6.21 = $
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465.7 5
425. 00
750.00
185
$ 1,175. 00
185
$ 1,175. 00
–20 @ 7.5 = 0 165 $6.21 $ 1,025.0 0
$
– 150.00
165
$ 1,025. 00
165
$ 1,025. 00
–75 @ 6.2 = 1
– 465.75
567
568 90 $6.21 $
559.2 5
15 P1 200 @ $7.7 = $ 1,550.0 5 0
15 @ $7.27 = $ 1,090.5 0 0
–$
31.00 140 $7.06 $
50 @ $7.06 = $
24 S1
75 @ $8.0 = $ 0
987.7 5
353.0 0 634.7 5
600.0 0
440
$
559. 25
$3,144.00 27 5
Cost of goods available for sale Cost of goods sold =
@ 7.7 = 5 1,550.00
290
$ 2,109. 25
290
$ 2,109. 25
140
$ 1,018. 75
140
$ 1,018. 75
0
– 31.00
140
$
987. 75
140
$
987. 75
$1,909.25 165 +
– 353.00
90
$
634. 75
90
$
634. 75
75 @ 8.0 = 0 165 $7.48 $ 1,234.7 5
Total
90
–50 @ 7.0 = 6 90 $7.06 $
31 P1
559. 25
– @ 7.2 = – 150 7 1,090.50 140 $7.28 $ 1,018.7 5
23 G1
$
200 290 $7.27 $ 2,109.2 5
18 S1
90
165
600.00 $ 1,234. 75
$1,234.75
Ending inventory
Note: An additional PR column has been added to the Inventory Subledger Record to facilitate referencing of inventory entries.
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568
569
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569
570
Ethics Challenge EC 8–1 1. Independence in fact means that the auditor maintains an objective point of view of the client. Independence in appearance means that a third party viewing the relationship between the auditor/client would have no reason to believe that the auditor is not independent of the client. 2. While auditors are hired by their clients to perform audits, auditors also have a responsibility to the public. In our society auditors provide credibility to financial reporting situations by offering professional audit opinions about companies’ financial statements. While it is sometimes difficult to be responsible to clients as well as the public, auditors must maintain their independence to keep the public trust. 3. Since John Harris is a sole practitioner it is questionable whether he can consult on the client’s accounting system and then remain objective in subsequent years when he performs the audit of the company. Large firms often separate consulting and auditing engagements for the same client by having staff stationed in two different geographic branches of the firm do the work. Or a large local firm might be able to perform consulting and auditing for the same client by assigning different personnel to the two jobs. In this scenario John would need to do both jobs himself, making it difficult to maintain independence in fact and appearance.
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570
571
Focus on Financial Statements FFS 8-1 Single-step income statement: MANGO DESIGNS Income Statement For Month Ended June 30, 2011
Revenues:
Net sales ............................................................ Expenses: Cost of goods sold ............................................ Sales salaries expense ..................................... Office supplies expense ................................... Advertising expense .......................................... Amortization expense, store equipment ........... Interest expense ................................................ Total expenses ................................................... Net income ...............................................................
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$211,404 $134,750 42,000 13,400 600 500 200
191,450 $ 19,954
571
572
FFS 8-1 (concluded) MANGO DESIGNS Statement of Owner’s Equity For Month Ended June 30, 2011
Tom Mandalay, capital, June 1 ......... Add: Owner investment .....................
$
-0-
75,000
Net income ...................................
19,954
Tom Mandalay, capital, June 30 ........
$94,954
MANGO DESIGNS Balance Sheet June 30, 2011
Assets
Current assets: Cash ............................................................................. Accounts receivable.................................................... Merchandise inventory ............................................... Office supplies ............................................................ Total current assets ................................................... Property, plant and equipment: Store equipment .......................................................... Less: Accumulated amortization ......................... Total assets .......................................................................
$156,304 64,000 36,750 4,600 $32,000 500
$261,654 31,500 $293,154
Liabilities
Current liabilities: Accounts payable ....................................................... Interest payable ........................................................... Total current liabilities ................................................ Long-term liabilities: Notes payable .............................................................. Total liabilities ................................................................ Owner’s Equity
Tom Mandalay, capital ............................................... Total liabilities and owner’s equity ..................................
$148,000 200
$148,200 50,000
$198,200 94,954 $293,154
Analysis Component Mango Designs operates under a perpetual inventory system because the special journals include the Cost of Goods Sold account.
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572
573
FFS 8-2 Danier Leather’s June 25, 2005, balance sheet includes Accounts receivable of $594 (thousand), about 0.7% of total assets (calculated as $594/$83,365 x 100). Although these accounts receivable are not significant in total, they represent amounts owed by various customers to Danier so it would help decision makers better monitor collection if the details of individual balances owed, by whom, and dates due were maintained in an accounts receivable subledger.
The same logic would apply regarding the June 25, 2005, Accounts payable and accrued liabilities balance of $8,170 (thousand), about 10% of total assets (calculated as $8,170/$83,365 x 100). Since these accounts payable are significant in total and represent amounts owed to various creditors, it would help decision makers better manage payments if the details of individual balances owed, by whom, credit terms, and dates due were maintained in an accounts payable subledger.
The June 25, 2005, balance sheet shows inventories of $29,031 (thousand), about 34.82% of total assets (calculated as $29,031/$83,365 x 100). Because Danier sells clothing and accessories, the inventory balance is significant and represents a large variety of items. It would help decision makers better manage inventory if the details of unit costs, units sold, units purchased, and units on hand along with any returns and/or allowances were detailed in an inventory subledger.
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573
574
Critical Thinking Question CT 8-1 Note to instructor: Student responses will vary therefore the answer here is only suggested and not inclusive of all possibilities; it is presented in point form for brevity.
Problem(s):
— Detailed information regarding mining assets is required but is not readily available given the current accounting information system Goal(s)*:
— To ensure the accounting information system is maintained in such a way that reasonable internal requests for information can be fulfilled efficiently and effectively Assumption(s)/Principle(s):
— That the computer system in place at Northern Outposts can accommodate special purpose reports — The disclosure principle requires that anything of significance be reported Facts:
— as presented Conclusion(s)/Consequence(s):
— Internal/external reporting requirements need to be identified and matched against what is currently being provided by the accounting information system … gaps need to be identified and resolved to ensure that decisions dependent on such reports can be done efficiently and effectively
*The goal is highly dependent on ―perspective.‖
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574
575
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COMPREHENSIVE PROBLEMS Comprehensive Problem 8.1—Alpine Company (150 minutes) SALES JOURNAL
Page 2 Invoice
Date
Account Debited
A/R Dr.
COGS Dr.
Sales Cr.
Merch. Inv. Cr
Numbe r
PR
2 Essex Company
8785
6,100
3,660
16 Essex Company
8786
3,990
2,394
22 Oscar Services
8787
6,850
4,110
26 Deaver Corp.
8788
2011 Ma y
31 Totals
14,210
Fundamental Accounting Principles, Twelfth Canadian Edition
31,150 (106/4 13)
CASH RECEIPTS JOURNAL Account Date
Credited
Explanation
PR
8,526 18,690 (502/119)
Other
Page 2
Sales
Accts.
COGS Dr.
Cash
Disc.
Rec.
Sales
Accts.
Merch. Inv.
Debit
Debit
Credit
Credit
Credit
Credit
576
2011 May
5 Nabors, Inc.*
Sale of Apr. 28
9 Store Supplies
Sold store supplies
1 Essex 1 Company
Sale of May 2
1 Sales 5
Cash sales, May 115
3 Oscar 0 Services
Sale of May 22
3 Sales 1
Cash sales, May 1631
3 Totals 1
*4,725 – 175 = 4,550; 4,550 x 2% = 91 discount
12 5
4,459
91
4,550
350 5,978
350 122
6,100
59,220
6,713
137
59,220
35,532
66,052
39,630
6,850
66,05 2 142,77 2
350
17,500
125,272
350
75,162
(101)
(414)
(106)
(413)
(X)
(502/11 9)
577 Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
Comprehensive Problem 8.1—Alpine Company
(continued)
PURCHASES JOURNAL
Page 2
Date of Date
Account Credited
Invoic e
Accounts
Merchandi se
Payable
Inventory Supplies Account s
Terms
PR
Credit
Debit
May 04
n/10 EOM
125/
37,729
37,072
10 Off. Equip./Thompson Supp.
May 10
n/10 EOM
163/
4,074
11 Gale, Inc.
May 10
2/10, n/30
8,800
8,800
17 Chandler Corp.
May 14
2/10, n/60
13,650
13,650
24 Store Supp./Thompson Supp.
May 24
n/10 EOM
125/
9,030
8,120
25 Parkay Products
May 23
2/10, n/30
3,080
3,080
76,363 (201)
Office
Other
Debit
Debit
83
574
2011 May
4 Store Supp./Thompson Supp.
31 Totals
4,074
280
630
70,722
363
5,278
(119)
(124)
(X)
771
CASH DISBURSEMENTS
578
JOURNAL
Ch. Date
No.
Payee
Account Debited
PR
Page 2
Merchandis Other e
Accts.
Cash
Inventory
Accts.
Payable
Credit
Credit
Debit
Debit
2011 May
1 3410 S&M Mgmt. Co.
8 3411 Parkay Products 15 3412 Payroll
Rent Expense, Selling Space
642
Rent Expense, Office Space
641
3,710
6,174
Parkay Products
2,968
Sales Salaries Expense
621
Office Salaries Expense
620
8,470
742 126
6,300 5,320 3,150
19 3413 Gale, Inc.
Gale, Inc.
8,624
176
8,800
23 3414 Chandler Corp.
Chandler Corp.
13,37 7
273
13,650
26 3415 Trinity Power
Utilities Expense
690
1,283
1,283
29 3416 Clint Barry
C. Barry, Withdrawal
302
7,000
7,000
30 3417 Payroll
Sales Salaries Expense
621
Office Salaries Expense
620
31
Totals
5,320 3,150
8,470 57,10 8
575
28,933
(119)
(X)
28,750
579
(101)
(201)
580
Comprehensive Problem 8.1—Alpine Company (continued) Date 2011 May
GENERAL JOURNAL Account Titles and Explanations
PR
Debit
2
Sales Returns and Allowances ......................... 415 Accounts Receivable—Nabors, Inc........... 106/
175
3
Accounts Payable—Parkay Products .............. 201/ Merchandise Inventory .............................. 119
798
12
Accounts Payable—Thompson Supply Co. ..... 201/ Office Equipment........................................ 163
854
Page 3 Credit 175 798 854
Adjusting entries: May 31
Insurance Expense ............................................ Prepaid Insurance ......................................
637 128
553
31
Store Supplies Expense .................................... Store Supplies ............................................
651 125
669
31
Office Supplies Expense ................................... Office Supplies ...........................................
650 124
289
31
Amortization Expense, Store Equipment ......... Accumulated Amort., Store Equipment ....
613 166
567
31
Amortization Expense, Office Equipment ........ Accumulated Amort., Office Equipment ...
612 164
329
31
Cost of Goods Sold ........................................... Merchandise Inventory ..............................
502 119
4,577
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553 669 289 567 329 4,577
580
581
Comprehensive Problem 8.1—Alpine Company (continued) Closing entries:
Page 4
2011 May 31
Sales ................................................................ Income Summary ................................
413 901
156,422
31
Income Summary ............................................ Sales Discounts....................................... Sales Returns and Allowances............... Cost of Goods Sold ................................. Amort. Expense, Office Equipment ........ Amort. Expense, Store Equipment ......... Office Salaries Expense .......................... Sales Salaries Expense........................... Insurance Expense .................................. Rent Expense, Office Space ................... Rent Expense, Selling Space.................. Office Supplies Expense ......................... Store Supplies Expense.......................... Utilities Expense......................................
901 414 415 502 612 613 620 621 637 641 642 650 651 690
123,294
31
Income Summary ............................................ Clint Barry, Capital ..................................
901 301
33,128
31
Clint Barry, Capital ......................................... Clint Barry, Withdrawals .........................
301 302
7,000
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156,422 350 175 98,429 329 567 6,300 10,640 553 742 2,968 289 669 1,283 33,128 7,000
581
582
Comprehensive Problem 8.1—Alpine Company (continued) GENERAL LEDGER
Cash Explanation
Date
Acct. No. 101
PR
Debit
Credit
Balance
2011 Apr.
30 Balance
50,247
May
31
R2
31
CD2
142,772
193,019 57,108
Accounts Receivable Explanation
Date
135,911
Acct. No. 106 PR
Debit
Credit
Balance
2011 Apr. May
30 Balance
4,725
2
G3
31
S2
31
CR2
Merchandise Inventory Explanation
Date
175 31,150
4,550 35,700
17,500
18,200
Acct. No. 119
PR
Debit
Credit
Balance
2011 Apr. May
30 Balance
220,080
3
G3
798
219,282
31
S2
18,690
200,592
31
P2
31
CR2
75,162
196,152
31
CD2
575
195,577
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70,722
271,314
582
583
31
G3
4,577
Acct. No. 124
Office Supplies Explanation
Date
191,000
PR
Debit
Credit
Balance
2011 Apr.
30 Balance
430
May
31
P2
31
G3
363
793 289
Acct. No. 125
Store Supplies Date
Explanation
504
PR
Debit
Credit
Balance
2011 Apr. May
30 Balance
2,447
4
P2
9
CR2
24
P2
31
G3
574
3,021 350
630
2,671 3,301
669
2,632
Comprehensive Problem 8-1—Alpine Company (continued) Prepaid Insurance
Date
Explanation
Acct. No. 128
PR
Debit
Credit
Balance
2011 Apr.
30 Balance
May
31
Date
3,318 G3
Office Equipment Explanation
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553
2,765
Acct. No. 163
PR
Debit
Credit
Balance
583
584
2011 Apr.
30 Balance
22,470
May
10
P2
12
G3
Accumulated Amortization, Office Equipment Explanation PR
Date
4,074
26,544 854
25,690
Acct. No. 164
Debit
Credit
Balance
2011 Apr.
30 Balance
May
31
9,898 G3
Store Equipment Explanation
Date
329
10,227
Acct. No. 165
PR
Debit
Credit
Balance
2011 Apr.
30 Balance
38,920
Accumulated Amortization, Store Equipment Explanation
Date
PR
Acct. No. 166 Debit
Credit
Balance
2011 Apr.
30 Balance
May
31
17,556 G3
567
Acct. No. 201
Accounts Payable Explanation
Date
18,123
PR
Debit
Credit
Balance
2011 Apr. May
30 Balance 3
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7,098 G3
798
6,300
584
585
12
G3
31
P2
31
CD2
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854
5,446 76,363
28,750
81,809 53,059
585
586
Comprehensive Problem 8.1—Alpine Company (continued) Clint Barry, Capital Explanation
Date
Acct. No. 301
PR
Debit
Credit
Balance
2011 Apr.
30 Balance
308,085
May
31
G4
31
G4
Clint Barry, Withdrawals Explanation
Date
33,128 7,000
341,213 334,213
Acct. No. 302
PR
Debit
Credit
Balance
2011 May
29
CD2
31
G4
7,000
7,000 7,000
Acct. No. 413
Sales Explanation
Date
0
PR
Debit
Credit
Balance
2011 May
31
S2
31
CR2
31
G4
156,422
PR
Debit
Sales Discounts Explanation
Date
31,150
31,150
125,272
156,422 0
Acct. No. 414
Credit
Balance
2011 May
Date
31
CR2
31
G4
Sales Returns and Allowances Explanation
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350
350 350
0
Acct. No. 415
PR
Debit
Credit
Balance
586
587
2011 May
2
G3
31
G4
Date
Cost of Goods Sold Explanation
175
175 175
0
Acct. No. 502
PR
Debit
Credit
Balance
2011 May
31
S2
18,690
18,690
31
CR2
75,162
93,852
31
G3
4,577
98,429
31
G4
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98,429
0
587
588
Comprehensive Problem 8.1—Alpine Company (continued) Amortization Expense, Office Equipment Explanation PR
Date
Acct. No. 612
Debit
Credit
Balance
2011 May
31
G3
31
G4
329
329 329
Amortization Expense, Store Equipment
Date
Explanation
PR
0 Acct. No. 613
Debit
Credit
Balance
2011 May
31
G3
31
G4
Office Salaries Expense Explanation
Date
567
567 567
0
Acct. No. 620
PR
Debit
Credit
Balance
2011 May
15
CD2
3,150
3,150
30
CD2
3,150
6,300
31
G4
Sales Salaries Expense Explanation
Date
6,300
0
Acct. No. 621
PR
Debit
Credit
Balance
2011 May
Date
15
CD2
5,320
5,320
30
CD2
5,320
10,640
31
G4
Insurance Expense Explanation
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10,640
0
Acct. No. 637
PR
Debit
Credit
Balance
588
589
2011 May
31
G3
31
G4
553
553 553
Rent Expense, Office Space
Date
Explanation
0
Acct. No. 641
PR
Debit
Credit
Balance
2011 May
1
CD2
31
742
G4
742 742
Rent Expense, Selling Space
Date
Explanation
0
Acct. No. 642
PR
Debit
CD2
2,968
Credit
Balance
2011 May
1 31
G4
2,968 2,968
0
Comprehensive Problem 8.1—Alpine Company (continued) Office Supplies Expense
Date
Explanation
Acct. No. 650
PR
Debit
31
G3
289
31
G4
Credit
Balance
2011 May
289 289
Acct. No. 651
Store Supplies Expense Explanation
Date
0
PR
Debit
Credit
Balance
2011 May
31
G3
31
G4
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669
669 669
0
589
590 Utilities Expense Explanation
Date
Acct. No. 690
PR
Debit
Credit
Balance
2011 May
26
CD2
31
G4
1,283
1,283 1,283
Acct. No. 901
Income Summary Explanation
Date
0
PR
Debit
Credit
Balance
2011 May
31
G4
156,422
156,422
31
G4
123,294
33,128
31
G4
33,128
0
ACCOUNTS RECEIVABLE SUBLEDGER
Deaver Corp. Explanation
Date
PR
Debit
S2
14,210
PR
Debit
Credit
Balance
2011 May
26
14,210
Essex Company Explanation
Date
Credit
Balance
2011 May
2
S2
11
CR2
16
S2
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6,100
6,100 6,100
3,990
0 3,990
590
591
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591
592
Comprehensive Problem 8.1—Alpine Company (continued) Nabors, Inc. Explanation
Date
PR
Debit
Credit
Balance
2011 Apr.
28
S1
May
2
G3
5
CR2
4,725
4,725 175
4,550
4,550
0
Oscar Services Explanation
Date
PR
Debit
Credit
Balance
2011 May
22
S2
30
CR2
6,850
6,850 6,850
0
ACCOUNTS PAYABLE SUBLEDGER
Chandler Corp.
Date
Explanation
PR
Debit
Credit
Balance
2011 May
17
P2
13,650
23
CD2
13,650
PR
Debit
13,650 0
Gale, Inc.
Date
Explanation
Credit
Balance
2011 May
11
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
P2
8,800
8,800
592
593
19
CD2
8,800
0
Parkay Products Explanation
Date
PR
Debit
Credit
Balance
2011 Apr.
29
P2
May
3
G3
8
CD2
25
7,098
7,098
798
6,300
6,300
0
P2
3,080
3,080
Thompson Supply Co.
Date
Explanation
PR
Debit
Credit
Balance
2011 May
4
P2
37,729
37,729
10
P2
4,074
41,803
12
G3
24
P2
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
854
40,949 9,030
49,979
593
594
Comprehensive Problem 8.1—Alpine Company (continued) ALPINE COMPANY Work Sheet For Month Ended May 31, 2011 Balance Sheet and
Trial Balance Adjustments
Income
Statement of
Statement
Owner’s Equity
Debit Credit Debit Credit Debit Credit Debit Credit Cash .............................................. 135,91 1
135,91 1
Accounts receivable ............... 18,200
18,200
Merchandise inventory ......... 195,57 7
(f) 4,577
191,00 0
Office supplies ..........................
793
(c) 289
504
Store supplies ...........................
3,301
(b) 669
2,632
Prepaid insurance ..................
3,318
(a) 553
2,765
Office equipment
25,690
Accumulated Amort., office equip.
25,690 9,898
(e) 329
Store equipment ...................... 38,920
10,227 38,920
Accumulated Amort., store equip.
17,556
Accounts payable ....................
53,059
53,059
Clint Barry, Capital .................
308,08 5
308,08 5
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
(d) 567
18,123
594
595
Clint Barry, Withdrawals .....
7,000
Sales .............................................
7,000 156,42 2
156,42 2
Sales discounts.........................
350
350
Sales returns and allowances .......................................................
175
175
Cost of goods sold.................... 93,852
(f) 4,577
Amort. expense, office equipment
(e)
Amort. expense, store equipment
(d)
Office salaries expense..........
98,429 329
329 567 567 6,300
6,300
Sales salaries expense ........... 10,640
10,640
Insurance expense ..................
(a)
553 553
Rent expense, office space ...
742
742
Rent expense, selling space .
2,968
2,968
Office supplies expense ...... .
(c)
Store supplies expense .........
(b)
Utilities expense ......................
289 669
1,283
Totals ...................................... 545,02 545,02 6,984 0 0 Net income................................. Totals ......................................
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289 669
1,283 6,984 123,29 156,42 422,62 389,49 4 2 2 4 33,12 8
33,128
156,42 156,42 422,62 422,62 2 2 2 2
595
596
Comprehensive Problem 8.1—Alpine Company (continued)
ALPINE COMPANY Income Statement For Month Ended May 31, 2011
Revenue: Sales ................................................................... Less: Sales discounts ................................. Sales returns and allowances ........... Net sales ............................................................ Cost of goods sold................................................... Gross profit on sales .............................................. Operating expenses: Selling expenses: Sales salaries expense ................................ Rent expense, selling space ....................... Store supplies expense ............................... Amortization expense, store equipment ..... Total selling expenses ................................. General and administrative expenses: Office salaries expense ................................ Utilities expense ........................................... Rent expense, office space ......................... Insurance expense ....................................... Amortization expense, office equipment .... Office supplies expense .............................. Total general and administrative expenses Total operating expenses .................................. Net income ...............................................................
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
$
$10,640 2,968 669 567 $6,300 1,283 742 553 329 289
350 175
$156,422 525 $155,897 98,429 $ 57,468
$ 14,844
9,496
24,340 $ 33,128
596
597
Comprehensive Problem 8.1— Alpine Company (continued) ALPINE COMPANY Statement of Owner’s Equity For Month Ended May 31, 2011
Clint Barry, Capital, April 30 ..............
$308,085
Add: Net income .....................................
33,128
Total ...........................................................
$341,213
Less: Withdrawals..................................
7,000
Clint Barry, Capital, May 31 ................
$334,213
ALPINE COMPANY Balance Sheet May 31, 2011
Assets
Current assets: Cash ............................................................................. Accounts receivable.................................................... Merchandise inventory ............................................... Office supplies ............................................................ Store supplies ............................................................. Prepaid insurance ...................................................... Total current assets ................................................... Property, plant and equipment: Office equipment.................................................... Less: Accumulated amortization ..................... Store equipment..................................................... Less: Accumulated amortization ..................... Total property, plant and equipment ......................... Total assets .......................................................................
$135,911 18,200 191,000 504 2,632 2,765 $25,690 10,227 $38,920 18,123
$351,012
$15,463 20,797
36,260 $387,272
Liabilities
Current liabilities: Accounts payable .......................................................
Owner’s Equity
Clint Barry, Capital ..................................................... Total liabilities and owner’s equity ..................................
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$ 53,059 334,213 $387,272
597
Comprehensive Problem 8.1—Alpine Company (concluded) ALPINE COMPANY Post-Closing Trial Balance May 31, 2011
Account............................. Debit Credit Cash ........................................................... $135,911 Accounts receivable .................................... 18,200 Merchandise inventory ................................ 191,000 Office supplies ............................................ 504 Store supplies ............................................. 2,632 Prepaid insurance ....................................... 2,765 Office equipment......................................... 25,690 Accumulated amortization, office equipment Store equipment ......................................... 38,920 Accumulated amortization, store equipment Accounts payable ...................................... Clint Barry, Capital ...................................... Totals .......................................................... $415,622
$ 10,227 53,059 334,213 $415,622
18,123
ALPINE COMPANY Schedule of Accounts Receivable May 31, 2011
Deaver Corp. ...................................................
$14,210
Essex Company ..............................................
3,990
Total accounts receivable ..........................
$18,200
ALPINE COMPANY Schedule of Accounts Payable May 31, 2011
Parkay Products ...........................................
$ 3,080
Thompson Supply Co. .................................
49,979
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598
Total accounts payable ..............................
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$53,059
599
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*Comprehensive Problem 8.2—Alpine Company (150 minutes) SALES JOURNAL
Page 2 Invoice
Date
Account Debited
A/R Dr.
Numbe r
PR
Sales Cr.
2 Essex Company
8785
6,100
16 Essex Company
8786
3,990
22 Oscar Services
8787
6,850
26 Deaver Corp.
8788
14,210
2011 Ma y
31 31,150 Fundamental Accounting Principles, Twelfth Canadian Edition
(106/41 3)
CASH RECEIPTS JOURNAL
Accts.
Cash
Disc.
Rec.
Sales
Accts.
PR
Debit
Debit
Credit
Credit
Credit
4,459
91
4,550
Account Date
Credited
Explanation
2011 May
5 Nabors, Inc.
Sale of Apr. 28
Page 2
Sales
Other
9 Store Supplies
Sold store supplies
1 Essex 1 Company
Sale of May 2
5,978
1 Sales 5
Cash sales, May 115
59,220
3 Oscar 0 Services
Sale of May 22
6,713
3 Sales 1
Cash sales, May 1631
66,05 2
3 Totals 1
12 5
350
142,77 2 (101)
350 122
6,100 59,220
137
6,850 66,052
350
17,500
125,27 2
350
(414)
(106)
(413)
(X)
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*Comprehensive Problem 8.2—Alpine Company (continued)
PURCHASES JOURNAL
Page 2 Accounts
Date of Date
Account Credited
Invoic e
Office
Other
Payable
Purchases
Supplie s
Accounts
Debit
Debit
83
574
Terms
PR
Credit
Debit
May 04
n/10 eom
125/
37,729
37,072
10 Off. Equip./Thompson Supp.
May 10
n/10 eom
163/
4,074
11 Gale, Inc.
May 10
2/10, n/30
8,800
8,800
17 Chandler Corp.
May 14
2/10, n/60
13,650
13,650
24 Store Supp./Thompson Supp.
May 24
n/10 eom
125/
9,030
8,120
25 Parkay Products
May 23
2/10, n/30
3,080
3,080
76,363
70,722
(201)
(505)
2011 May
4 Store Supp./Thompson Supp.
31 Totals
4,074
280
630
363
5,278 (X)
(124) 785
CASH DISBURSEMENTS JOURNAL Ch. Date
No.
Payee
Page 2
Purchas e
Other
Cash
Discoun t
Accts.
Payable
Credit
Credit
Debit
Debit
Account Debited
PR
Rent Expense, Selling Space
642
Rent Expense, Office Space
641
3,710
6,174
Accts.
2011 May
1 341 0
S&M Mgmt. Co.
2,968
8 341 1
Parkay Products
Parkay Products
1 341 5 2
Payroll
Sales Salaries Expense
621
Office Salaries Expense
620
8,470
742 126
6,300 5,320 3,150
1 341 9 3
Gale, Inc.
Gale, Inc.
8,624
176
8,800
2 341 3 4
Chandler Corp.
Chandler Corp.
13,377
273
13,650
2 341 6 5
Trinity Power
Utilities Expense
690
1,283
1,283
2 341 9 6
Clint Barry
C. Barry, Withdrawal
302
7,000
7,000
3 341 0 7
Payroll
Sales Salaries Expense
621
5,320
Office Salaries Expense 3 1
Totals
620
8,470 57,108
(101)
3,150 575
28,933
28,750
(119)
(X)
(201)
*Comprehensive Problem 8.2—Alpine Company (continued) Date 2011 May
GENERAL JOURNAL Account Titles and Explanations
PR
Debit
2
Sales Returns and Allowances ......................... 415 Accounts Receivable—Nabors, Inc........... 106/
175
3
Accounts Payable—Parkay Products .............. 201/ Purchase Returns and Allowances ........... 507
798
12
Accounts Payable—Thompson Supply Co. ..... 201/ Office Equipment........................................ 163
854
Page 3 Credit 175 798 854
Adjusting entries: May 31
Insurance Expense ............................................ Prepaid Insurance ......................................
637 128
553
31
Store Supplies Expense .................................... Store Supplies ............................................
651 125
669
31
Office Supplies Expense ................................... Office Supplies ...........................................
650 124
289
31
Amortization Expense, Store Equipment ......... Accumulated Amort., Store Equipment ....
613 166
567
31
Amortization Expense, Office Equipment ........ Accumulated Amort., Office Equipment ...
612 164
329
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553 669 289 567 329
605
*Comprehensive Problem 8.2—Alpine Company (continued) Closing entries:
2011 May 31
Page 4
Merchandise Inventory ................................... Sales ................................................................ Purchase Discounts ....................................... Purchase Returns and Allowances ............... Income Summary.....................................
119 413 506 507 901
191,000 156,422 575 798
31
Income Summary ............................................ Merchandise Inventory............................ Sales Discounts ....................................... Sales Returns and Allowances ............... Purchases ................................................ Amort. Expense, Office Equipment ........ Amort. Expense, Store Equipment ......... Office Salaries Expense .......................... Sales Salaries Expense ........................... Insurance Expense .................................. Rent Expense, Office Space ................... Rent Expense, Selling Space .................. Office Supplies Expense ......................... Store Supplies Expense .......................... Utilities Expense ......................................
901 119 414 415 505 612 613 620 621 637 641 642 650 651 690
315,667
31
Income Summary ............................................ Clint Barry, Capital ..................................
901 301
33,128
31
Clint Barry, Capital.......................................... Clint Barry, Withdrawals .........................
301 302
7,000
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348,795 220,080 350 175 70,722 329 567 6,300 10,640 553 742 2,968 289 669 1,283 33,128 7,000
606
*Comprehensive Problem 8.2—Alpine Company (continued) GENERAL LEDGER
Cash Explanation
Date
Acct. No. 101
PR
Debit
Credit
Balance
2011 Apr.
30 Balance
50,247
May
31
R2
31
CD2
142,772
193,019 57,108
Accounts Receivable Explanation
Date
135,911
Acct. No. 106 PR
Debit
Credit
Balance
2011 Apr. May
30 Balance
4,725
2
G3
31
S2
31
CR2
Merchandise Inventory Explanation
Date
175 31,150
4,550 35,700
17,500
18,200
Acct. No. 119
PR
Debit
Credit
Balance
2011 Apr.
30 Balance
220,080
May
31
G4
31
G4
220,080 191,000
191,000
Acct. No. 124
Office Supplies Date
Explanation
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PR
Debit
Credit
Balance
607
2011 Apr.
30 Balance
430
May
31
P2
31
G3
363
793 289
Acct. No. 125
Store Supplies Date
Explanation
504
PR
Debit
Credit
Balance
2011 Apr. May
30 Balance
2,447
4
P2
9
CR2
24
P2
31
G3
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574
3,021 350
630
2,671 3,301
669
2,632
608
*Comprehensive Problem 8.2—Alpine Company (continued) Prepaid Insurance
Date
Explanation
Acct. No. 128
PR
Debit
Credit
Balance
2011 Apr.
30 Balance
May
31
3,318 G3
Office Equipment Explanation
Date
553
2,765
Acct. No. 163
PR
Debit
Credit
Balance
2011 Apr.
30 Balance
22,470
May
10
P2
12
G3
Accumulated Amortization, Office Equipment Explanation PR
Date
4,074
26,544 854
25,690
Acct. No. 164
Debit
Credit
Balance
2011 Apr.
30 Balance
May
31
9,898 G3
Store Equipment Explanation
Date
329
10,227
Acct. No. 165
PR
Debit
Credit
Balance
2011 Apr.
30 Balance
38,920
Accumulated Amortization, Store Equipment
Date
Explanation
PR
Acct. No. 166 Debit
Credit
Balance
2011
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609
Apr.
30 Balance
May
31
17,556 G3
567
Acct. No. 201
Accounts Payable Explanation
Date
18,123
PR
Debit
Credit
Balance
2011 Apr. May
30 Balance
7,098
3
G3
798
6,300
12
G3
854
5,446
31
P2
31
CD2
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76,363 28,750
81,809 53,059
610
*Comprehensive Problem 8.2—Alpine Company (continued) Clint Barry, Capital Explanation
Date
Acct. No. 301
PR
Debit
Credit
Balance
2011 Apr.
30 Balance
308,085
May
31
G4
31
G4
Clint Barry, Withdrawals Explanation
Date
33,128 7,000
341,213 334,213
Acct. No. 302
PR
Debit
Credit
Balance
2011 May
29
CD2
31
G4
Sales Explanation
Date
7,000
7,000 7,000
0
Acct. No. 413 PR
Debit
Credit
Balance
2011 May
31
S2
31
CR2
31
G4
156,422
PR
Debit
Sales Discounts Explanation
Date
31,150
31,150
125,272
156,422 0
Acct. No. 414
Credit
Balance
2011 May
Date
31
CR2
31
G4
Sales Returns and Allowances Explanation
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350
350 350
0
Acct. No. 415
PR
Debit
Credit
Balance
611
2011 May
2
G3
31
G4
Date
Purchases Explanation
175
175 175
0
Acct. No. 505
PR
Debit
Credit
Balance
2011 May
31
P2
31
G4
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70,722
70,722 70,722
0
612
*Comprehensive Problem 8.2—Alpine Company (continued) Purchase Discounts Explanation
Date
Acct. No. 506
PR
Debit
Credit
Balance
2011 May
31
CD2
31
G4
Purchase Returns and Allowances Explanation PR
Date
575
575
575
0
Acct. No. 507
Debit
Credit
Balance
2011 May
3
CD2
31
G4
Amortization Expense, Office Equipment Explanation PR
Date
798
798
798
0
Acct. No. 612
Debit
Credit
Balance
2011 May
31
G3
31
G4
329
329 329
Amortization Expense, Store Equipment
Date
Explanation
PR
0 Acct. No. 613
Debit
Credit
Balance
2011 May
31
G3
31
G4
Office Salaries Expense Explanation
Date
567
567 567
0
Acct. No. 620
PR
Debit
Credit
Balance
2011 May
15
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CD2
3,150
3,150
613
30
CD2
31
G4
Sales Salaries Expense Explanation
Date
3,150
6,300 6,300
0
Acct. No. 621
PR
Debit
Credit
Balance
2011 May
15
CD2
5,320
5,320
30
CD2
5,320
10,640
31
G4
Insurance Expense Explanation
Date
10,640
0
Acct. No. 637
PR
Debit
31
G3
553
31
G4
Credit
Balance
2011 May
553 553
0
*Comprehensive Problem 8.2—Alpine Company (continued) Rent Expense, Office Space
Date
Explanation
Acct. No. 641
PR
Debit
Credit
Balance
2011 May
1
CD2
31
742
G4
742 742
Rent Expense, Selling Space
Date
Explanation
0
Acct. No. 642
PR
Debit
CD2
2,968
Credit
Balance
2011 May
1 31
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G4
2,968 2,968
0
614
Office Supplies Expense
Date
Explanation
Acct. No. 650
PR
Debit
31
G3
289
31
G4
Credit
Balance
2011 May
289 289
Acct. No. 651
Store Supplies Expense Explanation
Date
0
PR
Debit
Credit
Balance
2011 May
31
G3
31
G4
Utilities Expense Explanation
Date
669
669 669
0
Acct. No. 690
PR
Debit
Credit
Balance
2011 May
26
CD2
31
G4
1,283
1,283 1,283
Acct. No. 901
Income Summary Explanation
Date
0
PR
Debit
Credit
Balance
2011 May
31
G4
31
G4
315,667
33,128
31
G4
33,128
0
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
348,795
348,795
615
*Comprehensive Problem 8.2—Alpine Company (continued) ACCOUNTS RECEIVABLE SUBLEDGER
Deaver Corp. Explanation
Date
PR
Debit
S2
14,210
PR
Debit
Credit
Balance
2011 May
26
14,210
Essex Company Explanation
Date
Credit
Balance
2011 May
2
S2
11
CR2
16
S2
6,100
6,100 6,100
3,990
0 3,990
Nabors, Inc. Explanation
Date
PR
Debit
Credit
Balance
2011 Apr.
28
S2
May
2
G3
5
CR2
4,725
4,725 175
4,550
4,550
0
Oscar Services Explanation
Date
PR
Debit
Credit
Balance
2011 May
22
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S2
6,850
6,850
616
30
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
CR2
6,850
0
617
*Comprehensive Problem 8.2—Alpine Company (continued) ACCOUNTS PAYABLE SUBLEDGER
Chandler Corp.
Date
Explanation
PR
Debit
Credit
Balance
2011 May
17
P2
13,650
23
CD2
13,650
PR
Debit
13,650 0
Gale, Inc.
Date
Explanation
Credit
Balance
2011 May
11
P2
19
CD2
8,800 8,800
8,800 0
Parkay Products Explanation
Date
PR
Debit
Credit
Balance
2011 Apr.
29
P2
May
3
G3
8
CD2
25
7,098
7,098
798
6,300
6,300
0
P2
3,080
3,080
Thompson Supply Co.
Date
Explanation
PR
Debit
Credit
Balance
2011
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618
May
4
P2
37,729
37,729
10
P2
4,074
41,803
12
G3
24
P2
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
854
40,949 9,030
49,979
619
*Comprehensive Problem 8.2—Alpine Company (continued) ALPINE COMPANY Work Sheet For Month Ended May 31, 2011 Balance Sheet and
Trial Balance Adjustments
Income
Statement of
Statement
Owner’s Equity
Debit Credit Debit Credit Debit Credit Debit Credit Cash................................................. 135,91 1
135,91 1
Accounts receivable .................. 18,200
18,200
Merchandise inventory............ 220,08 0
220,08 191,00 191,00 0 0 0
Office supplies.............................
793
(c) 289
504
Store supplies..............................
3,301
(b) 669
2,632
Prepaid insurance .....................
3,318
(a) 553
2,765
Office equipment........................ 25,690 Accumulated Amort., office equip.
25,690 9,898
(e) 329
Store equipment......................... 38,920
10,227 38,920
Accumulated Amort., store equip.
17,556
Accounts payable .......................
53,059
53,059
Clint Barry, Capital ....................
308,08 5
308,08 5
Clint Barry, Withdrawals ........
7,000
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
(d) 567
18,123
7,000
620
Sales ................................................
156,42 2
156,42 2
Sales discounts ...........................
350
350
Sales returns and allowances
175
175
Purchases ..................................... 70,722
70,722
Purchase discounts ...................
575
575
Purchase returns and allowances ....................................
798
798
Amort. expense, office equipment ....................................
(e) 329
329
Amort. expense, store equipment ....................................
(d) 567
567
Office salaries expense ............
6,300
6,300
Sales salaries expense .............. 10,640
10,640
Insurance expense ....................
(a) 553
553
Rent expense, office space ......
742
742
Rent expense, selling space ....
2,968
2,968
Office supplies expense ...... ....
(c) 289
289
Store supplies expense ............
(b) 669
669
Utilities expense .........................
1,283
1,283
Totals ......................................... 546,39 546,39 2,407 2,407 315,66 348,79 422,62 389,49 3 3 7 5 2 4 Net income ................................... Totals .........................................
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
33,12 8
33,128
348,79 348,79 422,62 422,62 5 5 2 2
621
*Comprehensive Problem 8.2—Alpine Company (continued)
ALPINE COMPANY Income Statement For Month Ended May 31, 2011
Revenue: Sales ................................................................... Less: Sales discounts ................................. Sales returns and allowances ........... Net sales ............................................................. Cost of goods sold: Merchandise inventory, April 30........................ Purchases ........................................................... Less: Purchase discounts ........................... Purchase returns and allowances .... Cost of goods purchased .................................. Goods available for sale .................................... Merchandise inventory, May 31 ......................... Cost of goods sold ............................................. Gross profit on sales .............................................. Operating expenses: Selling expenses: Sales salaries expense ................................ Rent expense, selling space ....................... Store supplies expense ............................... Amortization expense, store equipment ..... Total selling expenses ................................. General and administrative expenses: Office salaries expense ................................ Utilities expense ........................................... Rent expense, office space ......................... Insurance expense ....................................... Amortization expense, office equipment .... Office supplies expense .............................. Total general and administrative expenses Total operating expenses .................................. Net income................................................................
Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
$
$575 798
$70,722 1,373
$10,640 2,968 669 567 $6,300 1,283 742 553 329 289
350 175
$156,422 525 $155,897
220,080
69,349 $289,429 191,000
98,429 $ 57,468
$ 14,844
9,496
24,340 $ 33,128
622
*Comprehensive Problem 8.2—Alpine Company (continued) ALPINE COMPANY Statement of Owner’s Equity For Month Ended May 31, 2011
Clint Barry, Capital, April 30. ..............
$308,085
Add: Net income .....................................
33,128
Total ............................................................
$341,213
Less: Withdrawals ..................................
7,000
Clint Barry, Capital, May 31 .................
$334,213
ALPINE COMPANY Balance Sheet May 31, 2011
Assets
Current assets: Cash.............................................................................. Accounts receivable .................................................... Merchandise inventory................................................ Office supplies ............................................................ Store supplies ............................................................. Prepaid insurance ...................................................... Total current assets .................................................... Property, plant and equipment: Office equipment ......................................................... Less: Accumulated amortization ......................... Store equipment .......................................................... Less: Accumulated amortization ......................... Total property, plant and equipment ......................... Total assets .....................................................................
$135,911 18,200 191,000 504 2,632 2,765 $25,690 10,227 $ 15,463 $38,920 18,123 20,797
$351,012
36,260 $387,272
Liabilities
Current liabilities: Accounts payable .................................................
Owner’s Equity
Clint Barry, Capital ......................................................... Total liabilities and owner’s equity ..................................
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$ 53,059 334,213 $387,272
623
*Comprehensive Problem 8.2—Alpine Company (concluded) ALPINE COMPANY Post-Closing Trial Balance May 31, 2011
Account ............................................. Debit Credit Cash ........................................................... $135,911 Accounts receivable .................................... 18,200 Merchandise inventory ................................ 191,000 Office supplies ............................................ 504 Store supplies ............................................. 2,632 Prepaid insurance ....................................... 2,765 Office equipment ......................................... 25,690 Accumulated amortization, office equipment Store equipment.......................................... 38,920 Accumulated amortization, store equipment Accounts payable ....................................... Clint Barry, Capital ...................................... Totals .......................................................... $415,622
$ 10,227 53,059 334,213 $415,622
18,123
ALPINE COMPANY Schedule of Accounts Receivable May 31, 2011
Deaver Corp. ...................................................
$14,210
Essex Company .............................................
3,990
Total accounts receivable ..........................
$18,200
ALPINE COMPANY Schedule of Accounts Payable May 31, 2011
Parkay Products ........................................... Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved. Solutions Manual for Chapter 8
$ 3,080
624
Thompson Supply Co. .................................
49,979
Total accounts payable ...............................
$53,059
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625
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