ACCT 201 Lecture Notes - Lecture 4: Financial Statement, Accounting Equation, Income Statement
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(f) Prepare a post-closing trial balance, and determine whether the subsidiary ledgers agree with the control accounts in the general ledger.
Check figures:
Cash Receipts Journal, total Cash DR: $ 70,348
Cash Payments Journal, total Cash CR: 62,060
Net Income: 25,218 Total Assets: 149,568
Total Post Closing Trial Balance: 151,193
Sun & Surf Company uses a perpetual inventory system and both an accounts receivable and an accounts payable subsidiary ledger. Balances related to both the general ledger and the subsidiary ledger for Sun & Surf are indicated in the working papers. Below are a series of transactions for Sun & Surf Co. for the month of January. Credit sales terms are 2/10, n/30. The cost of all merchandise sold was 55% of the sales price.
Jan.3 Sell merchandise on account to M. Knast $5,100, invoice no. 825, and to C. Ryder $1,900, invoice no. 826.
5 Purchase merchandise from R. Drifter $5,000 and N. Sova $2,200, terms n/30.
7 Receive checks from V. Arnold $4,000 and I. Tan $2,000 after discount period has lapsed.
8 Pay freight on merchandise purchased $235.
9 Send checks to K. Xerxes for $9,000 less 2% cash discount, and to T. Caper for $11,000 less 1% cash discount.
9 Issue credit of $300 to C. Ryder for merchandise returned.
10 Summary daily cash sales total $15,500.
11 Sell merchandise on account to D. Gallagher $1,600, invoice no. 827, and to V. Arnold $900, invoice no. 828.
12 Pay rent of $1,000 for January.
13 Receive payment in full from M. Knast and C. Ryder less cash discounts.
15 Withdrawal of $800 cash by J. Sandy for personal use.
15 Post all entries to the subsidiary ledgers.
16 Purchase merchandise from T. Caper $18,000, terms 1/10, n/30; K. Xerxes $14,200, terms 2/10, n/30; and R. Drifter $1,500, terms n/30.
17 Pay $400 cash for office supplies.
18 Return $200 of merchandise to K. Xerxes and receive credit.
20 Summary daily cash sales total $20,100.
21 Issue $15,000 note, maturing in 90 days, to M. Griffen in payment of balance due.
21 Receive payment in full from V. Arnold less cash discount.
22 Sell merchandise on account to M. Knast $2,700, invoice no. 829, and to D. Gallagher $1,300, invoice no. 830.
22 Post all entries to the subsidiary ledgers.
23 Send checks to T. Caper and K. Xerxes in full payment less cash discounts.
25 Sell merchandise on account to I. Tan $3,500, invoice no. 831, and to C. Ryder $6,100, invoice no. 832.
27 Purchase merchandise from T. Caper $14,500, terms 1/10, n/30; N. Sova $1,200, terms n/30; and R. Drifter $5,400, terms n/30.
27 Post all entries to the subsidiary ledgers.
28 Pay $275 cash for office supplies.
31 Summary daily cash sales total $21,300.
31 Pay salaries and wages of $8,100. (continued)
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Instructions
(a) Record the January transactions in a sales journal, a single-column purchases journal, a cash receipts journal, a cash payments journal, and a two-column general journal.
(b) Post the journals to the general ledger.
(c) Prepare a trial balance at January 31, 2017, in the trial balance columns of the worksheet. Complete the worksheet using the following additional information.
1. Office supplies at January 31 total $900.
2. Insurance coverage expires on September 30, 2017.
3. Annual depreciation on the equipment is $1,500.
4. Interest of $50 has accrued on the note payable.
(f) Prepare a post-closing trial balance, and determine whether the subsidiary ledgers agree with the control accounts in the general ledger.
General Ledger | |||||
Cash | No. 101 | ||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Jan. 1 | Balance | â | $ 37,150 | ||
Accounts Receivable | No. 112 | ||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Jan. 1 | Balance | â | $ 13,000 | ||
Notes Receivable | No. 115 | ||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Jan. 1 | Balance | â | $ 39,000 | ||
Inventory | No. 120 | ||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Jan. 1 | Balance | â | $ 17,795 | ||
Office Supplies | No. 125 | ||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Jan. 1 | Balance | â | $ 1,200 | ||
Prepaid Insurance | No. 130 | ||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Jan. 1 | Balance | â | $ 2,205 | ||
Equipment | No. 157 | ||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Jan. 1 | Balance | â | $ 6,450 | ||
Accumulated Depreciation - Equipment | No. 158 | ||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Jan. 1 | Balance | â | $ 1,500 | ||
Notes Payable | No. 200 | ||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Accounts Payable | No. 201 | ||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Jan. 1 | Balance | â | $ 35,000 | ||
Interest Payable | |||||
Date | Explanation | Ref. | Debit | Credit | Balance |
J. Sandy, Capital | No. 301 | ||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Jan. 1 | Balance | â | $ 80,300 | ||
J. Sandy, Drawing | No. 306 | ||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Income Summary | No. 350 | ||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Sales | No. 401 | ||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Sales Returns and Allowances | No. 412 | ||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Sales Discounts | No. 414 | ||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Cost of Goods Sold | No. 505 | ||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Salaries and Wages Expense | No. 627 | ||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Depreciation Expense | No. 711 | ||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Interest Expense | No. 718 | ||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Insurance Expense | No. 722 | ||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Office Supplies Expense | No. 728 | ||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Rent Expense | No. 729 | ||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Purchases and Cash Payments Journals; Accounts Payable Subsidiary and General Ledgers
AquaFresh Water Testing Service was established on April 16. AquaFresh uses field equipment and field supplies (chemicals and other supplies) to analyze water for unsafe contaminants in streams, lakes, and ponds. Transactions related to purchases and cash payments during the remainder of April are as follows:
April 16. | Issued Check No. 1 in payment of rent for the remainder of April, $3,500. | |
April 16. | Purchased field supplies on account from Hydro Supply Co., $5,340. | |
April 16. | Purchased field equipment on account from Pure Equipment Co., $21,450. | |
April 17. | Purchased office supplies on account from Best Office Supply Co., $510. | |
April 19. | Issued Check No. 2 in payment of field supplies, $3,340, and office supplies, $400. | |
Post the journals to the accounts payable subsidiary ledger. | ||
April 23. | Purchased office supplies on account from Best Office Supply Co., $660. | |
April 23. | Issued Check No. 3 to purchase land, $140,000. | |
April 24. | Issued Check No. 4 to Hydro Supply Co. in payment of April 16 invoice, $5,340. | |
April 26. | Issued Check No. 5 to Pure Equipment Co. in payment of April 16 invoice, $21,450. | |
Post the journals to the accounts payable subsidiary ledger. | ||
April 30. | Acquired land in exchange for field equipment having a cost of $12,000. | |
April 30. | Purchased field supplies on account from Hydro Supply Co., $7,650. | |
April 30. | Issued Check No. 6 to Best Office Supply Co. in payment of April 17 invoice, $510. | |
April 30. | Purchased the following from Pure Equipment Co. on account: field supplies, $1,340, and field equipment, $4,700. | |
April 30. | Issued Check No. 7 in payment of salaries, $29,400. | |
Post the journals to the accounts payable subsidiary ledger. |
Required:
1. Journalize the transactions (in chronological order as presented in the data) for April. Use a purchases journal and a cash payments journal, and a two-column general journal. Use debit columns for Field Supplies, Office Supplies, and Other Accounts in the purchases journal. Refer to the following partial chart of accounts:
11 | Cash | 19 | Land |
14 | Field Supplies | 21 | Accounts Payable |
15 | Office Supplies | 61 | Salary Expense |
17 | Field Equipment | 71 | Rent Expense |
At the points indicated in the narrative of transactions, post to the following accounts in chronological order in the accounts payable subsidiary ledger:
Best Office Supply Co. |
Hydro Supply Co. |
Pure Equipment Co. |
For those boxes in which no entry is required, leave the box blank. If no other account is needed in the "Other Accounts Dr." column select "No Entry Required".
PURCHASES JOURNAL | PAGE 1 | |||||||
---|---|---|---|---|---|---|---|---|
Date | Account Credited | Post. Ref. | Accounts Payable Cr. | Field Supplies Dr. | Office Supplies Dr. | Other Accounts Dr. | Post. Ref. | Amount |
April 16 | Hydro Supply Co. | ? | No Entry Required | |||||
April 16 | Pure Equipment Co. | ? | Field Equipment | |||||
April 17 | Best Office Supply Co. | ? | No Entry Required | |||||
April 23 | Best Office Supply Co. | ? | No Entry Required | |||||
April 30 | Hydro Supply Co. | ? | No Entry Required | |||||
April 30 | Pure Equipment Co. | ? | Field Equipment | |||||
April 30 |
CASH PAYMENTS JOURNAL | PAGE 1 | |||||
---|---|---|---|---|---|---|
Date | Ck. No. | Account Debited | Post. Ref. | Other Accounts Dr. | Accounts Payable Dr. | Cash Cr. |
April 16 | Rent Expense | |||||
April 19 | Field Supplies | |||||
Office Supplies | ||||||
April 23 | Land | |||||
April 24 | Hydro Supply Co. | ? | ||||
April 26 | Pure Equipment Co. | ? | ||||
April 30 | Best Office Supply Co. | ? | ||||
April 30 | Salary Expense | |||||
April 30 | Total |
JOURNAL | PAGE 1 | |||
---|---|---|---|---|
Date | Description | Post. Ref. | Debit | Credit |
April 30 | Land | |||
Field Equipment |
2. Post the individual entries in chronological order (Other Accounts columns of the purchases journal and the cash payments journal and both columns of the general journal) to the appropriate general ledger accounts. Post to the subsidiary ledger in chronological order. When posting to the general ledger, post in chronological order. However, if there is more than one entry on the same date, post transactions from the purchases journal first, then the cash payments journal before posting from the general journal.
3. Total each of the columns of the purchases journal and the cash payments journal, and post the appropriate totals to the general ledger.
For those boxes in which no entry is required, leave the box blank.
ACCOUNTS PAYABLE SUBSIDIARY LEDGER | |||||
---|---|---|---|---|---|
Date | Item | Post. Ref. | Debit | Credit | Balance |
Account: Best Office Supply Co. | |||||
April 17 | |||||
April 23 | |||||
April 30 | |||||
Account: Hydro Supply Co. | |||||
April 16 | |||||
April 24 | |||||
April 30 | |||||
Account: Pure Equipment Co. | |||||
April 16 | |||||
April 26 | |||||
April 30 |
Post transactions in chronological order. However, if there is more that one transaction on the same date, post from the purchases journal first, then from the cash payments journal before posting from the general journal. (Because the problem does not include transactions related to cash receipts, the cash account in the ledger will have a credit balance.)
GENERAL LEDGER | ||||||
---|---|---|---|---|---|---|
Balance | ||||||
Date | Item | Post. Ref. | Debit | Credit | Dr. | Cr. |
Account: Cash #11 | ||||||
April 30 | ||||||
Account: Field Supplies #14 | ||||||
April 19 | ||||||
April 30 | ||||||
Account: Office Supplies #15 | ||||||
April 19 | ||||||
April 30 | ||||||
Account: Field Equipment #17 | ||||||
April 16 | ||||||
April 30 | ||||||
April 30 | ||||||
Account: Land #19 | ||||||
April 23 | ||||||
April 30 | ||||||
Account: Accounts Payable #21 | ||||||
April 30 | ||||||
April 30 | ||||||
Account: Salary Expense #61 | ||||||
April 30 | ||||||
Account: Rent Expense #71 | ||||||
April 16 |
4. Prepare a schedule of the accounts payable creditor balances.
AQUAFRESH WATER TESTING SERVICE Accounts Payable Creditor Balances April 30 | |
---|---|
Best Office Supply Co. | $ |
Hydro Supply Co. | |
Pure Equipment Co. | |
Total accounts payable | $ |
5. All are reasons why AquaFresh might consider using a subsidiary ledger for the field equipment EXCEPT:
To secure lower pricing on equipment purchases