SOLUTION MANUAL FOR College Accounting A Contemporary Approach, 4e David Haddock, John Ellis Price, by StudyGuide

Chapter 1 ACCOUNTING: THE LANGUAGE OF BUSINESS Note: To create your own PDF version of the SM go to File: "Save As Adobe PDF". Chapter Opener: Thinking Critically Can you think of any organizations that would be interested in how Uber is performing? Stockholders, the IRS, SEC, banks, lenders and creditors are all examples of organizations that would be interested in how Uber is performing. Managerial Implications: Thinking Critically Managers use financial information to make decisions about adding new products and services, offering current products and services, and choosing vendors. Discussion Questions Note to instructor: These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter. 1. Owners and managers: evaluate operations. Suppliers: assess ability of a firm to pay debts. Banks: ability to repay loans. Tax authorities: determine a tax base. Governmental agencies: legal compliance. Employees: wage levels and profit-sharing plans. 2. Measure business performance; separate entity. 3. Sole proprietorship (owned by one person). Partnership (owned by two or more people). Corporation (can be owned by one person or many). 4. Establish accounting policies, direct the accounting system, prepare and interpret financial statements, provide financial advice, prepare tax forms. 5. Advice on how to structure financial affairs in order to reduce taxes without violating tax laws. 6. Auditing, tax, and management advisory services. 7. Public, managerial, and governmental. 8. Statements of Financial Accounting Standards. 9. SEC, AICPA, AAA. 10. Regulation of financial reporting by publicly owned corporations. 11. The Public Company Accounting Reform and Investor Protection Act of 2002 was passed in response to the wave of corporate accounting scandals starting with the demise of Enron Corporation in 2001, the arrest of top executives at WorldCom and Adelphia Communications Corporations, and ultimately, the demise of Arthur Andersen, an international public accounting firm. 12. The purpose of the Public Company Accounting Oversight Board is to oversee the accounting profession through its investigative and enforcement powers and to discipline corrupt accountants and auditors.

CRITICAL THINKING PROBLEM 1.1 Student answers will vary. The student’s reasons for choosing one form of ownership over another are more important than the specific choice made. Generate a discussion on the proposed name of the business. Ask the students if they think the name is creative. Sole proprietorship: Advantage—you would be your own boss and could direct the business as you want. Disadvantages—You would be responsible for the debts and taxes of the business and may be limited in the amount of capital you could borrow to finance the business. Partnership: Advantage—You would have one or more partners to assist with business operations and to contribute capital. Disadvantages—You would have to share control of the business, as well as its profits. You could be liable for the debts of the partnership. Corporation: Advantages—The business would be a separate entity. Capital would be easier to raise and liability would be limited to the assets of the business. Disadvantages—A corporation is a more complicated form of ownership and is usually more expensive to form. There is also more government regulation and, consequently, more paperwork with a corporation.

1-1

SOLUTIONS TO BUSINESS CONNECTIONS Managerial Focus: 1. Questions asked might include: What is the profit or loss?, How much cash does the business have?, How much money do customers owe the business?, How much money is owed to suppliers?, What is the change in sales volume?, and what is the cost of merchandise sold? 2. 3. 4. 5.

6. 7. 8.

Financial information is used to evaluate performance and make decisions about a business or a nonprofit Keep your employees, creditors, and investors happy. Yes, financial information is a tool for making business decisions that will yield the above results. Inaccurate accounting records and poor business decisions. Every business needs an efficient accounting system which accumulates financial data, classifies and summarizes the information. Without an accounting system, suppliers, lenders, investors, and governmental tax authorities would not be able to accurately make decisions based on the financial information of the company. The manager makes financial decisions based upon the financial information provided by the accountant. Yes. The firm’s financial records need to be separate from the owner’s personal financial records in order to evaluate and measure the performance of the business. These standards are important to management because they enhance comparability of reporting practices.

Ethical Dilemma: Yes. Ethics and accounting are intertwined. Financial Statement Analysis: Analyze Online: 1. Clothing, accessories, outerwear and footwear. 2. Investors, suppliers, and banks. To assist the users when making financial decisions. 3. 15 to 25 year-olds. 4. Economic entity because it is a business for profit. Teamwork: The bank will ask for information to assess the firm's finanacial position. Questions such as how much property does the firm own?; how much debt does the firm owe?; how much cash does the firm have? Anticipated cost of expansion and future income projections may also be requested. Banks might also require a list of your customers and vendors. There is no requirement to indicate to the bank problems you are having with certain customers and vendors. Internet Connection: The number of Accounting Standards Update used will vary from year to year. Accounting Standards Update are cited as “ASU2016-1 (year) (standard number in chronological order).

1-1

Problem EX EX EX EX EX EX EX EX EX EX

2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.1

Time 5 5 10 10 10 10 10 10 10 15

PR PR PR PR

2.1A 2.2A 2.3A 2.4A

15 20 10 20

CT CT

2.1 2.2

25 20

5 10 15 20 25 30 35 40 45 50 55 60

= = = = = = = = = = = =

1-5 min. 6-10 min. 11-15 min. 16-20 min. 21-25 min. 26-30 min. 31-35 min. 36-40 min. 41-45 min. 46-50 min. 51-55 min. 56-60 min.

CHAPTER 2 ANALYZING BUSINESS TRANSACTIONS Chapter Opener: Thinking Critically How does Southwest keep track of all of these transactions so that it can continue to run its airline profitability? The individuals in charge of keeping track of these transactions at Southwest as well as in other companies, are known as accountants. When recording the transactions, accountants are required to follow a set of rules and regulations known as GAAP. For every financial transaction that Southwest has, their accountants determine the accounts that were affected and then they record, report, and then analyze these transactions. By doing so they can, at a specific point in time and over a stipulated period, be able to assess the company’s financial performance including profitability of the airline, assets owned by the company, and of course the amount owed to creditors and owners. Managerial Implications: Thinking Critically Answers will vary. Students should mention total assets and the type of assets, the liabilities the business would be responsible for, and whether the business is making a profit. Discussion Questions Note to instructor: These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter. 1. Inflow of money/assets resulting from sales or use of property 2. Outflow of money/assets for costs used to produce revenue 3. Subtract total expenses from revenue 4. Increases owner's equity 5. a. assets increase, liabilities increase b. assets decrease, owner's equity decreases c. assets increase, owner's equity increases d. assets decrease, liabilities decrease e. no change in total assets, one asset increases and another decreases f. assets increase, owner’s equity increases

Discussion Questions (continued) 6. Assets = Liabilities + Owner’s Equity 7. Assets: property owned. Liabilities: debts. Owner's equity: owner’s financial interest. 8. Assets, liabilities, and owner’s equity. 9. Revenue and expenses; net income or loss. 10. Beginning-of-period capital balance, additional investments, net income/loss for period, less withdrawals, and the ending capital balance. 11. Firm name, title of statement, date of statement or the period of time covered. 12. Balance sheet shows position at particular date; income statement is for a period of time. EXERCISE 2.1 Assets: Liabilities: Owner's Equity:

$137,800 $26,575 $111,225

EXERCISE 2.2 1. 2. 3. 4. 5.

$25,630 $22,520 $35,775 $39,576 $24,800

EXERCISE 2.3 Transaction 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Assets D I I/D D D I I I/D I/D I

Liabilities

Owners’ Equity D I

I = Increase (+) D = Decrease (-)

D D I I

EXERCISE 2.4

$15,500 5,650

+ Owner’s Equity + Donna Wells, Capital $32,520 +

3. Dental Equipment 28,550 4. Office Furniture 10,000 5. Total $59,700

= = =

+ + +

Assets 1. Cash 2. Dental Supplies

Liabilities Accounts Payable $27,180

$27,180

$32,520

EXERCISE 2.5 Assets Cash 1.

= +

Accounts Receivable

Liabilities

Equipment

Accounts = Payable

Owner’s Equity John Amos, Capital + + Revenue

+$60,000

+22,000

+3,100

-4,600

+22,000 +3,100

+5,050 -4,450

+3,200

-13,000

Totals

$44,250

+5,050 $4,450

-3,200 -13,000 +

$1,850

$26,600

$9,000

$60,000

$8,150

EXERCISE 2.6 Net income of $22,140 Revenue Repair Fees ………………………………………….. $53,530 Expenses Advertising Expense ………………………………………….. $8,100 Salaries Expense ………………………………………….. 20,500 Telephone Expense ………………………………………….. 1,080 Utilities Expense ………………………………………….. 1,710 Total Expenses ………………………………………….. 31,390 Net Income ………………………………………….. $22,140 EXERCISE 2.7 1. 2. 3. 4. 5. 6. 7.

Expenses

+4,600

5. 6.

+$60,000

Services were performed for cash. Equipment was purchased for cash. A payment was made on the amount owed to a creditor. An expense was paid in cash. Cash was received from charge customer. Services were performed on credit. An expense was paid in cash.

$4,450

EXERCISE 2.8 Cantu Wealth Management Consulting Income Statement Month Ended September 30, 2019 Revenue Fees Income

155 8 0 0 00

Expenses Advertising Expense Salaries Expense Telephone Expense Total Expenses

13 0 0 0 00 32 0 0 0 00 1 6 0 0 00 46 6 0 0 00 109 2 0 0 00

Net Income

EXERCISE 2.9 NetNet Loss loss of of $1,150 $950 Revenue Service Revenue ………………………………………….. $5,800 Expenses Advertising Expense………………………………………….. $3,100 Telephone Expense………………………………………….. 800 Salaries Expense ………………………………………….. 2,600 Cleaning Expense ………………………………………….. 450 Total Expense ………………………………………….. $6,950 Net Loss ……………………………………………….. -$1,150 EXERCISE 2.10 Cantu Wealth Management Consulting Statement of Owner’s Equity Month Ended September 30, 2019 Selena Cantu, Capital, September 1, 2019 Net Income for September Less Withdrawals for September Increase in Capital Selena Cantu, Capital, September 30, 2019

53 4 0 0 00 0 109 2 0 0 00 18 0 0 0 00 91 2 0 0 00 144 6 0 0 00

EXERCISE 2.10 (continued) Cantu Wealth Management Consulting Balance Sheet September 30, 2019 Assets Cash Accounts Receivable Office Supplies Office Equipment Total Assets

Liabilities 66 2 0 0 00 Accounts Payable 11 4 0 0 00 8 0 0 0 00 6 8 0 0 00 Owner's Equity 75 0 0 0 00 Selena Cantu, Capital # 144 6 0 0 00 156 0 0 0 00 Total Liabilities and Owner's Equity 156 0 0 0 00

PROBLEM 2.1A

Cash +$100,000 -$20,250

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Totals

Assets Accounts + Receivable + Supplies

-$12,500 +$25,000 +$9,750 +$7,800 -$6,000 +$5,500 -$7,550 -$12,000 $81,950 +

= Liabilities + Owner's Equity Accounts Owner’s Capital + Equipment = Payable + +$100,000 +$20,250 +$15,200 +$15,200 -$12,500 +$25,000 +$9,750 +$7,800 -$6,000

-$5,500 +$7,550 $2,300

$7,550

$2,700

'-$12,000 $124,550

$35,450

Auto

= Liabilities + Accounts = Payable +

H. Joseph Capital

Revenue

Expenses

Analyze: The ending balance in the Cash account is $81,950. PROBLEM 2.2A

Cash Beginning Balances

Assets Accounts Office + Receivable + Furniture +

$72,000

$18,500 +7,200

+ $42,500

+ $27,500

$15,300

$107,250

$65,800 +7,200

$27,850

$72,000 -1,820

$25,700

+ $42,500 +1,820

+ $27,500

$15,300

$107,250

$73,000

$27,850

$70,180 +13,800

$25,700 -13,800

+ $44,320

+ $27,500

$15,300

$107,250

$73,000

$27,850

1. New Balances New Balances

Owner’s Equity

2-1

PROBLEM 2.2A (continued)

Cash New Balances

H. Joseph Capital

Revenue

Expenses

$11,900

$44,320

+ $27,500

$15,300

$107,250

$73,000

$27,850 +910

$83,070 -5,200

$11,900

$44,320

+ $27,500

$15,300 -5,200

$107,250

$73,000

$28,760

$77,870 -10,580

$11,900

$44,320

+ $27,500

$10,100

$107,250

$73,000

$28,760 +10,580

$67,290 -1,285

$11,900

$44,320

+ $27,500

$10,100

$107,250

$73,000

$39,340 +1,285

$11,900

$44,320

+ $27,500

$10,100

$107,250

$73,000 +12,900

$40,625

$66,005 +12,900 $78,905 -2,660

$11,900

$44,320

+ $27,500

$10,100

$107,250

$85,900

$40,625 +2,660

$76,245

+ +

$11,900 +13,800

$44,320

+ $27,500

$10,100

$107,250

$85,900 +13,800

$43,285

$76,245

$25,700

$44,320

+ $27,500

$10,100

$107,250

$99,700

$43,285

New Balances New Balances New Balances New Balances New Balances 10.

Analyze: Total assets equal $173,765.

Auto

Owner’s Equity

= Liabilities + Accounts = Payable +

$83,980 -910

New Balances

Assets + Accounts + Office Receivable Furniture +

2-1

PROBLEM 2.3A Taylor Equipment Repair Service Balance Sheet February 28, 2019 Assets Cash Supplies Accounts Receivable Equipment Total Assets

Liabilities 68 6 0 0 00 Accounts Payable 48 0 0 0 00 0 12 7 6 0 00 26 4 0 0 00 Owner's Equity 156 0 0 0 00 Jason Taylor, Capital 215 7 6 0 00 263 7 6 0 00 Total Liabilities and Owner's Equity 263 7 6 0 00

Analyze: Owner's Equity is $215,760 at February 28, 2019. PROBLEM 2.4A Cotton Cleaning Service Income Statement Month Ended May 31, 2019 Revenue Fees Income Expenses Utilities Expense Salaries Expense Telephone Expense Total Expenses Net Loss

7 8 8 0 00 9 8 0 00 8 9 0 0 00 3 1 4 00 (10 1 9 4 00) (2 3 1 4 00)

Cotton Cleaning Service Statement of Owner's Equity Month Ended May 31, 2019 Taylor Cotton, Capital, May 1, 2019 Net Loss for May (2 3 1 4 00) Less Withdrawal for May 3 0 0 0 00 Decrease in Capital Taylor Cotton, Capital, May 31, 2019

50 6 0 0 00

(5 3 1 4 00) 45 2 8 6 00

PROBLEM 2.4A (continued) Cotton Cleaning Service Balance Sheet May 31, 2019 Assets Cash Accounts Receivable Supplies Equipment Total Assets

Liabilities 4 6 8 6 00 Accounts Payable 0 4 9 0 0 00 5 9 0 0 00 5 8 0 0 00 Owner's Equity 33 8 0 0 00 Taylor Cotton, Capital 45 2 8 6 00 50 1 8 6 00 Total Liabilities and Owner's Equity 50 1 8 6 00

Analyze: Analyze:The Theamount amountofof$43,296 $45,286(Carol (Taylor West, Cotton, Capital) Capital) was was transferred transferred to the to balance the balance sheet. sheet.

PROBLEM 2.1B

Cash +$36,000 -$16,000

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Totals

Assets Accounts + Receivable + Supplies

-$3,000 +$6,000 +$4,200 -$2,600 +$2,500 -$3,150 -$5,000 $18,950

$3,650

$2,500

$1,150

$3,150

= Liabilities + Owner's Equity Accounts Owner’s Payable Capital + Equipment = + + $36,000 + $16,000 + $6,000 + $6,000 $3,000 + $6,000 + $4,200 + $3,650 $2,600

$22,000

$3,000

$5,000 $42,250

Analyze: Transaction 3 increased the Company's debt by $6,000. PROBLEM 2.2B

Cash Beginning Balances

Supplies

Office Furniture

= Liabilities + Accounts = Payable +

Owner’s Equity R. Johnson Capital

Revenue

Expenses

$76,000

+ +

$24,000 $16,000

$25,600

$48,000

$20,000

$99,600

+ $104,000 + $16,000

$50,000

$40,000

$25,600

$48,000

$20,000

$99,600

+ $120,000

$76,000 -5,760

$50,000 $5,760

$70,240 +20,000

$40,000

$25,600

$48,000

$20,000

$99,600

+ $120,000 + $20,000

$55,760

1. New Balances New Balances

Assets Accounts + Receivable +

2-1

PROBLEM 2.2B (continued)

+ Cash New Balances

Assets Accounts + Receivable

Supplies

= Liabilities + Accounts = Payable +

Revenue

Expenses

40,000

25,600

48,000

20,000

99,600

140,000

55,760 3,200

87,040 -9,600

40,000

25,600

48,000

= -

20,000 9,600

99,600

140,000

58,960

77,440 -3,840

40,000

25,600

48,000

10,400

99,600

140,000

58,960 3,840

40,000

25,600

48,000

10,400

99,600

140,000

73,600 -28,000

62,800 28,000

40,000

25,600

48,000

10,400

99,600

+ +

140,000 22,400

90,800

45,600 +22,400 68,000

40,000

+ +

25,600 4,000

48,000

= +

10,400 4,000

99,600

162,400

90,800

68,000 +12,000

+ -

40,000 12,000

29,600

48,000

14,400

99,600

162,400

90,800

$80,000

$28,000

$29,600

48,000

$14,400

99,600

+ $162,400

$90,800

New Balances New Balances New Balances New Balances 9. New Balances 10.

Analyze: Owner's Equity balance is $171,200; $99,600 + ($162,400 - $90,800).

Owner’s Equity R. Johnson Capital

90,240 -3,200

New Balances

Office Furniture

2-1

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PROBLEM 2.3B Ronald's Tax Service Balance Sheet December 1, 2019 Assets

Liabilities

Cash

25 0 0 0 00

Furniture

7 5 0 0 00

Equipment

8 5 0 0 00

0 Owner's Equity Ronald Thomas, Capital

Total Assets

41 0 0 0 00 Total Liabilities and Owner's Equity

41 0 0 0 00 41 0 0 0 00

Analyze: The amount reported on the balance sheet for owner’s equity would be $33,000 ($41,000 - $8,000). PROBLEM 2.4B Kathryn Proctor, Attorney and Counselor of Law Income Statement Month Ended August 31, 2019 Revenue Fees Income

10 8 0 0 00

Expenses Utilities Expense Salaries Expense Telephone Expense

6 0 0 00 5 4 0 0 00 6 0 0 00

Total Expenses

6 6 0 0 00

Net Income

4 2 0 0 00

Kathryn Proctor, Attorney and Counselor of Law Statement of Owner's Equity Month Ended August 31, 2019 Kathryn Proctor, Capital, Aug. 1, 2019 Net Income for August Less Withdrawals for August Increase in Capital Kathryn Proctor, Capital, Aug. 31, 2019

23 2 0 0 00 4 2 0 0 00 1 2 0 0 00 3 0 0 0 00 26 2 0 0 00

Analyze: Net Income of $4,200 was transferred from the income statement.

PROBLEM 2.4B (continued) Kathryn Proctor, Attorney and Counselor at Law Balance Sheet August 31, 2019 Assets Cash Accounts Receivable Supplies Equipment Total Assets

Liabilities 4 8 0 0 00 Accounts Payable 0 6 0 0 00 6 6 0 0 00 5 4 0 0 00 Owner's Equity 10 0 0 0 00 Kathryn Proctor, Capital 26 2 0 0 00 26 8 0 0 00 Total Liabilities and Owner's Equity 26 8 0 0 00

Analyze: Net income of $4,200 was transferred from the income statement.

CRITICAL THINKING PROBLEM 2.1 Determine the balance for William Giese, April 30, 2019. Assets

Cash $60,000

Accounts + Receivable + Machinery = + $24,000 + $42,000 =

Accounts Payable $26,400

= Liabilities + William Giese, + Capital + ? -

Owner’s Equity William Giese, Drawing $13,600

+ +

Revenue $53,600

Let William Giese, Capital = X. Solving for X: $126,000 (Total Assets) = $26,400 (Accounts Payable) - $13,600 (Drawing) + $53,600 (Revenue) - $42,980 (Expenses) + X

$126,000 William Giese, Capital, April 1, 2016 Advertising Expense Maintenance Expense Salaries Expense Total Expenses

$126,000 = $23,420 = $102,580 = $102,580

$23,420 $23,420 X

$7,780 9,200 26,000 $42,980

2-1

+ -

X $23,420

Expenses $42,980

CRITICAL THINKING PROBLEM 2.1 (continued) William Giese, Certified Public Accountant Income Statement Month Ended April 30, 2019 Revenue Fees Earned

53 6 0 0 00

Expenses Advertising Expense Maintenance Expense Salaries Expense

7 7 8 0 00 9 2 0 0 00 26 0 0 0 00

Total Expenses

42 9 8 0 00

Net Income

10 6 2 0 00

William Giese, Certified Public Accountant Statement of Owner's Equity Month Ended April 30, 2019 William Giese, Capital, April 1, 2019 Net Income for April Less Withdrawals for April Decrease in Capital William Giese, Capital, April 30, 2019

102 5 8 0 00 10 6 2 0 00 13 6 0 0 00 (2 9 8 0 00) 99 6 0 0 00

William Giese, Certified Public Accountant Balance Sheet April 30, 2019 Assets Cash Accounts Receivable Machinery Total Assets

60 0 0 0 00 24 0 0 0 00 42 0 0 0 00 # 126 0 0 0 00

Liabilities Accounts Payable 0 26 4 0 0 00 Owner's Equity William Giese, Capital 99 6 0 0 00 Total Liabilities and Owner's Equity 126 0 0 0 00

Analyze: The decrease in owner's equity was $2,980.

CRITICAL THINKING PROBLEM 2.2 Body Builders Fitness Center Income Statement Two Months Ended December 31, 2019 Revenue Fees Earned ($7,500 + $3,200) Expenses Rent Expense Cleaning Expense Advertising Expense Total Expenses Net Loss

10 7 0 0 00 9 0 0 0 00 2 1 0 0 00 6 0 0 00 11 7 0 0 00 (1 0 0 0 00)

Some students may include the warm-up suits as a business expense. If the suits are a type of uniform, their inclusion is appropriate; if they are to be worn at home and at work, their cost is not a business expense. The parking ticket is a personal expense. The cleaning of the studio and the printing of the flyers are business expenses. Payment of expenses with the owner’s personal credit card would be considered an additional investment by the owner. It is not unusual for new businesses to operate at a loss. James should project his income and expenses for the next several months to determine how much new business he will need to earn an income. Students’ suggestions for improving the accounting system might include opening a business checking account, not using a personal credit card for business expenses, setting up a filing system for business records, and purchasing a computer to maintain financial records.

SOLUTIONS TO BUSINESS CONNECTIONS Managerial Focus: 1. Not necessarily. Reinvestments in assets or use of cash to pay debts affect cash. In addition, sales or revenue may have been "on account." 2. No. Early development is expensive, risky, and time consuming. Profits may not be achieved for a year or more. 3. The firm’s obligations must be met as they become due. 4. Organized financial information can be used to evaluate operating efficiency and to make decisions about current and future activities. Ethical Dilemma: Julia should not record the sale until sh receives the purchase order from the customer and the goods are shipped. If she enters the sale and for ome reason the customer doesn’t make the order or the goods are not available for shipment, Carol would need to pay back the bonus. Julia's job would be in jeopardy.

Financial Statement Analysis: 1. Southwest Airlines Co., Consolidated Statement of Income, Years Ended December 31, 2015 and 2014. 2. Passenger, Freight, Other. 3. Statement of Owner’s Equity (Consolidated Statement of Stockholders’ Equity). 4. Total operating revenue was $4.977 million for the quarter ended December 31, 2015. 5. See current topic on website. Internet Connection: Macy’s, Bloomingdales, and now May is included in the Federated Corporation. Shopping online is on every home page. To record an online sale it must debit a credit card receivable and credit sales. A general job announcement and requirements are given at the site. Team Work: Accounts Payable Clerk would use Purchases (Increase), A/P (increase and decrease) and Cash (decrease). Accounts Receivable Clerk would use Sales (increase), A/R (increase and decrease) and Cash (increase). Full charge bookkeeper would use accounts Cash (increase and decrease), Bank Charges (increase) and Miscellaneous account (increase), Interest Income (increase), Interest Expense (increase). Accurate numbers are developed when it is determined that all transactions have been entered and that total assets equal total liabilities plus owner’s equity.

Problem EX EX EX EX EX EX EX EX

3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8

Time 5 10 5 10 10 15 15 15

PR PR PR PR PR

3.1A 3.2A 3.3A 3.4A 3.5A

15 15 20 25 30

CT CT

3.1 3.2

35 60

5 10 15 20 25 30 35 40 45 50 55 60

= = = = = = = = = = = =

1-5 min. 6-10 min. 11-15 min. 16-20 min. 21-25 min. 26-30 min. 31-35 min. 36-40 min. 41-45 min. 46-50 min. 51-55 min. 56-60 min.

CHAPTER 3 ANALYZING BUSINESS TRANSACTIONS USING T ACCOUNTS Chapter Opener: Thinking Critically How might accountants in 1877 have recorded The Bell Telephone Comnpany's first telephone service revenue transaction? How did this transaction affect the fundamental accounting equation? Cash or Accounts Receivable would have increased and Equity or the Service Revenue account would also have increased. The equation would increase by the same amount on both sides. (Assets would increase and Owners Equity would increase.) Managerial Implications: Thinking Critically Answers will vary but could include the following: • Cash is overstated and checks bounce. • The credit rating of the business is affected. • The business loses customers because payments on account are not recorded properly. Discussion Questions Note to instructor: These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter. 1. Written records for all assets, liabilities, and owner’s equity of a business. 2. To provide a classified list of the names and numbers of a firm’s accounts. 3. Order in which they appear on financial statements. Balance sheet accounts listed first, followed by income statement accounts. 4. Additional accounts can be added when needed. 5. Permanent account balances are carried forward to start a new accounting period. Temporary account balances are transferred to a summary account at the end of the period and are zero at the start of a new accounting period. 6. Adding the figures on both sides of the account and subtracting the smaller total from the larger 7. 8. 9. 10. 11.

total. a. debit b. credit c. credit d. credit e. debit Debit: entry on the left side of an account. Credit: entry on the right side of an account. Payment of rent in advance affords the right to occupy the facility for the number of months covered by the payment. Each transaction produces at least two effects with at least one debit and one credit. a, b, h, i, k: temporary c, d, e, f, g, j, l: permanent

EXERCISE 3.1 Cash 38,000

Equipment 92,000

Accounts Payable

Charles Anderson, Capital 81,600

48,400

EXERCISE 3.2 Cash 45,000 (2) 4,500 (4) (5)

(1) (3)

15,000 1,900 1,500

Fees Income (3)

Supplies 1,500

(5)

4,500

(2)

Equipment 15,000

(4)

Advertising Expense 1,900

Derrick Wells, Capital (1) 45,000

EXERCISE 3.3 1. 2. 3. 4.

Debit Debit Debit Debit

5. 6. 7. 8.

Credit Credit Credit Debit

EXERCISE 3.4 1. 2. 3. 4. 5.

Credit, Credit, Debit Credit, Credit, Debit Debit, Debit, Credit Debit, Debit, Credit Credit, Credit, Debit

EXERCISE 3.5 Cash, $80,150 Dr. Accounts Receivable, $3,500 Dr. Supplies, $23,000 Dr. Equipment, $40,000 Dr. Accounts Payable, $40,000 Cr.

Wade Wilson, Capital $95,000 Cr Fees Income, $20,000 Cr. Telephone Expense, $350 Dr. Salaries Expense, $5,500 Dr. Wade Wilson, Drawing, $2,500 Dr.

EXERCISE 3.6 Residential Relocators Trial Balance December 31, 2019 ACCOUNT NAME Cash Accounts Receivable Supplies Equipment Accounts Payable Wade Wilson, Capital Wade Wilson, Drawing Fees Income Salaries Expense Telephone Expense Totals

80 3 23 40

DEBIT 1 5 0 00 5 0 0 00 0 0 0 00 0 0 0 00

CREDIT

40 0 0 0 00 95 0 0 0 00 2 5 0 0 00 20 0 0 0 00 5 5 0 0 00 3 5 0 00 #155 0 0 0 00

155 0 0 0 00

Residential Relocators Income Statement Month Ended December 31, 2019 Revenue Fees Income Expenses Salaries Expense Telephone Expense

20 0 0 0 00 5 5 0 0 00 3 5 0 00 Total Expenses

Net Income

5 8 5 0 00 14 1 5 0 00

EXERCISE 3.7 Residential Relocators Statement of Owner's Equity Month Ended December 31, 2019 Wade Wilson, Capital, Dec. 1, 2019 Net Income for December Less Withdrawals for December Increase in Capital Wade Wilson, Capital, Dec. 31, 2019

95 0 0 0 00 14 1 5 0 00 2 5 0 0 00 11 6 5 0 00 106 6 5 0 00

Residential Relocators Balance Sheet December 31, 2019 Assets Cash Accounts Receivable Supplies Equipment Total Assets

Liabilities 80 1 5 0 00 Accounts Payable 3 5 0 0 00 23 0 0 0 00 Owner's Equity 40 0 0 0 00 Wade Wilson, Capital # 146 6 5 0 00 Total Liabilities & Owner's Equity

40 0 0 0 00

106 6 5 0 00 146 6 5 0 00

EXERCISE 3.8

Account Number 100-199 101 111 121 131 141 200-299 202

Dad & Sons Moving Company Chart of Accounts Account Name Account Number ASSETS 300-399 Cash 301 Accounts Receivable 302 Office Supplies 400-499 Prepaid Rent 401 Office Equipment 500-599 LIABILITIES 511 Accounts Payable 514 517

Account Name OWNER'S EQUITY Nelson Sullivan, Capital Nelson Sullivan, Drawing REVENUE Fees Income EXPENSES Salaries Expense Utilities Expense Telephone Expense

PROBLEM 3.1A 1.

Cash + 21,000

Hunter Thompson, Capital + 21,000

Equipment + 10,000

Cash - 10,000

Cash + 1,700

Office Furniture - 1,700

Office Equipment + 3,700

Accounts Payable + 3,700

Office Equipment + 11,200

Accounts Payable + 11,200

Nancy Fowler, Drawing + 6,000

Delivery Truck + 37,000

Accounts Payable - 3,500

Cash - 6,000

Accounts Payable + 37,000

Cash - 3,500

Analyze: Transactions 1 and 6 directly affect the owner's equity account.

PROBLEM 3.2A 1.

Cash + 35,000

Office Furniture + 8,500

Ronald Calhoun, Capital + 35,000

Cash - 8,500

Office Equipment + 525

Accounts Payable + 525

Automobile + 8,500

Cash

Cash + 5,500

Ronald Calhoun, Capital + 5,500

Office Equipment + 2,000

Accounts Payable - 525

Cash

8. Ronald Calhoun, Drawing + 2,500

Cash

- 8,500

Accounts Payable + 2,000

- 525

- 2,500

Analyze: All transactions affected asset accounts.

PROBLEM 3.3A 1.

Office Supplies + 6,000

Cash + 52,000

Rent Expense + 10,000

Accounts Receivable + 8,000

Cash - 6,000

Fees Income + 52,000

Cash - 10,000

Fees Income + 8,000

Cash + 4,000

Salaries Expense + 9,200

Cash

Telephone Expense 1,160

Cash

Accounts Receivable - 4,000

- 9,200

1,160

Accounts Receivable + 6,000

Fees Income + 6,000

Office Supplies + 2,200

Accounts Payable + 2,200

10.

Salaries Expense + 9,200

Cash - 9,200

PROBLEM 3.3A (continued) 11.

Cash + 6,000

Accounts Receivable - 6,000

12.

Cash + 18,200

Fees Income + 18,200

Analyze: $35,560 in cash was spent during the month.

PROBLEM 3.4A

Bal.

Cash + 80,000 (b) + 4,100 (c) + 3,500 (e) + 7,250 (g) + 4,000 (i) (k) (l) (p) (q) (r) 56,755 (s)

(g) (k) Bal.

Office Equipment + 19,000 + 20,000 39,000

(a) (d) (h) (m) (o)

(p)

Accounts Payable - 1,450 (g) (j) (k) Bal.

- 3,000 - 8,360 - 625 - 6,500 - 2,000 - 10,000 - 4,700 - 1,450 - 350 - 610 - 4,500

+ 12,500 + 2,900 + 10,000 23,950

(f) (n) Bal.

Accounts Receivable + 7,000 (h) + 8,000 (o) 7,500

Office Furniture + 8,360 + 2,900 11,260

Randy Guttery, Capital (a)

- 3,500 - 4,000

+ 80,000

PROBLEM 3.4A (continued) Randy Guttery, Drawing (s) + 4,500

(r)

Utilities Expense + 610

Fees Income (d) + 4,100 (f) + 7,000 (m) + 7,250 (n) + 8,000 Bal. 26,350

(l)

Salaries Expense + 4,700

(b)

Rent Expense + 3,000

Telephone Expense +625

Miscellaneous Expense (i) + 2,000 (q) + 350 Bal. 2,350

Analyze: The company owes $23,950 (accounts payable).

PROBLEM 3.5A Randy Guttery, Landscape Consultant Trial Balance June 30, 2019 ACCOUNT NAME Cash Accounts Receivable Office Equipment Office Furniture Accounts Payable Randy Guttery, Capital Randy Guttery, Drawing Fees Income Miscellaneous Expenses Rent Expense Salaries Expense Telephone Expense Utilities Expense Total

DEBIT 56 7 5 5 00 7 5 0 0 00 39 0 0 0 00 11 2 6 0 00

CREDIT

23 9 5 0 00 80 0 0 0 00 4 5 0 0 00 26 3 5 0 00 2 3 5 0 00 3 0 0 0 00 4 7 0 0 00 6 2 5 00 6 1 0 00 130 3 0 0 00

130 3 0 0 00

Randy Guttery, Landscape Consultant Income Statement Month Ended June 30, 2019 Revenue Fees Income Expenses Miscellaneous Expenses Rent Expense Salaries Expense Telephone Expense Utilities Expense Total Expenses Net Income

26 3 5 0 00 2 3 5 0 00 3 0 0 0 00 4 7 0 0 00 6 2 5 00 6 1 0 00 11 2 8 5 00 15 0 6 5 00

PROBLEM 3.5A (Continued) Randy Guttery, Landscape Consultant Statement of Owner's Equity Month Ended June 30, 2019 Randy Guttery, Capital, June 1, 2019 Net Income for June Less Withdrawals for June Increase in Capital Randy Guttery, Capital, June 30, 2019

80 0 0 0 00 15 0 6 5 00 4 5 0 0 00 10 5 6 5 00 90 5 6 5 00

Randy Guttery, Landscape Consultant Balance Sheet June 30, 2019 Assets Cash Accounts Receivable Office Equipment Office Furniture Total Assets

56 7 5 5 00 7 5 0 0 00 39 0 0 0 00 11 2 6 0 00 114 5 1 5 00

Liabilities Accounts Payable Owner's Equity Randy Guttery, Capital Total Liabilities & Owner's Equity

23 9 5 0 00

90 5 6 5 00 114 5 1 5 00

Analyze: The net increase in owner's equity during the month of June was $10,565.

PROBLEM 3.1B 1.

Equipment + 16,000

Cash

2. Ana Rodriguez, Drawing + 4,000

Cash

Cash + 3,000

- 16,000

- 4,000

Equipment - 3,000

Delivery Truck + 12,000

Cash

Accounts Payable - 3,600

Cash

Office Equipment + 5,000

Cash + 20,000

Accounts Payable - 1,500

- 12,000

- 3,600

Accounts Payable + 5,000

Kelvin Newton, Capital + 20,000

Cash - 1,500

Analyze: The transactions that affect the liability accounts are transactions 5, 6, and 8.

PROBLEM 3.2B 1.

Cash + 20,000

Shop Equipment + 1,800

Store Equipment + 1,200

Truck + 10,000

Alexander Neal, Capital + 20,000

Cash - 1,800

Accounts Payable + 1,200

Cash - 10,000

Shop Equipment + 3,000

Alexander Neal, Capital + 3,000

Store Equipment + 2,500

Accounts Payable + 2,500

Accounts Payable - 400

8. Alexander Neal, Drawing + 1,600

Cash - 400

Cash - 1,600

Analyze: The transactions that affect the cash account are transactions 1, 2, 4, 7, and 8.

PROBLEM 3.3B 1.

Rent Expense + 3,750

Cash - 3,750

PROBLEM 3.3B (continued) 2.

Cash + 4,500

Salaries Expense + 3,400

Accounts Receivable + 6,100

Telephone Expense + 790

Fees Income + 4,500

Cash - 3,400

Fees Income + 6,100

Cash - 790

Cash + 4,000

Accounts Receivable - 4,000

Cash - 190

Telephone Expense - 190

Accounts Receivable + 4,280

Utilities Expense + 425

Cash

Gasoline Expense + 795

Cash

10.

11.

Cash + 3,125

Fees Income + 4,280

- 425

- 795

Accounts Receivable - 3,125

PROBLEM 3.3B (continued) 12.

Cash + 4,700

Fees Income + 4,700

Analyze: The total cash collected for Accounts Receivable during the month was $7,125.

PROBLEM 3.4B

Bal.

Cash + 140,000 (b) +10,500 (c) + 5,400 (e) + 7,450 (i) + 4,200 (j) (k) (l) (o) (r) 73,843 (s)

(k) (q) Bal.

Office Equipment + 22,800 + 6,880 29,680

(a) (d) (h) (m) (p)

(i)

- 7,800 - 38,500 - 1,850 - 3,800 - 1,590 - 11,400 - 18,900 - 967 - 900 - 8,000

Accounts Payable - 3,800 (g) + 6,500 (k) + 11,400 (q) +6,880 Bal. 20,980

(f) (n) Bal.

Accounts Receivable + 11,280 (h) - 5,400 +6,500 (p) - 4,200 8,180

(g)

Office Furniture +6,500

(c)

Automobile + 38,500

Conner McAllister, Capital (a) + 140,000

PROBLEM 3.4B (continued) Conner McAllister, Drawing (s) + 8,000

Automobile Expense (e) + 1,850 (r) +900 Bal. 2,750

(o)

Fees Income (d) + 10,500 (f) + 11,280 (m) +7,450 (n) + 6,500 Bal. 35,730

(j)

Utilities Expense + 1,590

(b)

Rent Expense + 7,800

Salaries Expense (l) + 18,900

Telephone Expense + 967

Analyze: Credit customers owe the company $8,180 (Accounts Receivable).

PROBLEM 3.5B Conner McAllister, Counselor and Attorney at Law Trial Balance April 30, 2019 ACCOUNT NAME Cash Accounts Receivable Automobile Office Equipment Office Furniture Accounts Payable Conner McAllister, Capital Conner McAllister, Drawing Fees Income Automobile Expense Rent Expense Salaries Expense Utilities Expense Telephone Expense Total

DEBIT 73 8 4 3 00 8 1 8 0 00 38 5 0 0 00 29 6 8 0 00 6 5 0 0 00

CREDIT

20 9 8 0 00 140 0 0 0 00 8 0 0 0 00 35 7 3 0 00 2 7 5 0 00 7 8 0 0 00 18 9 0 0 00 1 5 9 0 00 9 6 7 00 #196 7 1 0 00

196 7 1 0 00

Conner McAllister, Counselor and Attorney at Law Income Statement Month Ended April 30, 2019 Revenue Fees Income Expenses Automobile Expense Rent Expense Salaries Expense Utilities Expense Telephone Expense Total Expenses Net Income

35 7 3 0 00 2 7 5 0 00 7 8 0 0 00 18 9 0 0 00 1 5 9 0 00 9 6 7 00 32 0 0 7 00 3 7 2 3 00

PROBLEM 3.5B (continued) Conner McAllister, Counselor and Attorney at Law Statement of Owner's Equity Month Ended April 30, 2019 C. McAllister, Capital, April 1, 2019 Net Income for April Less Withdrawals for April Decrease in Capital C. McAllister, Capital, April 30, 2019

140 0 0 0 00 3 7 2 3 00 8 0 0 0 00 (4 2 7 7 00) 135 7 2 3 00

Conner McAllister, Counselor and Attorney at Law Balance Sheet April 30, 2019 Assets Cash Accounts Receivable Automobile Office Equipment Office Furniture Total Assets

Liabilities 73 8 4 3 00 Accounts Payable 8 1 8 0 00 38 5 0 0 00 29 6 8 0 00 Owner's Equity 6 5 0 0 00 Conner McAllister, Capital 156 7 0 3 00 Total Liabilities & Owner's Equity

Analyze: The net decrease in owner's equity during the month of April was $4,277.

20 9 8 0 00

135 7 2 3 00 156 7 0 3 00

CRITICAL THINKING PROBLEM 3.1 Cash 3,000 2,400 2,000

Bal.

1,000 1,800 400 2,000 400

Accounts Receivable 1,200

Equipment and Tools 1,000

1,800

Truck 1,800

Brent Davis, Capital 3,000

Fees Income

Bal.

Salary Expense 2,000

Gasoline Expense 400

Advertsing Expense 400

2,400 1,200 2,000 5,600

CRITICAL THINKING PROBLEM 3.1 (continued) Emerald Lawn Care Income Statement Three Months Ended August 31, 2019 Revenue Fees Income Expenses Salary Expense Gasoline Expense Advertising Expense Total Expenses Net income

5 6 0 0 00 2 0 0 0 00 4 0 0 00 4 0 0 00 2 8 0 0 00 2 8 0 0 00

Emerald Lawn Care Statement of Owner's Equity Three Months Ended August 31, 2019 Brent Davis, Capital, June 1, 2019 Net Income for June-August Brent Davis, Capital, Jaugust 31, 2019

3 0 0 0 00 2 8 0 0 00 5 8 0 0 00

Emerald Lawn Care Balance Sheet August 31, 2019 Assets Cash Accounts Receivable Equipment/Tool Truck Total Assets

Liabilities 1 8 0 0 00 1 2 0 0 00 1 0 0 0 00 1 8 0 0 00 5 8 0 0 00

Owner's Equity Brent Davis, Capital Total Liabilities & Owner's Equity

5 8 0 0 00 5 8 0 0 00

Brent is better off than he would have been had he left his money in the savings account. He earned a profit of $2,800 from his Emerald Lawn Care business, compared to approximately $45.00 in interest his money would have earned over the three summer months (assuming a bank interest rate of 6%; $3,000 × 0.06 × 3/12). Brent needs to look beyond his current checking account balance of $1,800 and realize that this balance will increase to $3,000 when he collects the $1,200 still owed to him. He also owns a truck and power mowers that he could sell for additional cash.

CRITICAL THINKING PROBLEM 3.2 Cash (a) + 20,000 (b) (d) + 4,550 (c) (i) + 2,130 (e) (m) + 2,300 (g) (p) + 900 (h) (k) (l) (n) (q) Bal. 16,960 (r)

- 2,000 - 2,300 - 210 - 75 - 550 - 4,000 - 225 - 460 - 2,500 - 600

Accounts Receivable (f) + 1,560 (i) - 2,130 (0) + 2,150 (p) - 900 Bal. 680

(g)

Office Equipment + 325

(q)

Brenda Jo Smith, Drawing + 2,500

Fees Income (d) (f) (m) (o) Bal.

(n)

Utilities Expense + 460

Salaries Expense + 4,000

(h) (r) Bal.

Miscellaneous Expense + 550 + 600 1,150

(l)

(k)

Accounts Payable - 225 (g) + 250 (j) + 545 Bal. 570

+ 4,550 + 1,560 + 2,300 + 2,150 10,560

Office Furniture + 2,300 + 545 2,845

Brenda Jo Smith, Capital (a) + 20,000

(b)

Advertising Expense + 2,000

(e)

Telephone Expense + 210

CRITICAL THINKING PROBLEM 3.2 (continued) Brenda Jo Smith, Architect Trial Balance January 31, 2019 ACCOUNT NAME Cash Accounts Receivable Office Furniture Office Equipment Accounts Payable Brenda Jo Smith, Capital Brenda Jo Smith, Drawing Fees Income Advertising Expense Utilities Expense Salaries Expense Telephone Expense Miscellaneous Expense Totals

DEBIT 16 9 6 0 00 6 8 0 00 2 8 4 5 00 3 2 5 00

CREDIT

5 7 0 00 20 0 0 0 00 2 5 0 0 00 10 5 6 0 00 2 0 0 0 00 4 6 0 00 4 0 0 0 00 2 1 0 00 1 1 5 0 00 31 1 3 0 00

31 1 3 0 00

Brenda Jo Smith, Architect Income Statement Month Ended January 31, 2019 Revenue Fees Income Expenses Advertising Expense Utilities Expense Salaries Expense Telephone Expense Miscellaneous Expense Total Expenses Net Income

10 5 6 0 00 2 0 0 0 00 4 6 0 00 4 0 0 0 00 2 1 0 00 1 1 5 0 00 7 8 2 0 00 2 7 4 0 00

CRITICAL THINKING PROBLEM 3.2 (continued) Brenda Jo Smith, Architect Statement of Owner's Equity Month Ended January 31, 2019 Brenda Jo Smith, Capital, January 1, 2019 Net Income for January Less Withdrawals for January Increase in Capital Brenda Jo Smith, Capital, January 31, 2019

20 0 0 0 00 2 7 4 0 00 2 5 0 0 00 2 4 0 00 20 2 4 0 00

Brenda Jo Smith, Architect Balance Sheet January 31, 2019 Assets Cash Accounts Receivable Office Furniture Office Equipment Total Assets

16 9 6 0 00 6 8 0 00 2 8 4 5 00 3 2 5 00 20 8 1 0 00

Liabilities Accounts Payable

5 7 0 00

Owner's Equity Brenda Jo Smith, Capital20 2 4 0 00 Total Liabilities & 20 8 1 0 00 Owner's Equity

Analyze: Assets ($20,810) = Liabilities ($570) + Owner's Equity ($20,240)

SOLUTIONS TO BUSINESS CONNECTIONS Managerial Focus: 1. Net income (or net loss) for the period. 2. Reduce expenses; increase sales volume or raise sales prices. 3. Review of financial records containing cash available, amounts due, and dates due. 4. Provide summaries of: a. Income Statement—revenues and expenses, b. Balance Sheet—assets, liabilities, and owner’s equity. Ethical Dilemma: Do not open the account New Expenses without approval from the controller. You must identify what expenses will be put into that account. If the account is not monitored, the Accounts Payable clerk might enter personal expenses, which would not be appropriate. Financial Statement Analysis: 1. Financial data, operational information, plans for the future. 2. $4.80 Billion. 3. $3.99 Billion for cash, cash equivalents, and short-term investments were on hand at the end of fiscal year 2015. 4. Financial results were substantially improved for fiscal year 2015. GAAP net income was $222,705 million for fiscal year 2015 compared to $88,136 million in fiscal year 2014. 5. Adobe generated $1.47 billion in operating cash flows the 2015 fiscal year. Teamwork: All companies would have a cash account and accounts payable. A plumbing service would have accounts receivable whereas a clothing store would also have a credit card receivable. Both grocery store and clothing store would have inventory. All would have wages expense except the real estate would have sales commission. All would have office supplies expense. Depending on whether the company owned the building, most would have rent expense.

Internet Connection: Answers will vary depending on the latest fiscal year available. For fiscal year 2015, Honeywell is the most profitable, and has the most cash and total assets.

Problem EX EX EX EX EX EX

4.1 4.2 4.3 4.4 4.5 4.6

Time 10 15 15 10 5 5

PR PR PR PR

4.1A 4.2A 4.3A 4.4A

30 60 15 40

CT CT

4.1 4.2

30 90

5 10 15 20 25 30 35 40 45 50 55 60

= = = = = = = = = = = =

1-5 min. 6-10 min. 11-15 min. 16-20 min. 21-25 min. 26-30 min. 31-35 min. 36-40 min. 41-45 min. 46-50 min. 51-55 min. 56-60 min.

CHAPTER 4 THE GENERAL JOURNAL AND THE GENERAL LEDGER Chapter Opener: Thinking Critically How do you think Boeing would record the purchase of a robotic arm that could handle large payloads, move equipment and supplies around the station, and support astronauts working outside the space station? They would probably record (debit) the cost of the arm to their Equipment or Machinery account and credit Accounts Payable. The robotic arm will be used for many years so its cost will be expensed over its years of useful life. Managerial Implications: Thinking Critically Answers will vary but may include the following. • Exposing the assets of the business to fraud and theft. • Increasing the risk of producing inaccurate financial statements. • Difficulty in auditing transactions. • Research customer billing. (Customer says no invoice was received.) Discussion Questions Note to instructor: These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter. 1. To record business transactions in chronological order. 2. Assets, liabilities, and owner’s equity first, followed by revenue accounts, then expenses. They are in order of the financial statements. 3. Groups of accounts. 4. Transfer of data from a journal to a ledger. 5. Notations of the page number of the journal from which a figure comes; number of account to which the figure was posted; to provide cross-references. 6. Steps performed to classify, record, and summarize financial data for a business. 7. Entry that includes more than a single debit and credit—two or more debits and/or credits. 8. Helps establish audit trail. 9. Record month, day, debited account/amount, credited account/amount, description. 10. Before entry posted: cross out incorrect item, write correct data above it. After posted: journalize and post a correcting entry. 11. Chain of references; prevents fraud and errors.

EXERCISE 4.1

1. 2. 3. 4.

Debit Credit Debit 401 101 5. 202 517 101 6. 101 111 401 7. 101 131 101

Credit 101 401 111

8. 9. 10.

Debit 101 121 511

Credit 301 202 101

EXERCISE 4.2 GENERAL JOURNAL

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

DATE DESCRIPTION 2019 Sept. 1 Cash Zack Mason, Capital Beginning investment of owner

PAGE 1 POST. REF.

DEBIT 30 0 0 0 00

101 301

4 Equipment Accounts Payable Purchased equipment on credit from Den, Inc., Invoice 9823, payable in 30 days

131 202

3 2 5 0 00

16 Automobile Cash Purchased an automobile, Check 1001

141 101

15 0 0 0 00

20 Supplies Cash Purchased supplies, Check 1002

121 101

2 6 0 00

23 Cash Supplies Returned damaged supplies and received cash refund

101 121

8 5 00

30 Accounts Payable Cash Paid Den, Inc., on account for Invoice 9823, Check 1003

202 101

2 1 0 0 00

CREDIT 1 2 30 0 0 0 00 3 4 5 6 3 2 5 0 00 7 8 9 10 11 15 0 0 0 00 12 13 14 15 2 6 0 00 16 17 18 19 8 5 00 20 21 22 23 24 2 1 0 0 00 25 26 27

EXERCISE 4.2 (continued) GENERAL JOURNAL

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

DATE DESCRIPTION 2019 Sept. 30 Zack Mason, Drawing Cash Owner withdrew cash for personal use

PAGE 2 POST. REF. 302 101

30 Prepaid Rent Cash Paid October rent, Check 1004

511 101

30 Cash

101 401

Fees Income Performed services for cash 30 Telephone Expense Cash Paid monthly telephone bill, Check 1005

517 101

DEBIT

CREDIT

1 2 1 5 0 0 00 3 4 5 3 5 0 0 00 6 3 5 0 0 00 7 8 9 1 3 2 5 00 10 1 3 2 5 00 11 12 13 2 2 0 00 14 2 2 0 00 15 16 17 18 1 5 0 0 00

EXERCISE 4.3 GENERAL LEDGER ACCOUNT

Cash

DATE 2019 Sept. 1 16 20 23 30 30 30 30 30

ACCOUNT

J1 J1 J1 J1 J1 J2 J2 J2 J2

DEBIT

CREDIT

30 0 0 0 00 15 0 0 0 00 2 6 0 00 8 5 00 2 1 0 0 00 1 5 0 0 00 3 5 0 0 00 7 3 2 5 00 2 2 0 00

DEBIT

CREDIT

Supplies

30 0 0 0 00 15 0 0 0 00 14 7 4 0 00 14 8 2 5 00 12 7 2 5 00 11 2 2 5 00 7 7 2 5 00 15 0 5 0 00 14 8 3 0 00

BALANCE DEBIT CREDIT

ACCOUNT NO. 121

POST DESCRIPTION REF. J1 J1

DEBIT

CREDIT

2 6 0 00 8 5 00

Equipment

DATE DESCRIPTION 2019 Sept. 4

BALANCE DEBIT CREDIT

ACCOUNT NO. 111

POST DESCRIPTION REF.

DATE 2019 Sept. 20 23

ACCOUNT

POST DESCRIPTION REF.

Accounts Receivable

DATE

ACCOUNT

ACCOUNT NO. 101

BALANCE DEBIT CREDIT 2 6 0 00 1 7 5 00

ACCOUNT NO. 131 POST REF.

DEBIT

3 2 5 0 00

CREDIT

BALANCE DEBIT CREDIT 3 2 5 0 00

CCOUNT NO. 101

CCOUNT NO. 111

CCOUNT NO. 121

CCOUNT NO. 131

EXERCISE 4.3 (continued) ACCOUNT

DATE 2019 Sept. 16

ACCOUNT

Automobile POST DESCRIPTION REF. J1

DATE 2019 Sept. 1

ACCOUNT

DATE 2019 Sept. 30

ACCOUNT

DEBIT

CREDIT

15 0 0 0 00

ACCOUNT NO. 202

POST REF.

DEBIT

J1 J1

2 1 0 0 00

CREDIT

POST DESCRIPTION REF.

DEBIT

CREDIT

BALANCE DEBIT CREDIT

30 0 0 0 00

Zack Mason, Drawing

3 2 5 0 00 1 1 5 0 00

ACCOUNT NO. 301

POST DESCRIPTION REF.

BALANCE DEBIT CREDIT

3 2 5 0 00

Zack Mason, Capital

30 0 0 0 00

ACCOUNT NO. 302

DEBIT

CREDIT

1 5 0 0 00

BALANCE DEBIT CREDIT 1 5 0 0 00

Fees Income

DATE DESCRIPTION 2019 Sept. 30

BALANCE DEBIT CREDIT 15 0 0 0 00

Accounts Payable

DATE DESCRIPTION 2019 Sept. 4 30

ACCOUNT

ACCOUNT NO. 141

ACCOUNT NO. 401 POST REF. J2

DEBIT

CREDIT 7 3 2 5 00

BALANCE DEBIT CREDIT 7 3 2 5 00

EXERCISE 4.3 (continued) ACCOUNT

DATE 2019 Sept. 30

Rent Expense

DESCRIPTION

ACCOUNT

Salaries Expense

DATE

DESCRIPTION

ACCOUNT

DATE 2019 Sept. 30

ACCOUNT NO. 511 POST REF.

DEBIT

3 5 0 0 00

CREDIT

3 5 0 0 00

ACCOUNT NO. 514 POST REF.

DEBIT

CREDIT

Telephone Expense

DESCRIPTION

BALANCE DEBIT CREDIT

ACCOUNT NO. 517 POST REF. J2

DEBIT 2 2 0 00

CREDIT

BALANCE DEBIT CREDIT 2 2 0 00

EXERCISE 4.4 GENERAL JOURNAL DATE DESCRIPTION 1 2019 2 Nov. 5 Cash 3 Accounts Receivable 4 Fees Income 5 Performed services for Job Search 6 receiving part of fees in cash with 7 remainder due in 60 days 8 9 18 Equipment 10 Supplies 11 Cash 12 Purchased graphing calculator and 13 supplies, Check 1008 14 15 23 Automobile Expense 16 Cash 17 Accounts Payable 18 Received Invoice 1602 from Automotive 19 Technicians Repair, issued Check 1009 20 for half the amount, balance due in 30 days 21

PAGE POST. REF.

DEBIT

CREDIT

1 9 5 0 0 00 2 10 5 0 0 00 3 20 0 0 0 00 4 5 6 7 8 4 5 0 00 9 6 0 0 00 10 1 0 5 0 00 11 12 13 14 2 5 0 0 00 15 1 2 5 0 00 16 1 2 5 0 00 17 18 19 20 21

EXERCISE 4.5 GENERAL JOURNAL DATE DESCRIPTION 1 2019 2 June 30 Utilities Expense 3 Telephone Expense 4 To correct June 10 error charging 5 telephone bill to Utilities Expense 6

PAGE POST. REF.

DEBIT

CREDIT

1 0 0 0 00 1 0 0 0 00

1 2 3 4 5 6

EXERCISE 4.6 GENERAL JOURNAL DATE DESCRIPTION 1 2019 2 Oct. 1 Truck Expense 3 Repair Expense 4 To correct August 22 error charging 5 truck charges to the Truck account 6

PAGE POST. REF.

DEBIT

CREDIT

9 0 0 00 9 0 0 00

1 2 3 4 5 6

PROBLEM 4.1A GENERAL JOURNAL DATE DESCRIPTION 1 2019 2 Sept. 1 Rent Expense 3 Cash 4 Paid September rent, Check 1169 5 6 5 Cash 7 Fees Income 8 Performed services for cash 9 10 6 Accounts Receivable 11 Fees Income 12 Performed services on credit 13 14 10 Telephone Expense 15 Cash 16 Paid monthly telephone bill, Check 1170 17 18 11 Equipment Repair Expense 19 Cash 20 Paid for repairs, Check 1171 21 22 12 Cash 23 Accounts Receivable 24 Received cash on account

PAGE 1 POST. REF.

DEBIT 2 0 0 0 00

4 0 0 0 00

2 9 5 0 00

9 0 0 00

1 0 5 0 00

1 5 0 0 00

CREDIT 1 2 2 0 0 0 00 3 4 5 6 4 0 0 0 00 7 8 9 10 2 9 5 0 00 11 12 13 14 9 0 0 00 15 16 17 18 1 0 5 0 00 19 20 21 22 1 5 0 0 00 23 24

PROBLEM 4.1A (continued) GENERAL JOURNAL DATE DESCRIPTION 1 2019 2 Sept. 15 Salaries Expense 3 Cash 4 Paid semimonthly salaries, Checks 1172-1177 5 6 18 Supplies 7 Cash 8 Paid for supplies, Check 1178 9 10 19 Equipment 11 Accounts Payable 12 Purchased tennis rackets from The Tennis 13 Supply Shop, Invoice 3108, payable in 30 days 14 15 20 Equipment 16 Cash 17 Purchased nets, Check 1179 18 19 21 Cash 20 Accounts Receivable 21 Received cash on account 22 23 21 Cash 24 Equipment 25 Returned damaged net for cash refund 26 27 22 Cash 28 Fees Income 29 Performed services for cash 30 31 23 Accounts Receivable 32 Fees Income 33 Performed services on account 34 35 26 Supplies 36 Cash 37 Paid for supplies, Check 1180

PAGE POST. REF.

DEBIT 5 2 0 0 00

2 7 0 0 00

3 2 5 0 00

3 8 2 0 00

5 0 0 00

5 7 0 00

3 4 8 0 00

5 0 5 0 00

6 2 0 00

CREDIT 1 2 5 2 0 0 00 3 4 5 6 2 7 0 0 00 7 8 9 10 3 2 5 0 00 11 12 13 14 15 3 8 2 0 00 16 17 18 19 5 0 0 00 20 21 22 23 5 7 0 00 24 25 26 27 3 4 8 0 00 28 29 30 31 5 0 5 0 00 32 33 34 35 6 2 0 00 36 37

PROBLEM 4.1A (continued) GENERAL JOURNAL DATE DESCRIPTION 1 2019 2 Sept. 28 Utilities Expense 3 Cash 4 Paid monthly electric bill, Check 1181 5 6 30 Salaries Expense 7 Cash 8 Paid semimonthly salaries, Check 1182-1187 9 10 30 Ellis Carter, Drawing 11 Cash 12 Owner withdrew cash for personal use, 13 Check 1188

PAGE 3 POST. REF.

DEBIT 2 5 0 0 00

5 2 0 0 00

5 0 0 0 00

CREDIT 1 2 2 5 0 0 00 3 4 5 6 5 2 0 0 00 7 8 9 10 5 0 0 0 00 11 12 13

Analyze: Check 1189 would be included in the journal entry description.

PROBLEM 4.2A GENERAL JOURNAL DATE DESCRIPTION 1 2019 2 Oct. 1 Cash 3 Helen Kennedy, Capital 4 Beginning investment of owner 5 6 2 Rent Expense 7 Cash 8 Paid October rent, Check 1001 9 10 5 Office Equipment 11 Accounts Payable 12 Purchased equipment from Office Furniture 13 Mart, Inc., Invoice 6704, payable in 60 days

PAGE POST. REF. 101 301

514 101

141 202

DEBIT

CREDIT

1 70 0 0 0 00 2 70 0 0 0 00 3 4 5 4 0 0 0 00 6 4 0 0 0 00 7 8 9 18 0 0 0 00 10 18 0 0 0 00 11 12 13

PROBLEM 4.2A (continued) GENERAL JOURNAL DATE DESCRIPTION 1 2019 2 Oct. 6 Art Equipment 3 Cash Purchased art equipment, Check 1002 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31

PAGE 12 POST. REF. 151 101

DEBIT

CREDIT

4 1 0 0 0 4 1 0 0 0

7 Supplies Cash Purchased supplies, Check 1003

121 101

1 6 7 0 00

10 Office Cleaning Expense Cash Paid for office cleaning, Check 1004

511 101

8 0 0 00

12 Cash Accounts Receivable Fees Income Performed services for cash and on credit

101 111 401

4 2 0 0 00 1 8 0 0 00

15 Cash Supplies Returned damaged supplies for cash refund

101 121

3 0 0 00

18 Office Equipment Cash Accounts Payable Purchased equip. from Office Furniture Mart, Inc., Invoice 7108; Check 1005; balance due in 30 days

141 101 202

3 0 0 0 00

20 Accounts Payable Cash Paid Office Furniture Mart, Inc., on account, Invoice 6704; Check 1006

202 101

9 5 0 0 00

1 6 7 0 00

8 0 0 00

6 0 0 0 00

3 0 0 00

1 7 5 0 00 1 2 5 0 00

9 5 0 0 00

1 2 3

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31

PROBLEM 4.2A (continued) GENERAL JOURNAL DATE DESCRIPTION 1 2019 2 Oct. 26 Accounts Receivable 3 Fees Income Performed services on credit 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

PAGE 13 POST. REF. 111 401

DEBIT 4 8 0 0 00

4 8 0 0 00

27 Telephone Expense Cash Paid monthly telephone bill, Check 1007

520 101

3 7 5 00

30 Cash

101 111

4 2 0 0 00

30 Utilities Expense Cash Paid monthly utility bill, Check 1008

523 101

1 0 8 0 00

30 Salaries Expense Cash Paid monthly salaries, Checks 1009-1011

517 101

9 0 0 0 00

Accounts Receivable Received cash on account

CREDIT 1 2 3

4 5 3 7 5 00 6 7 8 9 4 2 0 0 00 10 11 12 13 1 0 8 0 00 14 15 16 17 9 0 0 0 00 18 19 20

PROBLEM 4.2A (continued) GENERAL LEDGER ACCOUNT

Cash

ACCOUNT NO. 101

POST DATE DESCRIPTION REF. DEBIT 2019 Oct. 1 J1 70 0 0 0 00 2 J1 6 J1 7 J1 10 J1 12 J1 4 2 0 0 00 15 J1 3 0 0 00 18 J2 20 J2 27 J3 30 J3 4 2 0 0 00 30 J3 30 J3

ACCOUNT

4 0 0 0 00 4 1 0 0 00 1 6 7 0 00 8 0 0 00

1 7 5 0 00 9 5 0 0 00 3 7 5 00 1 0 8 0 00 9 0 0 0 00

Accounts Receivable

DATE 2019 Oct. 12 26 30

ACCOUNT

CREDIT

POST DESCRIPTION REF. J1 J3 J3

70 0 0 0 00 66 0 0 0 00 61 9 0 0 00 60 2 3 0 00 59 4 3 0 00 63 6 3 0 00 63 9 3 0 00 62 1 8 0 00 52 6 8 0 00 52 3 0 5 00 56 5 0 5 00 55 4 2 5 00 46 4 2 5 00

ACCOUNT NO. 111

DEBIT

CREDIT

1 8 0 0 00 4 8 0 0 00 4 2 0 0 00

Supplies

DATE 2019 Oct. 7 15

BALANCE DEBIT CREDIT

BALANCE DEBIT CREDIT 1 8 0 0 00 6 6 0 0 00 2 4 0 0 00

ACCOUNT NO. 121

POST DESCRIPTION REF. J1 J1

DEBIT

CREDIT

1 6 7 0 00 3 0 0 00

BALANCE DEBIT CREDIT 1 6 7 0 00 1 3 7 0 00

PROBLEM 4.2A (continued) GENERAL LEDGER ACCOUNT

Office Equipment

ACCOUNT NO. 141

POST DATE DESCRIPTION REF. DEBIT 2019 Oct. 5 J1 18 0 0 0 00 18 J2 3 0 0 0 00

ACCOUNT

ACCOUNT NO. 151

POST DESCRIPTION REF. J1

DEBIT

CREDIT

4 1 0 0 00

BALANCE DEBIT CREDIT 4 1 0 0 00

Accounts Payable

DATE 2019 Oct. 5 18 20

BALANCE DEBIT CREDIT 18 0 0 0 00 21 0 0 0 00

Art Equipment

DATE 2019 Oct. 6

ACCOUNT

CREDIT

ACCOUNT NO. 202

POST DESCRIPTION REF. J1 J2 J2

DEBIT

CREDIT 18 0 0 0 00 1 2 5 0 00

9 5 0 0 00

Helen Kennedy, Capital

POST DATE DESCRIPTION REF. 2019 Oct. 1 J1

BALANCE DEBIT CREDIT 18 0 0 0 00 19 2 5 0 00 9 7 5 0 00

ACCOUNT NO. 301

DEBIT

CREDIT 70 0 0 0 00

BALANCE DEBIT CREDIT 70 0 0 0 00

PROBLEM 4.2A (continued) GENERAL LEDGER ACCOUNT

Helen Kennedy, Drawing

DATE

ACCOUNT

DESCRIPTION

CREDIT

POST REF.

DEBIT

J1 J3

CREDIT

POST DESCRIPTION REF.

BALANCE DEBIT CREDIT

6 0 0 0 00 4 8 0 0 00

6 0 0 0 00 10 8 0 0 00

ACCOUNT NO. 511

DEBIT

CREDIT

8 0 0 00

BALANCE DEBIT CREDIT 8 0 0 00

Rent Expense

DATE 2019 Oct. 2

BALANCE DEBIT CREDIT

ACCOUNT NO. 401

Office Cleaning Expense

DATE 2019 Oct. 10

ACCOUNT

DEBIT

Fees Income

DATE DESCRIPTION 2019 Oct. 12 26

ACCOUNT

POST REF.

ACCOUNT NO. 302

ACCOUNT NO. 514

POST DESCRIPTION REF. J1

DEBIT 4 0 0 0 00

CREDIT

BALANCE DEBIT CREDIT 4 0 0 0 00

PROBLEM 4.2A (continued) GENERAL LEDGER ACCOUNT

Salaries Expense

ACCOUNT NO. 517

POST DATE DESCRIPTION REF. 2019 Oct. 30 J3

ACCOUNT

CREDIT

9 0 0 0 00

ACCOUNT NO. 520

POST DESCRIPTION REF. J3

DEBIT

CREDIT

3 7 5 00

BALANCE DEBIT CREDIT 3 7 5 00

Utilities Expense

DATE 2019 Oct. 30

BALANCE DEBIT CREDIT 9 0 0 0 00

Telephone Expense

DATE 2019 Oct. 27

ACCOUNT

DEBIT

ACCOUNT NO. 523

POST DESCRIPTION REF. J3

DEBIT

CREDIT

1 0 8 0 00

BALANCE DEBIT CREDIT 1 0 8 0 00

Analyze: General ledger account 202 has an $9,750 credit balance. PROBLEM 4.3A April 1: The debit should be to Accounts Receivable, not Accounts Payable. April 2: The debit and credit amounts are reversed. Telephone Expense should be debited and Cash should be credited. April 3: The two debit amounts and the credit amount in the entry are not equal because of a math error. The credit for Cash should be $9,100. Analyze: After correcting the three entries, the assets are increased by $15,000 ($15,800 - $1,200 + $400).

PROBLEM 4.4A GENERAL JOURNAL DATE DESCRIPTION 1 2019 2 Nov. 1 Cash 3 Tools 4 Ryan O'Malley, Capital 5 Beginning investment of owner 6 7 2 Equipment 8 Office Supplies 9 Cash 10 Accounts Payable 11 Purchased equipment and office supplies from 12 Office Depot, Invoice 501; issued Check 100 13 for a down payment, balance payable in 30 days 14 15 10 Cash 16 Accounts Receivable 17 Fees Income 18 Services for cash and credit 19 20 20 Machinery 21 Cash 22 Accounts Payable 23 Purchased machinery from Craft Machinery, Inc., 24 Invoice 709; issued Check 101 25 for a down payment, balance due in 30 days 26

PAGE 1 POST. REF.

DEBIT

101 131 301

60 0 0 0 00 5 0 0 0 00

151 121 101 202

3 5 0 0 00 7 0 0 00

101 111 401

1 0 0 0 00 2 2 0 0 00

141 101 202

4 0 0 0 00

CREDIT

65 0 0 0 00

7 0 0 00 3 5 0 0 00

3 2 0 0 00

1 5 0 0 00 2 5 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

PROBLEM 4.4A (continued) GENERAL LEDGER ACCOUNT

Cash

DATE DESCRIPTION 2019 Nov. 1 2 10 20

ACCOUNT

J1 J1 J1 J1

DEBIT 60 0 0 0 00 1 0 0 0 00

CREDIT

ACCOUNT NO. 111

POST REF.

DEBIT

2 2 0 0 00

CREDIT

BALANCE DEBIT CREDIT 2 2 0 0 00

ACCOUNT NO. 121

POST DESCRIPTION REF. J1

DEBIT

CREDIT

7 0 0 00

BALANCE DEBIT CREDIT 7 0 0 00

Tools

DATE 2019 Nov. 1

BALANCE DEBIT CREDIT

60 0 0 0 00 7 0 0 00 59 3 0 0 00 60 3 0 0 00 1 5 0 0 00 58 8 0 0 00

Office Supplies

DATE 2019 Nov. 2

ACCOUNT

POST REF.

Accounts Receivable

DATE DESCRIPTION 2019 Nov. 10

ACCOUNT

ACCOUNT NO. 101

ACCOUNT NO. 131

POST DESCRIPTION REF. J1

DEBIT 5 0 0 0 00

CREDIT

BALANCE DEBIT CREDIT 5 0 0 0 00

PROBLEM 4.4A (continued) GENERAL LEDGER ACCOUNT

Machinery

DATE DESCRIPTION 2019 Nov. 20

ACCOUNT

DEBIT

4 0 0 0 00

CREDIT

ACCOUNT NO. 151 POST REF.

DEBIT

3 5 0 0 00

CREDIT

BALANCE DEBIT CREDIT 3 5 0 0 00

ACCOUNT NO. 202 POST REF.

DEBIT

J1 J1

CREDIT 3 5 0 0 00 2 5 0 0 00

Ryan O'Malley, Capital

DATE DESCRIPTION 2019 Nov. 1

BALANCE DEBIT CREDIT 4 0 0 0 00

Accounts Payable

DATE DESCRIPTION 2019 Nov. 2 20

ACCOUNT

POST REF.

Equipment

DATE DESCRIPTION 2019 Nov. 2

ACCOUNT

ACCOUNT NO. 141

POST REF. J1

BALANCE DEBIT CREDIT 3 5 0 0 00 6 0 0 0 00

ACCOUNT NO. 301

DEBIT

CREDIT 65 0 0 0 00

BALANCE DEBIT CREDIT 65 0 0 0 00

PROBLEM 4.4A (continued) GENERAL LEDGER ACCOUNT

Fees Income

ACCOUNT NO. 401

POST DATE DESCRIPTION REF. 2019 Nov. 10 J1

DEBIT

CREDIT

BALANCE DEBIT CREDIT

3 2 0 0 00

Analyze: The business owes $6,000 as of November 30.

PROBLEM 4.1B GENERAL JOURNAL DATE DESCRIPTION 1 2019 2 Sept. 1 Cash 3 Ruth Moore, Capital 4 Beginning investment of owner 5 6 5 Cash 7 Fees Income 8 Performed services for cash 9 10 6 Rent Expense 11 Cash 12 Paid for September, Check 1000 13 14 7 Accounts Receivable 15 Fees Income 16 Performed services on credit 17 18 9 Telephone Expense 19 Cash 20 Paid telephone bill, Check 1001

PAGE 1 POST REF.

DEBIT

CREDIT

65 0 0 0 00 65 0 0 0 00

3 0 0 0 00 3 0 0 0 00

6 5 0 0 00 6 5 0 0 00

7 5 0 00 7 5 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

PROBLEM 4.1B (continued) GENERAL JOURNAL

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

DATE DESCRIPTION 2019 Sept. 10 Equipment Repair Expense Cash Paid for equipment repairs, Check 1002 12 Cash Accounts Receivable Received cash on account 14 Salaries Expense Cash Paid semimonthly salaries to employees, Checks 1003-1004 18 Cleaning Supplies Expense Cash Paid for cleaning supplies, Check 1005 19 Office Supplies Expense Cash Paid for office supplies, Check 1006 20 Equipment Cash Accounts Payable Purchase from Razor Equipment, Inc., Invoice 1012; issued Check 1007 for down payment, balance due in 30 days 22 Cash Fees Income Performed services for cash 24 Utilities Expense Cash Paid utility bill, Check 1008

PAGE 12 POST. REF.

DEBIT

CREDIT

1 2 7 7 5 00 3 4 5 2 1 0 0 00 6 2 1 0 0 00 7 8 9 13 0 0 0 00 10 13 0 0 0 00 11 12 13 14 9 0 0 00 15 9 0 0 00 16 17 18 1 0 5 0 00 19 1 0 5 0 00 20 21 22 12 0 0 0 00 23 2 0 0 0 00 24 10 0 0 0 00 25 26 27 28 29 5 2 0 0 00 30 5 2 0 0 00 31 32 33 1 0 5 0 00 34 1 0 5 0 00 35 36 7 7 5 00

PROBLEM 4.1B (continued) GENERAL JOURNAL

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

DATE DESCRIPTION 2019 Sept. 26 Accounts Receivable Fees Income Performed services on account

PAGE 13 POST. REF.

DEBIT

CREDIT

1 2 7 5 0 0 00 3 4 5 13 0 0 0 00 6 13 0 0 0 00 7 8 9 10 10 0 0 0 00 11 10 0 0 0 00 12 13 14 15 7 5 0 0 00

30 Salaries Expense Cash Paid semimonthly salaries, Checks 1009-1010 30 Ruth Moore, Drawing Cash Owner withdrew cash for personal use, Check 1011

Analyze: Eight transactions affected expense accounts. PROBLEM 4.2B GENERAL JOURNAL DATE DESCRIPTION 1 2019 2 June 1 Cash 3 Ian Lee, Capital 4 Beginning investment of owner 5 6 2 Rent Expense 7 Cash 8 Paid rent for June, Check 1001 9 10 5 Office Equipment 11 Accounts Payable 12 Purchased office equipment from Office 13 Supply Inc., Invoice 5312, payable in 14 60 days

PAGE 1 POST. REF. 101 301

514 101

141 202

DEBIT

CREDIT

1 20 0 0 0 00 2 20 0 0 0 00 3 4 5 2 0 0 0 00 6 2 0 0 0 00 7 8 9 9 5 0 0 00 10 9 5 0 0 00 11 12 13 14

PROBLEM 4.2B (continued) GENERAL JOURNAL DATE DESCRIPTION 1 2019 2 June 6 Photographic Equipment 3 Cash 4 Purchased photo equipment, Check 1002 5 6 7 Supplies 7 Cash 8 Purchased supplies, Check 1003 9 10 10 Office Cleaning Expense 11 Cash 12 Paid for office cleaning, Check 1004 13 14 12 Cash 15 Accounts Receivable 16 Fees Income 17 Performed services for cash and credit 18 19 15 Cash 20 Supplies 21 Returned damaged supplies for cash 22 23 18 Office Equipment 24 Cash 25 Accounts Payable 26 Purchase from Dallas Office Supply, 27 Invoice 304; issued Check 1005 for down 28 payment, balance payable in 30 days 29 30 20 Accounts Payable 31 Cash 32 Paid , Inc., Office Supply, Inc., account, 33 Invoice 5312, Check 1006 34 35 26 Accounts Receivable 36 Fees Income 37 Performed services on credit

PAGE 12 POST. REF.

DEBIT

151 101

2 1 0 0 00

121 101

5 5 0 00

511 101

8 0 0 00

101 111 401

2 6 0 0 00 2 6 0 0 00

101 121

1 8 0 00

141 101 202

2 2 5 0 00

202 101

2 5 0 0 00

111 401

2 5 0 0 00

CREDIT 1 2 2 1 0 0 00 3 4 5 6 5 5 0 00 7 8 9 10 8 0 0 00 11 12 13 14 15 5 2 0 0 00 16 17 18 19 1 8 0 00 20 21 22 23 5 0 0 00 24 1 7 5 0 00 25 26 27 28 29 30 2 5 0 0 00 31 32 33 34 35 2 5 0 0 00 36 37

PROBLEM 4.2B (continued) GENERAL JOURNAL DATE DESCRIPTION 1 2019 2 June 27 Telephone Expense 3 Cash 4 Paid monthly phone bill, Check 1007 5 6 30 Cash 7 Accounts Receivable 8 Received cash on account 9 10 30 Utilities Expense 11 Cash 12 Paid monthly utility bill, Check 1008 13 14 30 Salaries Expense 15 Cash 16 Paid monthly salaries to employees, 17 Checks 1009-1011 18

PAGE 13 POST. REF.

DEBIT

520 101

6 3 2 00

101 111

2 3 0 0 00

523 101

7 5 0 00

517 101

6 5 5 0 00

CREDIT 1 2 6 3 2 00 3 4 5 6 2 3 0 0 00 7 8 9 10 7 5 0 00 11 12 13 14 6 5 5 0 00 15 16 17 18

PROBLEM 4.2B (continued) GENERAL LEDGER ACCOUNT

DATE 2019 June 1 2 6 7 10 12 15 18 20 27 30 30 30

ACCOUNT

DATE 2019 June 12 26 30

ACCOUNT

DATE 2019 June 7 15

Cash

DESCRIPTION

ACCOUNT NO. 101 POST REF. J1 J1 J1 J1 J1 J1 J1 J2 J2 J3 J3 J3 J3

DEBIT

CREDIT

20 0 0 0 00 2 0 0 0 00 2 1 0 0 00 5 5 0 00 8 0 0 00 2 6 0 0 00 1 8 0 00 5 0 0 00 2 5 0 0 00 6 3 2 00 2 3 0 0 00 7 5 0 00 6 5 5 0 00

Accounts Receivable

BALANCE DEBIT CREDIT 20 0 0 0 00 18 0 0 0 00 15 9 0 0 00 15 3 5 0 00 14 5 5 0 00 17 1 5 0 00 17 3 3 0 00 16 8 3 0 00 14 3 3 0 00 13 6 9 8 00 15 9 9 8 00 15 2 4 8 00 8 6 9 8 00

ACCOUNT NO. 111

POST DESCRIPTION REF. J1 J2 J3

DEBIT

CREDIT

BALANCE DEBIT CREDIT

2 3 0 0 00

2 6 0 0 00 5 1 0 0 00 2 8 0 0 00

2 6 0 0 00 2 5 0 0 00

Supplies

ACCOUNT NO. 121

POST DESCRIPTION REF. J1 J1

DEBIT

CREDIT

5 5 0 00 1 8 0 00

BALANCE DEBIT CREDIT 5 5 0 00 3 7 0 00

PROBLEM 4.2B (continued) GENERAL LEDGER ACCOUNT

Office Equipment

DATE DESCRIPTION 2019 June 5 18

ACCOUNT

DEBIT

J1 J2

9 5 0 0 00 2 2 5 0 00

CREDIT

ACCOUNT NO. 151

POST REF.

DEBIT

2 1 0 0 00

CREDIT

BALANCE DEBIT CREDIT 2 1 0 0 00

ACCOUNT NO. 202 POST REF. J1 J2 J2

DEBIT

CREDIT 9 5 0 0 00 1 7 5 0 00

2 5 0 0 00

Ian Lee, Capital

DATE DESCRIPTION 2019 June 1

BALANCE DEBIT CREDIT 9 5 0 0 00 11 7 5 0 00

Accounts Payable

DATE DESCRIPTION 2019 June 5 18 20

ACCOUNT

POST REF.

Photographic Equipment

DATE DESCRIPTION 2019 June 6

ACCOUNT

ACCOUNT NO. 141

BALANCE DEBIT CREDIT 9 5 0 0 00 11 2 5 0 00 8 7 5 0 00

ACCOUNT NO. 301 POST REF. J1

DEBIT

CREDIT 20 0 0 0 00

BALANCE DEBIT CREDIT 20 0 0 0 00

PROBLEM 4.2B (continued) GENERAL LEDGER ACCOUNT

Ian Lee, Drawing

DATE

DESCRIPTION

ACCOUNT

DEBIT

CREDIT

POST REF.

DEBIT

J1 J2

CREDIT

POST DESCRIPTION REF.

BALANCE DEBIT CREDIT

5 2 0 0 00 2 5 0 0 00

5 2 0 0 00 7 7 0 0 00

ACCOUNT NO. 511

DEBIT

CREDIT

8 0 0 00

BALANCE DEBIT CREDIT 8 0 0 00

Rent Expense

DATE 2019 June 2

BALANCE DEBIT CREDIT

ACCOUNT NO. 401

Office Cleaning Expense

DATE 2019 June 10

ACCOUNT

POST REF.

Fees Income

DATE DESCRIPTION 2019 June 12 26

ACCOUNT

ACCOUNT NO. 302

ACCOUNT NO. 514

POST DESCRIPTION REF. J1

DEBIT 2 0 0 0 00

CREDIT

BALANCE DEBIT CREDIT 2 0 0 0 00

PROBLEM 4.2B (continued) GENERAL LEDGER ACCOUNT

Salaries Expense

ACCOUNT NO. 517

POST DATE DESCRIPTION REF. 2019 June 30 J3

ACCOUNT

DATE 2019 June 27

ACCOUNT

DATE 2019 June 30

DEBIT

CREDIT

6 5 5 0 00

BALANCE DEBIT CREDIT 6 5 5 0 00

Telephone Expense POST DESCRIPTION REF. J3

ACCOUNT NO. 520

DEBIT

CREDIT

6 3 2 00

BALANCE DEBIT CREDIT 6 3 2 00

Utilities Expense

ACCOUNT NO. 523

POST DESCRIPTION REF. J3

DEBIT 7 5 0 00

CREDIT

BALANCE DEBIT CREDIT 7 5 0 00

Analyze: The Cash account balance after the June 27 transaction was $13,698.

PROBLEM 4.3B January 1: The debit should be to Accounts Receivable, not Accounts Payable. January 2: The debit and credit amounts are reversed. Telephone Expense should be debited and Cash should be credited. January 3: The two debit amounts and the credit amount in the entry are not equal because of a mathematical error. The credit for Cash should be $1,500. Analyze: The assets decreased by $600. (Accounts Receivable + $1,100; Cash - $1,500 [$750 x 2]; Cash - $200)

PROBLEM 4.4B GENERAL JOURNAL

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

DATE 2019 Dec. 3 Cash

DESCRIPTION

Charles Wilner, Capital Beginning investment of owner

PAGE 1 POST. REF. 101 301

4 Computers Cash Paid cash for computer

131 101

5 Furnitures and Fixtures Accounts Payable Purchased office furniture on credit

151 202

6 Office Equipment Cash Paid cash for equipment

141 101

10 Accounts Receivable Fees Income Rendered services on account

111 401

11 Office Supplies Cash Paid cash for supplies

121 101

15 Accounts Payable Cash Paid invoice for furniture purchased on December 5

202 101

DEBIT

CREDIT

1 2 25 0 0 0 00 3 4 5 2 5 0 0 00 6 2 5 0 0 00 7 8 9 7 5 0 0 00 10 7 5 0 0 00 11 12 13 2 8 0 0 00 14 2 8 0 0 00 15 16 17 3 2 0 0 00 18 3 2 0 0 00 19 20 21 1 0 5 0 00 22 1 0 5 0 00 23 24 25 7 5 0 0 00 26 7 5 0 0 00 27 28 29

25 0 0 0 00

PROBLEM 4.4B (continued) GENERAL LEDGER ACCOUNT

Cash

DATE DESCRIPTION 2019 Dec. 3 4 6 11 15

ACCOUNT

J1 J1 J1 J1 J1

DEBIT

CREDIT

25 0 0 0 00 2 5 0 0 00 2 8 0 0 00 1 0 5 0 00 7 5 0 0 00

POST REF.

DEBIT

3 2 0 0 00

CREDIT

25 0 0 0 00 22 5 0 0 00 19 7 0 0 00 18 6 5 0 00 11 1 5 0 00

BALANCE DEBIT CREDIT 3 2 0 0 00

ACCOUNT NO. 121 POST REF.

DEBIT

1 0 5 0 00

CREDIT

BALANCE DEBIT CREDIT 1 0 5 0 00

Computers

DATE DESCRIPTION 2019 Dec. 4

BALANCE DEBIT CREDIT

ACCOUNT NO. 111

Office Supplies

DATE DESCRIPTION 2019 Dec. 11

ACCOUNT

POST REF.

Accounts Receivable

DATE DESCRIPTION 2019 Dec. 10

ACCOUNT

ACCOUNT NO. 101

ACCOUNT NO. 131 POST REF.

DEBIT

2 5 0 0 00

CREDIT

BALANCE DEBIT CREDIT 2 5 0 0 00

PROBLEM 4.4B (continued) GENERAL LEDGER ACCOUNT

Office Equipment

DATE DESCRIPTION 2019 Dec. 6

ACCOUNT

DEBIT

2 8 0 0 00

CREDIT

ACCOUNT NO. 151

POST REF.

DEBIT

7 5 0 0 00

CREDIT

BALANCE DEBIT CREDIT 7 5 0 0 00

ACCOUNT NO. 202 POST REF.

DEBIT

J1 J1

7 5 0 0 00

CREDIT 7 5 0 0 00

Charles Wilner, Capital

DATE DESCRIPTION 2019 Dec. 3

BALANCE DEBIT CREDIT 2 8 0 0 00

Accounts Payable

DATE DESCRIPTION 2019 Dec. 5 15

ACCOUNT

POST REF.

Furniture and Fixtures

DATE DESCRIPTION 2019 Dec. 5

ACCOUNT

ACCOUNT NO. 141

POST REF. J1

BALANCE DEBIT CREDIT 7 5 0 0 00 − 0 −

ACCOUNT NO. 301

DEBIT

CREDIT 25 0 0 0 00

BALANCE DEBIT CREDIT 25 0 0 0 00

PROBLEM 4.4B (continued) GENERAL LEDGER ACCOUNT

Fees Income

DATE 2019 Dec. 10

DESCRIPTION

ACCOUNT NO. 401 POST REF. J1

DEBIT

CREDIT 3 2 0 0 00

BALANCE DEBIT CREDIT 3 2 0 0 00

Analyze: Two postings were recorded, one debit and one credit.

CRITICAL THINKING PROBLEM 4.1 Income Statement Errors: 1. The third line of the heading is incorrect; this line must indicate the time period covered by the income statement. 2. Drawing is not an expense but a reduction of owner’s equity and is included in the calculation of ending owner’s equity, not on the income statement. 3. Arithmetic errors were made in adding column of expenses and in subtracting total expenses from revenue. Balance Sheet Errors: 1. The third line of the heading is incorrect; the balance sheet is identified by the last day of the accounting period. 2. Accounts Payable and Accounts Receivable are classified incorrectly; they should be interchanged. Accounts Payable is a liability and Accounts Receivable is an asset. 3. 4.

The assets are not listed in the correct order. The amount for Owner’s Equity on the balance sheet should be the ending owner’s equity, not the beginning owner’s equity. A statement of owner’s equity should be prepared to compute ending owner’s equity.

CRITICAL THINKING PROBLEM 4.1 (continued) Zoie's Beauty Supply Income Statement Month Ended April 30, 2019 Revenue Fees Income Expenses Salaries Expense Rent Expense Repair Expense Utilities Expense Total Expenses Net Income

38 8 0 0 00 9 5 0 0 00 2 5 0 0 00 8 0 0 00 1 7 0 0 00 14 5 0 0 00 24 3 0 0 00

Zoie's Beauty Supply Statement of Owner's Equity Month Ended April 30, 2019 Zoie Taylor, Capital, April 1, 2019 Net Income for April Less Withdrawals for April Increase in Capital Zoie Taylor, Capital, April 30, 2019

49 2 0 0 00 24 3 0 0 00 4 5 0 0 00 19 8 0 0 00 69 0 0 0 00

Zoie's Beauty Supply Balance Sheet April 30, 2019 Assets Cash Accounts Receivable Land Building Total Assets

15 0 0 0 00 7 0 0 0 00 # 12 0 0 0 00 40 0 0 0 00 74 0 0 0 00

Liabilities Accounts Payable

5 0 0 0 00

Owner's Equity Zoie Taylor, Capital Total Liabilities & Owner's Equity

69 0 0 0 00 74 0 0 0 00

CRITICAL THINKING PROBLEM 4.2 GENERAL JOURNAL DATE DESCRIPTION 1 2019 2 June 1 Cash 3 Jenna Davis, Capital 4 Beginning investment of owner 5 6 2 Rent Expense 7 Cash 8 Paid rent for June, Check 201 9 10 3 Office Furniture 11 Cash 12 Accounts Payable 13 Purchased furniture from Lowe's 14 Office Supply, Invoice 5103; issued 15 Check 202, balance due in 30 days 16 17 4 Supplies 18 Cash 19 Purchased supplies, Check 203 20 21 6 Cash 22 Fees Income 23 Performed services for cash 24 25 7 Advertising Expense 26 Cash 27 Paid for advertising, Check 204 28 29 8 Recording Equipment 30 Cash 31 Accounts Payable 32 Purchased equipment from Special 33 Moves, Inc., Invoice 2122; 34 issued Check 205, balance due in 30 days 35 36 10 Accounts Receivable 37 Fees Income 38 Performed services on account

PAGE 1 POST. REF. 101 301

514 101

141 101 202

121 101

101 401

511 101

151 101 202

111 401

DEBIT

CREDIT

1 40 0 0 0 00 2 40 0 0 0 00 3 4 5 2 0 0 0 00 6 2 0 0 0 00 7 8 9 12 0 0 0 00 10 2 0 0 0 00 11 10 0 0 0 00 12 13 14 15 16 1 7 0 0 00 17 1 7 0 0 00 18 19 20 7 0 0 0 00 21 7 0 0 0 00 22 23 24 3 0 0 0 00 25 3 0 0 0 00 26 27 28 15 0 0 0 00 29 5 0 0 0 00 30 10 0 0 0 00 31 32 33 34 35 5 5 0 0 00 36 5 5 0 0 00 37 38

CRITICAL THINKING PROBLEM 4.2 (continued) GENERAL JOURNAL DATE DESCRIPTION 1 2019 2 June 11 Accounts Payable 3 Cash 4 Paid Lowe's Office Supply on account 5 for Invoice 5103, Check 206 6 7 12 Cash 8 Fees Income 9 Performed services for cash 10 11 15 Salaries Expense 12 Cash 13 Paid semimonthly salary, Check 207 14 15 18 Cash 16 Accounts Receivable 17 Received payment on account 18 19 20 Accounts Payable 20 Cash 21 Paid Special Moves, Inc., 22 on account, Invoice 2122, Check 208 23 24 25 Telephone Expense 25 Cash 26 Paid telephone bill, Check 209 27 28 27 Utilities Expense 29 Cash 30 Paid utility bill, Check 210 31 32 28 Jenna Davis, Drawing 33 Cash 34 Owner withdrew cash for personal use, 35 Check 211 36 37 30 Salaries Expense 38 Cash 39 Paid semimonthly salary, Check 212

PAGE 2 POST. REF. 202 101

101 401

517 101

101 111

202 101

520 101

523 101

302 101

517 101

DEBIT

CREDIT

1 3 0 0 0 00 2 3 0 0 0 00 3 4 5 6 10 0 0 0 00 7 10 0 0 0 00 8 9 10 6 2 0 0 00 11 6 2 0 0 00 12 13 14 4 0 0 0 00 15 4 0 0 0 00 16 17 18 6 0 0 0 00 19 6 0 0 0 00 20 21 22 23 3 7 5 00 24 3 7 5 00 25 26 27 9 8 0 00 28 9 8 0 00 29 30 31 5 0 0 0 00 32 5 0 0 0 00 33 34 35 36 6 2 0 0 00 37 6 2 0 0 00 38 39

CRITICAL THINKING PROBLEM 4.2 (continued) GENERAL LEDGER ACCOUNT

Cash

DATE DESCRIPTION 2019 June 1 2 3 4 6 7 8 11 12 15 18 20 25 27 28 30

ACCOUNT

DATE 2019 June 4

POST REF. J1 J1 J1 J1 J1 J1 J1 J2 J2 J2 J2 J2 J2 J2 J2 J2

DEBIT 40 0 0 0 00

7 0 0 0 00

10 0 0 0 00 4 0 0 0 00

CREDIT

BALANCE DEBIT CREDIT

40 0 0 0 00 2 0 0 0 00 38 0 0 0 00 2 0 0 0 00 36 0 0 0 00 1 7 0 0 00 34 3 0 0 00 41 3 0 0 00 3 0 0 0 00 38 3 0 0 00 5 0 0 0 00 33 3 0 0 00 3 0 0 0 00 30 3 0 0 00 40 3 0 0 00 6 2 0 0 00 34 1 0 0 00 38 1 0 0 00 6 0 0 0 00 32 1 0 0 00 3 7 5 00 31 7 2 5 00 9 8 0 00 30 7 4 5 00 5 0 0 0 00 25 7 4 5 00 6 2 0 0 00 19 5 4 5 00

Accounts Receivable

DATE DESCRIPTION 2019 June 10 18

ACCOUNT

ACCOUNT NO. 101

ACCOUNT NO. 111

POST REF. J2 J2

DEBIT

CREDIT

BALANCE DEBIT CREDIT

4 0 0 0 00

5 5 0 0 00 1 5 0 0 00

5 5 0 0 00

Supplies

ACCOUNT NO. 121

POST DESCRIPTION REF. J1

DEBIT 1 7 0 0 00

CREDIT

BALANCE DEBIT CREDIT 1 7 0 0 00

CRITICAL THINKING PROBLEM 4.2 (continued) GENERAL LEDGER ACCOUNT

Office Furniture

DATE DESCRIPTION 2019 June 3

ACCOUNT

DEBIT

12 0 0 0 00

CREDIT

ACCOUNT NO. 151

POST REF.

DEBIT

15 0 0 0 00

CREDIT

BALANCE DEBIT CREDIT 15 0 0 0 00

ACCOUNT NO. 202 POST REF. J1 J1 J2 J2

DEBIT

CREDIT 10 0 0 0 00 10 0 0 0 00

3 0 0 0 00 6 0 0 0 00

Jenna Davis, Capital

DATE DESCRIPTION 2019 June 1

BALANCE DEBIT CREDIT 12 0 0 0 00

Accounts Payable

DATE DESCRIPTION 2019 June 3 8 11 20

ACCOUNT

POST REF.

Recording Equipment

DATE DESCRIPTION 2019 June 8

ACCOUNT

ACCOUNT NO. 141

BALANCE DEBIT CREDIT 10 0 0 0 00 20 0 0 0 00 17 0 0 0 00 11 0 0 0 00

ACCOUNT NO. 301

POST REF. J1

DEBIT

CREDIT 40 0 0 0 00

BALANCE DEBIT CREDIT 40 0 0 0 00

CRITICAL THINKING PROBLEM 4.2 (continued) GENERAL LEDGER ACCOUNT

Jenna Davis, Drawing

DATE DESCRIPTION 2019 June 28

ACCOUNT

DEBIT

5 0 0 0 00

CREDIT

ACCOUNT NO. 401 POST REF.

DEBIT

J1 J2 J2

CREDIT

BALANCE DEBIT CREDIT

7 0 0 0 00 5 5 0 0 00 10 0 0 0 00

7 0 0 0 00 12 5 0 0 00 22 5 0 0 00

ACCOUNT NO. 511

POST REF.

DEBIT

3 0 0 0 00

CREDIT

BALANCE DEBIT CREDIT 3 0 0 0 00

Rent Expense

DATE DESCRIPTION 2019 June 2

BALANCE DEBIT CREDIT 5 0 0 0 00

Advertising Expense

DATE DESCRIPTION 2019 June 7

ACCOUNT

POST REF.

Fees Income

DATE DESCRIPTION 2019 June 6 10 12

ACCOUNT

ACCOUNT NO. 302

ACCOUNT NO. 514 POST REF.

DEBIT

2 0 0 0 00

CREDIT

BALANCE DEBIT CREDIT 2 0 0 0 00

CRITICAL THINKING PROBLEM 4.2 (continued) GENERAL LEDGER ACCOUNT

Salaries Expense

DATE DESCRIPTION 2019 June 15 30

ACCOUNT

POST REF.

DEBIT

J2 J2

6 2 0 0 00 6 2 0 0 00

CREDIT

ACCOUNT NO. 520 POST REF. J2

DEBIT

CREDIT

3 7 5 00

BALANCE DEBIT CREDIT 3 7 5 00

Utilities Expense

DATE DESCRIPTION 2019 June 27

BALANCE DEBIT CREDIT 6 2 0 0 00 12 4 0 0 00

Telephone Expense

DATE DESCRIPTION 2019 June 25

ACCOUNT

ACCOUNT NO. 517

ACCOUNT NO. 523 POST REF. J2

DEBIT 9 8 0 00

CREDIT

BALANCE DEBIT CREDIT 9 8 0 00

CRITICAL THINKING PROBLEM 4.2 (continued) Leadership Coaching Agency Trial Balance June 30, 2019 ACCOUNT NAME Cash Accounts Receivable Supplies Office Furniture Recording Equipment Accounts Payable Jenna Davis, Capital Jenna Davis, Drawing Fees Income Advertising Expense Rent Expense Salaries Expense Telephone Expense Utilities Expense Totals

19 DEBIT 5 4 5 00 1 5 0 0 00 1 7 0 0 00 12 0 0 0 00 15 0 0 0 00

CREDIT

11 0 0 0 00 40 0 0 0 00 5 0 0 0 00 22 5 0 0 00 3 0 0 0 00 2 0 0 0 00 12 4 0 0 00 3 7 5 00 9 8 0 00 73 5 0 0 00

73 5 0 0 00

Leadership Coaching Agency Income Statement Month Ended June 30, 2019 Revenue Fees Income Expenses Advertising Expense Rent Expense Salaries Expense Telephone Expense Utilities Expense Total Expenses Net Income

22 5 0 0 00 3 0 0 0 00 2 0 0 0 00 12 4 0 0 00 3 7 5 00 9 8 0 00 18 7 5 5 00 3 7 4 5 00

CRITICAL THINKING PROBLEM 4.2 (continued) Leadership Coaching Agency Statement of Owner's Equity Month Ended June 30, 2019 Jenna Davis, Capital, June 1, 2019 Net Income for June Less Withdrawals for June Decrease in Owner's Equity Jenna Davis, Capital, June 30, 2019

40 0 0 0 00 3 7 4 5 00 5 0 0 0 00 1 2 5 5 00 38 7 4 5 00

Leadership Coaching Agency Balance Sheet June 30, 2019 Assets Cash Accounts Receivable Supplies Office Furniture Recording Equipment Total Assets

19 5 4 5 00 1 5 0 0 00 1 7 0 0 00 12 0 0 0 00 15 0 0 0 00 49 7 4 5 00

Liabilities Accounts Payable

Owner's Equity Jenna Davis, Capital Total Liabilities & Owner's Equity

11 0 0 0 00

38 7 4 5 00 # 49 7 4 5 00

Analyze: There were 16 postings in the Cash account.

SOLUTIONS TO BUSINESS CONNECTIONS Managerial Focus: 1. Inefficient flow of information; errors and insufficient information. 2. For prompt and accurate journalizing of all transactions. 3. To assure accuracy and safeguards against fraud. 4. Journal: detailed chronological record. Ledger: permanent, classified record of all financial events. Ethical Dilemma: You must check to see if the cash account is going down because of her actions. Is Mesia keeping the cash from the reversed sales because she has made so many errors? Is this something she does each month? It is unethical to accept a dinner for fixing her error. Financial Statement Analysis: 1. Debit the Property and Equipment account, credit Accounts Payable. 2. Invoice from the supplier. 3. Dates for equipment purchases, posting reference, purchase amount, and account balance. Analyze Online: Answers will vary depending on the year. Teamwork: Answers will vary. Journal Entry to General Ledger to Trial Balance to Financial Statement. Internet Connection: Sites that might be displayed are: www.careerbank.com , www.careersinaccounting.com , www.account.com . Suggested experience would require 5 years or more, with an AA degree. Skills would include good communication skills, detailed, and multi-task oriented.

Problem EX EX EX EX EX

5.1 5.2 5.3 5.4 5.5

Time 10 10 30 10 25

PR PR PR PR

5.1A 5.2A 5.3A 5.4A

45 40 35 60

CT CT

5.1 5.2

45 60

5 10 15 20 25 30 35 40 45 50 55 60

= = = = = = = = = = = =

1-5 min. 6-10 min. 11-15 min. 16-20 min. 21-25 min. 26-30 min. 31-35 min. 36-40 min. 41-45 min. 46-50 min. 51-55 min. 56-60 min.

CHAPTER 5 ADJUSTMENTS AND THE WORKSHEET Chapter Opener: Thinking Critically Careful recordkeeping is critical to all businesses, large and small. Why does matching these revenues and expenses within the same year matter so much? If businesses are allowed to record revenues in one year and then postpone the recognition of their expenses until the next year, then their reported net income would be too high in the first year and too low in the second year when all of the expenses were recorded. Managerial Implications: Thinking Critically Assets are depreciated because they have a limited life and will be used up over time. Depreciation is the allocation of the cost of the asset over its useful life. Discussion Questions Note to instructor : These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter.

Discussion Questions (cont.) 8. a. none b. none c. none d. decrease 9. a. decrease b. none c. none d. decrease 10. To create a permanent record of any changes in account balances that are shown on the worksheet. 11. Asset cost, accumulated depreciation, book value. 12. Cost of asset less accumulated depreciation. 13. Contra asset accounts have a credit balance. Asset accounts have a debit balance. 14. To keep a record of total depreciation taken; to reduce the book value of asset. EXERCISE 5.1 1.

Rent Expense, $1,200 Dr. Prepaid Rent, $1,200 Cr. ($8,400 ÷ 7 months = $1,200 per month)

Supplies Expense, $4,290 Dr. Supplies, $4,290 Cr. ($10,250 - $5,960 = $4,290)

Depreciation Expense—Equipment, $675 Dr. Accumulated Depreciation—Equipment, $675 Cr. ($72,900 ÷ 108 months = $675)

EXERCISE 5.2 1.

Insurance Expense, $375 Dr. Prepaid Insurance, $375 Cr. ($13,500 ÷ 36 months = $375)

Advertising Expense, $1,500 Dr. Prepaid Advertising, $1,500 Cr. ($36,000 ÷ 24 months = $1,500)

EXERCISE 5.3 Palmer Company Worksheet (Partial) Month Ended January 31, 2019 ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Supplies 4 Prepaid Insurance 5 Equipment 6 Accumulated Depreciation—Equipment 7 Accounts Payable 8 Sadie Palmer, Capital 9 Fees Income 10 Rent Expense 11 Salaries Expense 12 Supplies Expense 13 Insurance Expense 14 Depreciation Expense—Equipment 15 Totals 16 17 18 19 20 21 22

TRIAL BALANCE DEBIT CREDIT 31 5 0 0 00 11 2 5 0 00 4 5 0 0 00 4 1 0 0 00 45 7 5 0 00

ADJUSTMENTS DEBIT CREDIT

8 3 5 0 00 40 9 7 5 00 58 5 0 0 00 5 3 0 0 00 5 4 2 5 00

107 8 2 5 00

(a) 2 8 5 0 00 (b) 1 0 2 5 00 (c ) 9 2 5 00 107 8 2 5 00 4 8 0 0 00

ADJUSTED TRIAL BALANCE DEBIT CREDIT 31 5 0 0 00 11 2 5 0 00 (a) 2 8 5 0 00 1 6 5 0 00 (b) 1 0 2 5 00 3 0 7 5 00 45 7 5 0 00 (c) 9 2 5 00 9 2 5 00 8 3 5 0 00 40 9 7 5 00 58 5 0 0 00 5 3 0 0 00 5 4 2 5 00 2 8 5 0 00 1 0 2 5 00 9 2 5 00 4 8 0 0 00# 108 7 5 0 00 108 7 5 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

EXERCISE 5.4 Net Income Before Adjustments Less Adjustments: Rent Expense Depreciation Expense Supplies Expense Total Adjustments for Expenses Not Made

$45,000 $3,500 4,100 1,800

Corrected Net Income

9,400 $35,600

If the adjusting entries are not made, total expenses will be understated by $9,400. Net income will be overstated by $9,400. EXERCISE 5.5 PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Adjusting Entries

1 2 2019 3 Dec. 31 Supplies Expense 4 Supplies 5 6 31 Insurance Expense 7 Prepaid Insurance 8 9 31 Depreciation Expense—Equipment 10 Accumulated Depreciation—Equipment

POST. REF.

DEBIT

523 121

5 5 0 0 00

521 131

4 1 0 0 00

517 142

2 9 0 0 00

CREDIT

5 5 0 0 00

4 1 0 0 00

2 9 0 0 00

1 2 3 4 5 6 7 8 9 10

EXERCISE 5.5 (continued) GENERAL LEDGER ACCOUNT Supplies

DATE DESCRIPTION 2019 Dec. 1 31 Adjusting

ACCOUNT NO. POST. REF. J1 J3

DEBIT

CREDIT

BALANCE DEBIT CREDIT

5 5 0 0 00

9 0 0 0 00 3 5 0 0 00

9 0 0 0 00

ACCOUNT Prepaid Insurance

DATE DESCRIPTION 2019 Dec. 1 31 Adjusting

ACCOUNT NO. POST. REF. J1 J3

DEBIT 24 6 0 0 00

CREDIT

POST. REF.

DEBIT

ACCOUNT NO.

CREDIT

ACCOUNT Depreciation Expense—Equipment

DATE DESCRIPTION 2019 Dec. 31 Adjusting

BALANCE DEBIT CREDIT

DEBIT

2 9 0 0 00

ACCOUNT NO.

CREDIT

142

BALANCE DEBIT CREDIT

2 9 0 0 00

POST. REF.

131

24 6 0 0 00 4 1 0 0 00 20 5 0 0 00

ACCOUNT Accumulated Depreciation—Equipment

DATE DESCRIPTION 2019 Dec. 31 Adjusting

121

517

BALANCE DEBIT CREDIT 2 9 0 0 00

121

131

142

517

EXERCISE 5.5 (continued) GENERAL LEDGER ACCOUNT Insurance Expense

ACCOUNT NO.

POST. DESCRIPTION REF.

DATE 2019 Dec. 31 Adjusting

DEBIT

CREDIT

4 1 0 0 00

DATE 2019 Dec. 31 Adjusting

BALANCE DEBIT CREDIT 4 1 0 0 00

ACCOUNT Supplies Expense

ACCOUNT NO.

POST. DESCRIPTION REF. J3

DEBIT 5 5 0 0 00

521

CREDIT

523

BALANCE DEBIT CREDIT 5 5 0 0 00

PROBLEM 5.1A Neal Company Worksheet (Partial) Month Ended January 31, 2019 ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Supplies 4 Prepaid Insurance 5 Equipment 6 Accumulated Depn—Equipment 7 Accounts Payable 8 Alexander Neal, Capital 9 Alexander Neal, Drawing 10 Fees Income 11 Supplies Expense 12 Insurance Expense 13 Salaries Expense 14 Depreciation Expense—Equipment 15 Utilities Expense 16 Totals 17 Net Income 18 19

TRIAL BALANCE DEBIT CREDIT 52 5 0 0 00 10 9 0 0 00 19 7 0 0 00 33 0 0 0 00 54 5 0 0 00

ADJUSTMENTS DEBIT CREDIT

(a) 17 6 0 0 (b) 2 7 5 0 (c )

8 0 0

12 9 0 0 00 126 5 0 0 00 7 7 0 0 00 57 1 0 0 00 (a) 17 6 0 0 00 (b) 2 7 5 0 00 16 1 0 0 00 (c ) 2 1 0 0 00 196 5 0 0 00 196 5 0 0 00

8 0 0 00 21 1 5 0 00

21 1 5 0

31, 2019

TS CREDIT

00 00 00

PROBLEM 5.1A (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 52 5 0 0 00 10 9 0 0 00 2 1 0 0 00 30 2 5 0 00 54 5 0 0 00 8 0 0 00 12 9 0 0 00 126 5 0 0 00 7 7 0 0 00 57 1 0 0 00 17 6 0 0 00 2 7 5 0 00 16 1 0 0 00 8 0 0 00 2 1 0 0 00 197 3 0 0 00 197 3 0 0 00

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT 52 5 0 0 00 10 9 0 0 00 2 1 0 0 00 30 2 5 0 00 54 5 0 0 00 8 0 0 12 9 0 0 126 5 0 0 7 7 0 0 00

57 1 0 0 00 17 6 0 0 00 2 7 5 0 00 16 1 0 0 00 8 0 0 00 2 1 0 0 00 39 3 5 0 00 17 7 5 0 00 57 1 0 0 00

57 1 0 0 00 57 1 0 0 00

157 9 5 0 00 140 2 0 0 17 7 5 0 157 9 5 0 00 157 9 5 0

Analyze: The adjustment to Prepaid Insurance decreased the account balance.

HEET CREDIT

00 00 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

PROBLEM 5.2A The University Bookstore Worksheet (Partial) Month Ended November 30, 2019 ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Supplies 4 Prepaid Rent 5 Equipment 6 Accumulated Depreciation-Equip. 7 Accounts Payable 8 Ruby Darkson, Capital 9 Ruby Darkson, Drawing 10 Fees Income 11 Depreciation Expense—Equipment 12 Rent Expense 13 Salaries Expense 14 Supplies Expense 15 Utilities Expense 16 Totals 17

TRIAL BALANCE DEBIT CREDIT 23 0 7 5 00 3 8 1 2 00 7 5 0 0 00 24 5 0 0 00 27 5 0 0 00

ADJUSTMENTS DEBIT CREDIT

(a) 2 (b) 3

9 0 0 00 5 0 0 00

(c)

9 5 0 00

9 0 0 0 00 41 8 3 7 00 4 0 0 0 00 48 5 5 0 00 (c) (b) 3

9 5 0 00 5 0 0 00

(a) 2

9 0 0 00

8 5 0 0 00 5 0 0 00 99 3 8 7 00

99 3 8 7 00

7 3 5 0 00

2019

PROBLEM 5.2A (continued)

ADJUSTED TRIAL BALANCE DEBIT 23 0 7 5 00 3 8 1 2 00 4 6 0 0 00 21 0 0 0 00 27 5 0 0 00

CREDIT

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT

9 5 0 00 9 0 0 0 00 41 8 3 7 00 4 0 0 0 00 48 5 5 0 00 9 5 0 00 3 5 0 0 00 8 5 0 0 00 2 9 0 0 00 5 0 0 00 100 3 3 7 00 100 3 3 7 00

Analyze:

The balance of the Prepaid Rent account prior to the adjusting entry for expired rent is $24,500.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

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PROBLEM 5.3A Cantu Corporation Income Statement Month Ended December 31, 2019 Revenue Fees Income Expenses Salaries Expense Utilities Expense Supplies Expense Advertising Expense Depreciation Expense—Equipment Total Expenses Net Income

57 7 5 0 00 8 9 0 0 00 1 4 0 0 00 3 5 0 0 00 1 7 0 0 00 8 5 0 00 #

16 3 5 0 00 41 4 0 0 00

Cantu Corporation Statement of Owner's Equity Month Ended December 31, 2019 Selena Cantu, Capital, December 1, 2019 Net income for December Less Withdrawals for December Increase in Capital Selena Cantu, Capital, December 31, 2019

54 5 0 0 00 41 4 0 0 00 4 1 0 0 00 #

37 3 0 0 00 91 8 0 0 00

PROBLEM 5.3A (continued) Cantu Corporation Balance Sheet December 31, 2019 Assets Cash Accounts Receivable Supplies Prepaid Advertising Equipment Less Accumulated Depreciation—Equipment Total Assets

39 1 0 0 00 6 5 0 0 00 2 5 5 0 00 8 5 0 0 00 # 42 5 0 0 00 1 8 5 0 00

Liabilities and Owner's Equity Liabilities Accounts Payable Owner's Equity Selena Cantu, Capital Total Liabilities and Owner's Equity

41 6 5 0 00 98 3 0 0 00

6 5 0 0 00 91 8 0 0 00 98 3 0 0 00

Analyze: Net Income $39,700 ($41,400 - $1,700). Analyze: Incomewould wouldbebe $48,900 ($51,300 - $2,400).

PROBLEM 5.4A Judge Creative Designs Worksheet Month Ended January 31, 2019 ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Supplies 4 Prepaid Advertising 5 Prepaid Rent 6 Equipment 7 Accumulated Depreciation—Equip. 8 Accounts Payable 9 Paula Judge, Capital 10 Paula Judge, Drawing 11 Fees Income 12 Advertising Expense 13 Depreciation Expense—Equipment 14 Rent Expense 15 Salaries Expense 16 Supplies Expense 17 Utilities Expense 18 Totals 19 Net Income 20 21

TRIAL BALANCE DEBIT CREDIT 36 5 0 0 00 13 6 0 0 00 9 7 5 0 00 12 4 0 0 00 25 2 0 0 00 33 6 0 0 00

ADJUSTMENTS DEBIT CREDIT

(a) 8 1 5 0 00 (b) 3 1 0 0 00 (c )2 1 0 0 00 (d)

2 8 0 00

16 5 5 0 00 61 0 0 0 00 8 0 0 0 00 74 1 0 0 00 (b) 3 1 0 0 00 (d) 2 8 0 00 (c )2 1 0 0 00 10 7 0 0 00 (a) 8 1 5 0 00 1 9 0 0 00 151 6 5 0 00 151 6 5 0 00

13 6 3 0 00

PROBLEM 5.4A (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 36 5 0 0 00 13 6 0 0 00 1 6 0 0 00 9 3 0 0 00 23 1 0 0 00 33 6 0 0 00 2 8 0 00 16 5 5 0 00 61 0 0 0 00 8 0 0 0 00 74 1 0 0 00 3 1 0 0 00 2 8 0 00 2 1 0 0 00 10 7 0 0 00 8 1 5 0 00 1 9 0 0 00 151 9 3 0 00 151 9 3 0 00

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT 36 5 0 0 00 13 6 0 0 00 1 6 0 0 00 9 3 0 0 00 23 1 0 0 00 33 6 0 0 00 2 8 0 00 16 5 5 0 00 61 0 0 0 00 8 0 0 0 00

74 1 0 0 00 3 1 0 0 00 2 8 0 00 2 1 0 0 00 10 7 0 0 00 8 1 5 0 00 1 9 0 0 00 26 2 3 0 00 47 8 7 0 00 74 1 0 0 00

74 1 0 0 00 74 1 0 0 00

125 7 0 0 00

77 8 3 0 00 47 8 7 0 00 125 7 0 0 00 125 7 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

PROBLEM 5.4A (continued) Judge Creative Designs Income Statement Month Ended January 31, 2019 Revenue Fees Income Expenses Salaries Expense Utilities Expense Supplies Expense Advertising Expense Rent Expense Depreciation Expense—Equipment Total Expenses Net Income

74 1 0 0 00 10 7 0 0 00 1 9 0 0 00 8 1 5 0 00 3 1 0 0 00 2 1 0 0 00 2 8 0 00 26 2 3 0 00 47 8 7 0 00

Judge Creative Designs Statement of Owner's Equity Month Ended January 31, 2019 Paula Judge, Capital, January 1, 2019 Net income for January Less Withdrawals for January Increase in Capital Paula Judge, Capital, January 31, 2019

61 0 0 0 00 47 8 7 0 00 8 0 0 0 00 39 8 7 0 00 100 8 7 0 00

PROBLEM 5.4A (continued) Judge Creative Designs Balance Sheet January 31, 2019 Assets Cash Accounts Receivable Supplies Prepaid Advertising Prepaid Rent Equipment Less Accumulated Depreciation—Equipment Total Assets

36 5 0 0 00 13 6 0 0 00 1 6 0 0 00 9 3 0 0 00 23 1 0 0 00 # 33 6 0 0 00 2 8 0 00

Liabilities and Owner's Equity Liabilities Accounts Payable Owner's Equity Paula Judge, Capital Total Liabilities and Owner's Equity

16 5 5 0 00 100 8 7 0 00 117 4 2 0 00

PAGE

GENERAL JOURNAL

DATE 1 2 3 4 5 6 7 8 9 10 11 12 13 14

2019 Jan.

DESCRIPTION Adjusting Entries 31 Supplies Expense Supplies 31 Advertising Expense Prepaid Advertising 31 Rent Expense Prepaid Rent 31 Depreciation Expense—Equipment Accumulated Depreciation—Equipment

33 3 2 0 00 117 4 2 0 00

P POST. O REF. S

DEBIT

517 8 1 5 0 00 121 # # 519 3 1 0 0 00 130 # # 520 2 1 0 0 00 131 # # 523 2 8 0 00 142 #

CREDIT

8 1 5 0 00

3 1 0 0 00

2 1 0 0 00

2 8 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14

PROBLEM 5.4A (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2019 Jan. 1 31 Adjusting

ACCOUNT

J1 J3

DEBIT

BALANCE DEBIT CREDIT

8 1 5 0 00

9 7 5 0 00 1 6 0 0 00

9 7 5 0 00

ACCOUNT NO. POST. REF. J1 J3

DEBIT 12 4 0 0 00

CREDIT

J1 J3

DEBIT 25 2 0 0 00

12 4 0 0 00 3 1 0 0 00 9 3 0 0 00

CREDIT

POST. REF. J3

DEBIT

131

BALANCE DEBIT CREDIT

25 2 0 0 00 2 1 0 0 00 23 1 0 0 00

Accumulated Depreciation—Equipment

DATE DESCRIPTION 2019 Jan. 31 Adjusting

130

BALANCE DEBIT CREDIT

ACCOUNT NO. POST. REF.

121

CREDIT

Prepaid Rent

DATE DESCRIPTION 2019 Jan. 1 31 Adjusting

ACCOUNT

POST. REF.

Prepaid Advertising

DATE DESCRIPTION 2019 Jan. 1 31 Adjusting

ACCOUNT

ACCOUNT NO.

Supplies

ACCOUNT NO.

CREDIT

142

BALANCE DEBIT CREDIT

2 8 0 00

121

130

131

142

PROBLEM 5.4A (continued) GENERAL LEDGER ACCOUNT Supplies Expense

DATE DESCRIPTION 2019 Jan. 31 Adjusting

ACCOUNT NO. POST. REF.

DEBIT

8 1 5 0 00

CREDIT

DATE DESCRIPTION 2019 Jan. 31 Adjusting

ACCOUNT NO.

DEBIT

3 1 0 0 00

CREDIT

DEBIT

2 1 0 0 00

CREDIT

Analyze:

POST. REF. J3

DEBIT 2 8 0 00

520

BALANCE DEBIT CREDIT 2 1 0 0 00

ACCOUNT Depreciation Expense—Equipment

DATE DESCRIPTION 2019 Jan. 31 Adjusting

BALANCE DEBIT CREDIT

ACCOUNT NO. POST. REF.

519

3 1 0 0 00

ACCOUNT Rent Expense

DATE DESCRIPTION 2019 Jan. 31 Adjusting

BALANCE DEBIT CREDIT 8 1 5 0 00

ACCOUNT Advertising Expense POST. REF.

517

ACCOUNT NO.

CREDIT

523

BALANCE DEBIT CREDIT 2 8 0 00

If adjusting entries had not been made, net income would be overstated.

517

519

520

523

PROBLEM 5.1B Martinez Company Worksheet Month Ended February 28, 2019

ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Supplies 4 Prepaid Rent 5 Equipment 6 Accumulated Depreciation—Equip. 7 Accounts Payable 8 Julie Martinez, Capital 9 Julie Martinez, Drawing 10 Fees Income 11 Salaries Expense 12 Utilities Expense 13 Supplies Expense 14 Rent Expense 15 Depreciation Expense-Equipment 16 Totals 17 Net Income 18 19 20 21

TRIAL BALANCE DEBIT CREDIT 36 5 0 0 00 3 2 0 0 00 2 1 0 0 00 12 0 0 0 00 23 0 0 0 00

ADJUSTMENTS DEBIT CREDIT

(a) 1 0 0 0 00 (b) 1 0 0 0 00 (c)

5 0 0 00

6 0 0 0 00 49 2 5 0 00 1 5 0 0 00 27 0 0 0 00 3 1 5 0 00 8 0 0 00

82 2 5 0 00

(a) 1 0 0 0 00 (b) 1 0 0 0 00 (c) 5 0 0 00 82 2 5 0 00 2 5 0 0 00

2 5 0 0 00

PROBLEM 5.1B (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 36 5 0 0 00 3 2 0 0 00 1 1 0 0 00 11 0 0 0 00 23 0 0 0 00 5 0 0 00 6 0 0 0 00 49 2 5 0 00 1 5 0 0 00 27 0 0 0 00 3 1 5 0 00 8 0 0 00 1 0 0 0 00 1 0 0 0 00 5 0 0 00 82 7 5 0 00 82 7 5 0 00

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT 36 5 0 0 00 3 2 0 0 00 1 1 0 0 00 11 0 0 0 00 23 0 0 0 00 5 0 0 00 6 0 0 0 00 49 2 5 0 00 1 5 0 0 00

27 0 0 0 00 3 1 5 0 00 8 0 0 00 1 0 0 0 00 1 0 0 0 00 5 0 0 00 6 4 5 0 00 20 5 5 0 00 27 0 0 0 00

27 0 0 0 00

76 3 0 0 00

27 0 0 0 00

76 3 0 0 00

55 7 5 0 00 20 5 5 0 00 76 3 0 0 00

Analyze: No depreciation has been recorded for the fiscal period, or any previous fiscal period.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

PROBLEM 5.2B Kelvin Newton, Attorney-at-Law Worksheet (Partial) Month Ended November 30, 2019

ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Supplies 4 Prepaid Rent 5 Equipment 6 Accumulated Depreciation—Equip. 7 Accounts Payable 8 Kelvin Newton, Capital 9 Kelvin Newton, Drawing 10 Fees Income 11 Salaries Expense 12 Utilities Expense 13 Supplies Expense 14 Rent Expense 15 Depreciation Expense—Equipment 16 Totals 17 18 19

TRIAL BALANCE DEBIT CREDIT 70 1 0 0 00 17 0 0 0 00 20 8 0 0 00 88 4 0 0 00 132 0 0 0 00

ADJUSTMENTS DEBIT CREDIT

(a) 7 2 0 0 (b) 6 8 0 0 (c ) 1 1 0 0

34 0 0 0 00 160 0 0 0 00 12 0 0 0 00 171 4 0 0 00 21 6 0 0 00 3 5 0 0 00 (a) 7 2 0 0 00 (b) 6 8 0 0 00 (c ) 1 1 0 0 00 365 4 0 0 00 365 4 0 0 00 15 1 0 0 00

15 1 0 0

TS REDIT

00 00 00

PROBLEM 5.2B (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 70 1 0 0 00 17 0 0 0 00 13 6 0 0 00 81 6 0 0 00 132 0 0 0 00 1 1 0 0 00 34 0 0 0 00 160 0 0 0 00 12 0 0 0 00 171 4 0 0 00 21 6 0 0 00 3 5 0 0 00 7 2 0 0 00 6 8 0 0 00 1 1 0 0 00 # 366 5 0 0 00 366 5 0 0 00

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT

Analyze: Accumulated Depreciation—Equipment

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

PROBLEM 5.3B JP's Accounting Services Income Statement Month Ended December 31, 2019 Revenue Fees Income Expenses Salaries Expense Supplies Expense Utilities Expense Rent Expense Advertising Expense Depreciation Expense—Fixtures Total Expenses Net Income

62 6 6 0 00 37 2 0 0 00 1 2 0 0 00 2 1 6 0 00 7 0 0 0 00 1 6 0 0 00 6 0 0 00 49 7 6 0 00 12 9 0 0 00

JP’s Accounting Services Statement of Owner's Equity Month Ended December 31, 2019 Jackie Peaches, Capital, December 1, 2019 Net income for December 2019 Less Withdrawals for Year Increase in Capital Jackie Peaches, Capital, December 31, 2019

60 0 0 0 00 12 9 0 0 00 6 0 0 0 00 6 9 0 0 00 66 9 0 0 00

PROBLEM 5.3B (continued) JP's Accounting Services Balance Sheet December 31, 2019 Assets Cash Accounts Receivable Supplies Prepaid Advertising Fixtures Less Accumulated Depreciation Total Assets Liabilities and Owner's Equity Liabilities Accounts Payable Owner's Equity Jackie Peaches, Capital Total Liabilities and Owner's Equity

33 9 0 0 00 4 4 0 0 00 1 8 0 0 00 6 4 0 0 00 36 0 0 0 00 6 0 0 00

35 4 0 0 00 81 9 0 0 00

15 0 0 0 00 66 9 0 0 00 81 9 0 0 00

Analyze: Adjusting entries decreased the assets of the company by $3,400.

PROBLEM 5.4B Nix Estate Planning and Investments Worksheet Month Ended June 30, 2019 ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Supplies 4 Prepaid Advertising 5 Prepaid Rent 6 Equipment 7 Accum. Depreciation—Equip. 8 Accounts Payable 9 Sam Nix, Capital 10 Sam Nix, Drawing 11 Fees Income 12 Advertising Expense 13 Depreciation Expense—Equipment 14 Rent Expense 15 Salaries Expense 16 Supplies Expense 17 Utilities Expense 18 Totals 19 Net Income 20 21 22

TRIAL BALANCE DEBIT CREDIT 39 4 0 0 00 12 2 0 0 00 15 2 0 0 00 28 8 0 0 00 72 0 0 0 00 96 0 0 0 00

ADJUSTMENTS DEBIT CREDIT

(a) 9 2 0 0 00 (b) 7 2 0 0 00 (c )6 0 0 0 00 (d) 1 6 0 0 00

21 6 0 0 00 120 2 0 0 00 8 0 0 0 00 147 6 0 0 00 (b) 7 2 0 0 00 (d) 1 6 0 0 00 (c ) 6 0 0 0 00 15 2 0 0 00 (a) 9 2 0 0 00 2 6 0 0 00 289 4 0 0 00 289 4 0 0 00

24 0 0 0 00

PROBLEM 5.4B (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 39 4 0 0 00 12 2 0 0 00 6 0 0 0 00 21 6 0 0 00 66 0 0 0 00 96 0 0 0 00 1 6 0 0 00 21 6 0 0 00 120 2 0 0 00 8 0 0 0 00 147 6 0 0 00 7 2 0 0 00 1 6 0 0 00 6 0 0 0 00 15 2 0 0 00 9 2 0 0 00 2 6 0 0 00 291 0 0 0 00 291 0 0 0 00

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT 39 4 0 0 00 12 2 0 0 00 6 0 0 0 00 21 6 0 0 00 66 0 0 0 00 96 0 0 0 00 1 6 0 0 00 21 6 0 0 00 120 2 0 0 00 8 0 0 0 00

147 6 0 0 00 7 2 0 0 00 1 6 0 0 00 6 0 0 0 00 15 2 0 0 00 9 2 0 0 00 2 6 0 0 00 41 8 0 0 00 105 8 0 0 00 147 6 0 0 00

147 6 0 0 00

249 2 0 0 00

147 6 0 0 00

249 2 0 0 00

143 4 0 0 00 105 8 0 0 00 249 2 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

PROBLEM 5.4B (continued) Nix Estate Planning and Investments Income Statement Month Ended June 30, 2019 Revenue Fees Income Expenses Salaries Expense Utilities Expense Supplies Expense Advertising Expense Rent Expense Depreciation Expense—Equipment Total Expenses Net Income

147 6 0 0 00 15 2 9 7 6 1

2 0 6 0 2 0 2 0 0 0 6 0

0 00 0 00 0 00 0 00 0 00 0 00 41 8 0 0 00 105 8 0 0 00

Nix Estate Planning and Investments Statement of Owner's Equity Month Ended June 30, 2019 Sam Nix, Capital, June 1, 2019 Net income for June Less Withdrawals for June Increase in Capital Sam Nix, Capital, June 30, 2019

120 2 0 0 00 105 8

8 0 0 00 0 0 0 00 97 8 0 0 00 218 0 0 0 00

PROBLEM 5.4B (continued) Nix Estate Planning and Investments Balance Sheet June 30, 2019 Assets Cash Accounts Receivable Supplies Prepaid Advertising Prepaid Rent Equipment Less Accumulated Depreciation—Equipment Total Assets

39 4 0 0 00 12 2 0 0 00 6 0 0 0 00 21 6 0 0 00 66 0 0 0 00 # 96 0 0 0 00 1 6 0 0 00

Liabilities and Owner's Equity Liabilities Accounts Payable Owner's Equity Sam Nix, Capital Total Liabilities and Owner's Equity

21 6 0 0 00 218 0 0 0 00 239 6 0 0 00

PAGE

GENERAL JOURNAL

DATE 1 2 3 4 5 6 7 8 9 10 11 12 13 14

2019 June

DESCRIPTION Adjusting Entries 30 Supplies Expense Supplies 30 Advertising Expense Prepaid Advertising 30 Rent Expense Prepaid Rent 30 Depreciation Expense—Equipment Accumulated Depreciation—Equipment

94 4 0 0 00 239 6 0 0 00

P POST. O REF. S DEBIT

517 9 2 0 0 00 121 # # 519 7 2 0 0 00 130 # # 520 6 0 0 0 00 131 # # 523 1 6 0 0 00 142 #

CREDIT 1 2 3 9 2 0 0 00 4 5 6 7 2 0 0 00 7 8 9 6 0 0 0 00 10 11 12 1 6 0 0 00 13 14

PROBLEM 5.4B (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2019 June 1 30 Adjusting

ACCOUNT

J1 J3

DEBIT 15 2 0 0 00

CREDIT

J1 J3

DEBIT 28 8 0 0 00

CREDIT

BALANCE DEBIT CREDIT

ACCOUNT NO. POST. REF. J1 J3

DEBIT 72 0 0 0 00

POST. REF. J3

DEBIT

130

28 8 0 0 00 7 2 0 0 00 21 6 0 0 00

CREDIT

131

BALANCE DEBIT CREDIT

72 0 0 0 00 6 0 0 0 00 66 0 0 0 00

Accumulated Depreciation—Equipment

DATE DESCRIPTION 2019 June 30 Adjusting

BALANCE DEBIT CREDIT

ACCOUNT NO. POST. REF.

121

15 2 0 0 00 9 2 0 0 00 6 0 0 0 00

Prepaid Rent

DATE DESCRIPTION 2019 June 1 30 Adjusting

ACCOUNT

POST. REF.

Prepaid Advertising

DATE DESCRIPTION 2019 June 1 30 Adjusting

ACCOUNT

ACCOUNT NO.

Supplies

ACCOUNT NO.

CREDIT 1 6 0 0 00

142

BALANCE DEBIT CREDIT 1 6 0 0 00

121

130

131

142

PROBLEM 5.4B (continued) GENERAL LEDGER ACCOUNT Supplies Expense

DATE DESCRIPTION 2019 June 30 Adjusting

ACCOUNT NO. POST. REF.

DEBIT

9 2 0 0 00

CREDIT

DATE DESCRIPTION 2019 June 30 Adjusting

ACCOUNT NO.

DEBIT

7 2 0 0 00

CREDIT

DEBIT

6 0 0 0 00

CREDIT

POST. REF.

DEBIT

1 6 0 0 00

520

BALANCE DEBIT CREDIT 6 0 0 0 00

ACCOUNT Depreciation Expense—Equipment

DATE DESCRIPTION 2019 June 30 Adjusting

BALANCE DEBIT CREDIT

ACCOUNT NO. POST. REF.

519

7 2 0 0 00

ACCOUNT Rent Expense

DATE DESCRIPTION 2019 June 30 Adjusting

BALANCE DEBIT CREDIT 9 2 0 0 00

ACCOUNT Advertising Expense POST. REF.

517

ACCOUNT NO.

CREDIT

523

BALANCE DEBIT CREDIT 1 6 0 0 00

Analyze: Generally accepted accounting principles require that the original cost of the asset appear in the asset account until the asset has been used up or disposed. A contra asset account is used to record depreciation costs.

517

519

520

523

CRITICAL THINKING PROBLEM 5.1 TO: Ellis Austin, Owner FROM: Student’s Name DATE: Current Date SUBJEC Effect on Financial Statements of Omitting Adjusting Entries Adjusting entries are recorded to update the accounts at the end of the accounting period for previously unrecorded items that belong to that period. If these entries are omitted, the net income will not be an accurate measure of the operation of the company for the year and certain accounts on the balance sheet will not report correct end-of-year balances. In particular, Austin Industries' net income for the year will be overstated by $43,280; net income should be $52,280 instead of $95,560. This amount represents a 45.3% decrease in net income over the amount that would be reported if the adjusting entries were not made. ($43,280 ÷ $95,560 = 0.453). This decrease in net income results from not making adjusting entries for the following unrecorded expenses: 1. Expense of Rent for the year ($42,000 x 6/12 = $21,000 for 6 months) 2. Expense of supplies used during the year (Total supplies of $18,000 - Ending Inventory of $2,720 = $15,280 supplies used) 3. Depreciation expense for the year ($210,000 ÷ 30 years = $7,000 per year) Total increase in expenses

$21,000 15,280 7,000 $43,280

In addition to overstating the net income, the balances of Prepaid Rent and Supplies on the balance sheet would be overstated and the book value of Building would also be overstated. Preparation of the adjusting entries would permit the financial statements to present a more accurate measure of the company’s operations for the year and its financial condition at the end of the year. Therefore, it is important and the time is well spent to prepare adjusting entries so that the financial statements are up-to-date and present an accurate picture of the business.

CRITICAL THINKING PROBLEM 5.2 Patterson International Company Worksheet Month Ended January 31, 2019 ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Supplies 4 Prepaid Insurance 5 Equipment 6 Accumulated Depreciation—Equip. 7 Accounts Payable 8 Roger Patterson, Capital 9 Roger Patterson, Drawing 10 Fees Income 11 Advertising Expense 12 Depreciation Expense—Equipment 13 Insurance Expense 14 Rent Expense 15 Salaries Expense 16 Supplies Expense 17 Telephone Expense 18 Utilities Expense 19 Totals 20 Net Income 21 22

TRIAL BALANCE DEBIT CREDIT 36 9 5 0 00 6 8 0 0 00 4 3 0 0 00 30 0 0 0 00 48 0 0 0 00

ADJUSTMENTS DEBIT CREDIT

(a) 2 1 0 0 00 (b) 5 0 0 0 00 (c)

4 0 0 00

12 0 0 0 00 80 0 0 0 00 4 0 0 0 00 61 8 5 0 00 3 0 0 0 00 (c) 4 0 0 00 (b) 5 0 0 0 00 5 0 0 0 00 13 4 0 0 00 (a) 2 1 0 0 00 7 0 0 00 1 7 0 0 00 153 8 5 0 00 153 8 5 0 00

7 5 0 0 00

Company

1, 2019

CRITICAL THINKING PROBLEM 5.2 (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 36 9 5 0 00 6 8 0 0 00 2 2 0 0 00 25 0 0 0 00 48 0 0 0 00 4 0 0 00 12 0 0 0 00 80 0 0 0 00 4 0 0 0 00 61 8 5 0 00 3 0 0 0 00 4 0 0 00 5 0 0 0 00 5 0 0 0 00 13 4 0 0 00 2 1 0 0 00 7 0 0 00 1 7 0 0 00 154 2 5 0 00 154 2 5 0 00

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT 36 9 5 0 00 6 8 0 0 00 2 2 0 0 00 25 0 0 0 00 48 0 0 0 00 4 0 0 00 12 0 0 0 00 80 0 0 0 00 4 0 0 0 00

61 8 5 0 00 3 0 0 0 00 4 0 0 00 5 0 0 0 00 5 0 0 0 00 13 4 0 0 00 2 1 0 0 00 7 0 0 00 1 7 0 0 00 31 3 0 0 00 30 5 5 0 00 61 8 5 0 00

61 8 5 0 00

122 9 5 0 00

61 8 5 0 00

122 9 5 0 00

92 4 0 0 00 30 5 5 0 00 122 9 5 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

CRITICAL THINKING PROBLEM 5.2 (continued) Patterson International Company Income Statement Month Ended January 31, 2019 Revenue Fees Income Expenses Advertising Expense Depreciation Expense—Equipment Insurance Expense Rent Expense Salaries Expense Supplies Expense Telephone Expense Utilities Expense Total Expenses Net Income

61 8 5 0 00 3 0 0 0 00 4 0 0 00 5 0 0 0 00 5 0 0 0 00 13 4 0 0 00 2 1 0 0 00 7 0 0 00 1 7 0 0 00 31 3 0 0 00 30 5 5 0 00

Patterson International Company Statement of Owner’s Equity Month Ended January 31, 2019 Roger Patterson, Capital, January 1, 2019 Net income for January Less Withdrawals for January Increase in Capital Roger Patterson, Capital, January 31, 2019

80 0 0 0 00 30 5 5 0 00 4 0 0 0 00 # 26 5 5 0 00 106 5 5 0 00

CRITICAL THINKING PROBLEM 5.2 (continued) Patterson International Company Balance Sheet January 31, 2019 Assets Cash Accounts Receivable Supplies Prepaid Insurance Equipment Less Accumulated Depreciation—Equipment Total Assets

36 9 5 0 00 6 8 0 0 00 2 2 0 0 00 25 0 0 0 00 48 0 0 0 00 4 0 0 00

Liabilities and Owner's Equity Liabilities Accounts Payable Owner's Equity Maxine Rogers, Capital Total Liabilities and Owner's Equity

12 0 0 0 00 106 5 5 0 00 118 5 5 0 00

PAGE

GENERAL JOURNAL

DATE 1 2 3 4 5 6 7 8 9 10 11

2019 Jan.

DESCRIPTION Adjusting Entries 31 Supplies Expense Supplies 31 Insurance Expense Prepaid Insurance 30 Depreciation Expense—Equipment Accumulated Depreciation—Equipment

47 6 0 0 00 118 5 5 0 00

P POST. O REF. S

DEBIT

520 2 1 0 0 00 121 # # 517 5 0 0 0 00 131 # # 514 4 0 0 00 142 # #

CREDIT 1 2 3 2 1 0 0 00 4 5 6 5 0 0 0 00 7 8 9 4 0 0 00 10 11

CRITICAL THINKING PROBLEM 5.2 (continued) GENERAL LEDGER ACCOUNT Supplies

DATE DESCRIPTION 2019 Jan. 1 Balance 31 Adjusting

ACCOUNT NO. POST. REF. ✔ J3

DEBIT

CREDIT

BALANCE DEBIT CREDIT

2 1 0 0 00

4 3 0 0 00 2 2 0 0 00

4 3 0 0 00

ACCOUNT Prepaid Insurance

DATE DESCRIPTION 2019 Jan. 1 Balance 31 Adjusting

ACCOUNT NO. POST. REF. ✔ J3

DEBIT 30 0 0 0 00

CREDIT

POST. REF.

DEBIT

DATE DESCRIPTION 2019 Jan. 31 Adjusting

BALANCE DEBIT CREDIT

ACCOUNT NO.

CREDIT

DEBIT 4 0 0 00

4 0 0 00

ACCOUNT NO.

CREDIT

142

BALANCE DEBIT CREDIT

4 0 0 00

ACCOUNT Depreciation Expense—Equipment POST. REF.

131

30 0 0 0 00 5 0 0 0 00 25 0 0 0 00

ACCOUNT Accumulated Depreciation—Equipment

DATE DESCRIPTION 2019 Jan. 31 Adjusting

121

514

BALANCE DEBIT CREDIT 4 0 0 00

CRITICAL THINKING PROBLEM 5.2 (continued) GENERAL LEDGER ACCOUNT Insurance Expense

DATE DESCRIPTION 2019 Jan. 31 Adjusting

ACCOUNT NO. POST. REF.

DEBIT

5 0 0 0 00

CREDIT

DATE DESCRIPTION 2019 Jan. 31 Adjusting

Analyze:

BALANCE DEBIT CREDIT 5 0 0 0 00

ACCOUNT Supplies Expense

ACCOUNT NO. POST. REF.

DEBIT

2 1 0 0 00

517

CREDIT

520

BALANCE DEBIT CREDIT 2 1 0 0 00

If the useful life of the equipment had been 12 years instead of 10 years, depreciation would have been $333.34 rather than $400. Net Income would have been $66.66 greater.

SOLUTIONS TO BUSINESS CONNECTIONS Managerial Focus: 1. Accounting records generally reflect an asset’s historical or original cost, less accumulated depreciation (not market value). 2. Depreciation Expense will offset income. Accumulated Depreciation will decrease the book value of the asset. 3. Are necessary to present an accurate financial position of the firm. 4. Provides end-of-period adjusting entries and contains income statement and balance sheet accounts.

Ethical Dilemma: If the company wanted to donate to a nonprofit organization they would write a check and get a tax deduction. It is unethical to record higher costs than are actually incurred. Financial Statement Analysis: 1. 6.1% ($1,466/$24,130,000). 2. 59.5% ($14,346,000/$24,130,000). 3. 6.67 years ($9,784,000/$1,466). Analyze Online: Answers will vary depending on the year. Teamwork: Mr. Foster has expenses that will appear on the income statement. He needs to match these expenses with revenue. He can record the revenue as a receivable for the amount that he has completed (40% 25% = 15%). In this case, he can record $30,000 or 15% of the price of the job.

Internet Connection: Professional liability, surety bonds, umbrella policies, errors and omissions, product liability, fire, auto, dental, workers’ compensation, sexual harassment.

Problem EX EX EX EX EX EX EX EX

6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8

Time 10 10 5 10 5 20 5 10

PR PR PR PR

6.1A 6.2A 6.3A 6.4A

20 40 30 60

CT CT

6.1 6.2

60 30

5 10 15 20 25 30 35 40 45 50 55 60

= = = = = = = = = = = =

1-5 min. 6-10 min. 11-15 min. 16-20 min. 21-25 min. 26-30 min. 31-35 min. 36-40 min. 41-45 min. 46-50 min. 51-55 min. 56-60 min.

CHAPTER 6 CLOSING ENTRIES AND THE POSTCLOSING TRIAL BALANCE Chapter Opener: Thinking Critically How do Carnival's managers use financial statements to evaluate performance? How might these evaluations affect business policies or strategies? Students should recognize that financial statements can be used to evaluate net profit or loss, return on investments, expense trends, or growth in company net assets. The income statement is used to measure net income or loss, while the balance sheet can be used to measure growth in assets or liabilities. Executives and managers would use financial statements to make decisions about expanding business, investing in new ventures, or hiring new employees. Managerial Implications: Thinking Critically Answers will vary but could include monthly or quarterly. Students should want financial statements frequently so that trends can be observed and timely decisions made before the business is negatively impacted. Discussion Questions Note to instructor: These questions are designed to check the students’ understanding of the new terms, concepts, and procedures presented in the chapter. 1. (1) analyze (2) journalize (3) post (4) prepare worksheet (5) prepare financial statements (6) journalize and post adjusting entries (7) journalize and post-closing entries (8) prepare post-closing trial balance (9) interpret financial information 2. Steps to classify, record, and summarize financial data. 3. Asset, liability, and owner’s capital. 4. Avoids errors, proves total debits and credits are equal after the closing process. 5. Adjustments columns of the worksheet. 6. Transfer results of operations to the owner’s capital account; Reduce balances of revenue, expense, and drawing accounts to zero. 7. Worksheet. 8. Balances of revenue and expense accounts are transferred to Income Summary. Next the balance of the Income Summary account is transferred to the owner’s equity account. 9. Source document info to general journal, to general ledger, to worksheet, to financial statements.

Chapter 6 n 131

10 Journalize and post adjusting entries; Journalize and postclosing entries; Prepare a postclosing trial balance.

Chapter 6 n 131

EXERCISE 6.1 PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 Closing Entries 2 2019 3 Dec. 31 Fees Income 4 Income Summary 5 6 31 Income Summary 7 Depreciation Expense 8 Salaries Expense 9 Supplies Expense 10 Telephone Expense 11 Utilities Expense 12 13 31 Income Summary 14 Maria Lopez, Capital 15 16 31 Maria Lopez, Capital 17 Maria Lopez, Drawing 18

POST. REF.

DEBIT

CREDIT

107 5 0 0 00 107 5 0 0 00 60 0 0 0 00 5 5 0 0 00 34 0 0 0 00 6 0 0 0 00 5 2 0 0 00 9 3 0 0 00 47 5 0 0 00 47 5 0 0 00 52 0 0 0 00 52 0 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

EXERCISE 6.2 1. Analyze transactions. 2. Journalize the transactions. 3. Post the journal entries. 4. Prepare a worksheet. 5. Prepare financial statements. 6. Record adjusting entries. 7. Record closing entries. 8. Prepare a post-closing trial balance. 9. Interpret the financial information.

Chapter 6 n 133

EXERCISE 6.3 1. Cash 2. Accounts Receivable 3. Supplies 4. Equipment

5. Accumulated Depreciation 6. Accounts Payable 7. Brianna Celina, Capital

EXERCISE 6.4 1.I 2.B 3.I, E 4.B, E 5.B

6. 7. 8. 9. 10.

I B B I B

11. 12. 13. 14. 15.

B I B E B

EXERCISE 6.5 1. Total revenue for the period is $134,000. 2. Total expenses for the period are $71,800. 3. Net income for the period is $62,200. 4. Owner’s withdrawals for the period are $22,000.

134 n Chapter 6

EXERCISE 6.6 PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 Closing Entries 2 2019 3 Mar. 31 Fees Income 4 Income Summary 5 6 31 Income Summary 7 Depreciation Expense- Equipment 8 Insurance Expense 9 Rent Expense 10 Salaries Expense 11 Supplies Expense 12 Telephone Expense 13 Utilities Expense 14 15 31 Income Summary 16 Aretha Hinkle, Capital 17 18 31 Aretha Hinkle, Capital 19 Aretha Hinkle, Drawing 20

POST. REF.

DEBIT

401 399

187 2 3 0 00

399 510 511 514 517 518 519 523

126 6 8 0 00

399 301

60 5 5 0 00

301 302

6 5 0 0 00

CREDIT

187 2 3 0 00

10 5 8 0 00 5 7 0 0 00 16 5 0 0 00 83 0 0 0 00 2 8 0 0 00 3 4 0 0 00 4 7 0 0 00

60 5 5 0 00

6 5 0 0 00

Chapter 6 n 135

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Chapter 6 n 135

EXERCISE 6.6 (continued) GENERAL LEDGER ACCOUNT Aretha Hinkle, Capital

DATE DESCRIPTION 2019 Mar. 31 Balance 31 Closing 31 Closing

POST. REF.  J4 J4

ACCOUNT NO.

DEBIT

CREDIT

DATE DESCRIPTION 2019 Mar. 31 Balance 31 Closing

POST. REF.

136 n Chapter 6

65 0 0 0 125 5 0 0 119 0 5 0

60 5 5 0 00 0

ACCOUNT NO.

DEBIT

 J4

CREDIT

6 5 0 0 00

6 5 0 0 00 − 0 −

ACCOUNT NO. POST. REF.

DEBIT

J4 J4 J4

126 6 8 0 00 60 5 5 0 00

302

BALANCE DEBIT CREDIT

ACCOUNT Income Summary

DATE DESCRIPTION 2019 Mar. 31 Closing 31 Closing 31 Closing

BALANCE DEBIT CREDIT

6 5 0 0 00

ACCOUNT Aretha Hinkle, Drawing

301

CREDIT 187 2 3 0 00

399

BALANCE DEBIT CREDIT 187 2 3 0 60 5 5 0 − 0 −

301

CE CREDIT 00 00 00

302

CE CREDIT

399

CE CREDIT 00 00

136 n Chapter 6

EXERCISE 6.6 (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2019 Mar. 31 Balance 31 Closing

ACCOUNT

POST. REF.

DEBIT

 J4

187 2 3 0 00

CREDIT

POST. REF.

DEBIT

 J4

DATE DESCRIPTION 2019 Mar. 31 Balance 31 Closing

CREDIT

10 5 8 0 00

DEBIT

 J4

10 5 8 0 00 − 0 −

DEBIT

511

CREDIT

BALANCE DEBIT CREDIT

5 7 0 0 00

5 7 0 0 00 − 0 −

ACCOUNT NO. POST. REF.

510

BALANCE DEBIT CREDIT

ACCOUNT NO.

ACCOUNT Rent Expense

DATE DESCRIPTION 2019 Mar. 31 Balance 31 Closing

BALANCE DEBIT CREDIT

ACCOUNT NO.

Insurance Expense POST. REF.

401

187 2 3 0 − 0 −

Depreciation Expense—Equipment

DATE DESCRIPTION 2019 Mar. 31 Balance 31 Closing

ACCOUNT

ACCOUNT NO.

Fees Income

CREDIT

 16 5 0 0 00

514

BALANCE DEBIT CREDIT 16 5 0 0 00 − 0 −

Chapter 6 n 137

401 BALANCE CREDIT 00

510 BALANCE CREDIT

511 BALANCE CREDIT

514 BALANCE CREDIT

Chapter 6 n 137

EXERCISE 6.6 (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2019 Mar. 31 Balance 31 Closing

ACCOUNT

DEBIT

 J4

CREDIT

83 0 0 0 00

POST. REF.

DEBIT

 J4

CREDIT

2 8 0'00 00

DEBIT

 J4

CREDIT

3 4 0 0 00

138 n Chapter 6

POST. REF.  J4

DEBIT

CREDIT

4 7 0 0 00

518

BALANCE DEBIT CREDIT 2 8 0 0 00 − 0 −

519

BALANCE DEBIT CREDIT 3 4 0 0 00 − 0 −

ACCOUNT NO.

Utilities Expense

DATE DESCRIPTION 2019 Mar. 31 Balance 31 Closing

83 0 0 0 00 − 0 −

ACCOUNT NO. POST. REF.

517

BALANCE DEBIT CREDIT

ACCOUNT NO.

Telephone Expense

DATE DESCRIPTION 2019 Mar. 31 Balance 31 Closing

ACCOUNT

POST. REF.

Supplies Expense

DATE DESCRIPTION 2019 Mar. 31 Balance 31 Closing

ACCOUNT

ACCOUNT NO.

Salaries Expense

523

BALANCE DEBIT CREDIT 4 7 0 0 00 − 0 −

138 n Chapter 6

EXERCISE 6.7 PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Closing Entries

POST. REF.

1 2 2019 3 Dec. 31 Madison Wells, Capital 4 Income Summary 5 6 31 Madison Wells, Capital 7 Madison Wells, Drawing 8

DEBIT

CREDIT

1 2 111 0 0 0 00 3 111 0 0 0 00 4 5 12 0 0 0 00 6 12 0 0 0 00 7 8

The new balance of Madison Wells, Capital is $51,000 ($174,000 – $111,000 – $12,000).

Chapter 6 n 139

EXERCISE 6.8

Analyze transactions

Journalize transactions

Post transactions

Prepare a worksheet

Prepare financial statements

Record adjusting entries

Record closing entries

Prepare post-closing trial balance

Interpret financial information

140 n Chapter 6

PROBLEM 6.1A PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Adjusting Entries

POST. REF.

1 2 2019 3 Jan. 31 Supplies Expense 4 Supplies 5 6 31 Rent Expense 7 Prepaid Rent 8 9 31 Depreciation Expense—Office Equipment 10 Accumulated Depreciation—Office Equip. 11

DEBIT

4 6 8 0 00

26 0 0 0 00

9 1 6 0 00

CREDIT 1 2 3 4 6 8 0 00 4 5 6 26 0 0 0 00 7 8 9 9 1 6 0 00 10 11

Chapter 6 n 141

PROBLEM 6.1A (continued) PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Closing Entries

1 2 2019 3 Jan. 31 Fees Income 4 Income Summary 5 6 31 Income Summary 7 Depreciation Expense—Office Equipment 8 Rent Expense 9 Salaries Expense 10 Supplies Expense 11 Telephone Expense 12 Travel Expense 13 Utilities Expense 14 15 31 Income Summary 16 Gloria Johnson, Capital 17 18 31 Gloria Johnson, Capital 19 Gloria Johnson, Drawing 20

POST. REF.

DEBIT

CREDIT

200 0 0 0 00 200 0 0 0 00 164 8 2 0 00 9 1 6 0 00 26 0 0 0 00 99 0 0 0 00 4 6 8 0 00 2 7 0 0 00 20 7 8 0 00 2 5 0 0 00 35 1 8 0 00 35 1 8 0 00 22 0 0 0 00 22 0 0 0 00

Analyze: Debit the Capital account; credit the Drawing account.

142 n Chapter 6

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

142 n Chapter 6

PROBLEM 6.2A PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Adjusting Entries

1 2 2019 3 Dec. 31 Supplies Expense 4 Supplies 5 6 31 Advertising Expense 7 Prepaid Advertising 8 9 31 Depreciation Expense—Equipment 10 Accumulated Depreciation—Equipment 11

POST. REF.

DEBIT

517 121

3 4 0 0 00

526 131

4 0 0 0 00

523 142

3 4 0 0 00

DATE

DESCRIPTION Closing Entries

1 2 2019 3 Dec. 31 Fees Income 4 Income Summary 5 6 31 Income Summary 7 Supplies Expense 8 Advertising Expense 9 Depreciation Expense—Equipment 10 Salaries Expense 11 Utilities Expense 12 13 31 Income Summary 14 Delva King, Capital 15 16 31 Delva King, Capital 17 Delva King, Drawing 18

CREDIT

3 4 0 0 00

4 0 0 0 00

3 4 0 0 00

PAGE

GENERAL JOURNAL POST. REF.

DEBIT

401 309

103 5 0 0 00

309 517 526 523 511 514

28 5 0 0 00

309 301

75 0 0 0 00

301 302

9 4 0 0 00

CREDIT

103 5 0 0 00

3 4 0 0 00 4 0 0 0 00 3 4 0 0 00 15 4 0 0 00 2 3 0 0 00

75 0 0 0 00

9 4 0 0 00

Chapter 6 n 143

1 2 3 4 5 6 7 8 9 10 11

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Chapter 6 n 143

PROBLEM 6.2A (continued) GENERAL LEDGER ACCOUNT Supplies

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Adjusting

ACCOUNT NO. 121 POST. REF.

DEBIT

 J3

CREDIT

BALANCE DEBIT CREDIT

3 4 0 0 00

8 0 0 0 00 4 6 0 0 00

ACCOUNT Prepaid Advertising

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Adjusting

ACCOUNT NO. 131 POST. REF.

DEBIT

 J3

CREDIT

4 0 0 0 00

ACCOUNT Accumulated Depreciation—Equipment

DATE DESCRIPTION 2019 Dec. 31 Adjusting

POST. REF.

DEBIT

144 n Chapter 6

32 0 0 0 00 28 0 0 0 00

ACCOUNT NO. 142

CREDIT 3 4 0 0 00

ACCOUNT Delva King, Capital

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing 31 Closing

BALANCE DEBIT CREDIT

BALANCE DEBIT CREDIT 3 4 0 0 00

ACCOUNT NO. 301 POST. REF.  J4 J4

DEBIT

CREDIT

75 0 0 0 00 9 4 0 0 00

BALANCE DEBIT CREDIT 142 0 0 0 00 217 0 0 0 00 207 6 0 0 00

PROBLEM 6.2A (continued) GENERAL LEDGER ACCOUNT Delva King, Drawing

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing

ACCOUNT

ACCOUNT NO. 302

POST. REF.

DEBIT

 J4

CREDIT

BALANCE DEBIT CREDIT

9 4 0 0 00

9 4 0 0 00 −0−

ACCOUNT NO. 309

Income Summary

DATE DESCRIPTION 2019 Dec. 31 Closing 31 Closing 31 Closing

POST. REF. J4 J4 J4

DEBIT

CREDIT 103 5 0 0 00

28 5 0 0 00 75 0 0 0 00

ACCOUNT Fees Income

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing

BALANCE DEBIT CREDIT 103 5 0 0 00 75 0 0 0 00 −0−

ACCOUNT NO. 401 POST. REF.

DEBIT

 J4

103 5 0 0 00

CREDIT

BALANCE DEBIT CREDIT 103 5 0 0 00 −0−

Chapter 6 n 145

PROBLEM 6.2A (continued) GENERAL LEDGER ACCOUNT Salaries Expense

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing

ACCOUNT NO. 511 POST. REF.

DEBIT

 J4

CREDIT

15 4 0 0 00

ACCOUNT Utilities Expense

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing

POST. REF.  J4

DEBIT

CREDIT

BALANCE DEBIT CREDIT

2 3 0 0 00

2 3 0 0 00 −0−

ACCOUNT NO. 517

POST. REF. J3 J4

DEBIT

CREDIT

BALANCE DEBIT CREDIT

3 4 0 0 00

3 4 0 0 00 −0−

3 4 0 0 00

ACCOUNT Depreciation Expense—Equipment

DATE DESCRIPTION 2019 Dec. 31 Adjusting 31 Closing

146 n Chapter 6

15 4 0 0 00 −0−

ACCOUNT NO. 514

ACCOUNT Supplies Expense

DATE DESCRIPTION 2019 Dec. 31 Adjusting 31 Closing

BALANCE DEBIT CREDIT

POST. REF.

DEBIT

ACCOUNT NO. 523

CREDIT

BALANCE DEBIT CREDIT

3 4 0 0 00

3 4 0 0 00 −0−

3 4 0 0 00 J3 J4

PROBLEM 6.2A (continued) GENERAL LEDGER ACCOUNT

ACCOUNT NO. 526

Advertising Expense

DATE DESCRIPTION 2019 Dec. 31 Adjusting 31 Closing

POST. REF. J3 J4

BALANCE DEBIT CREDIT

DEBIT

CREDIT

4 0 0 0 00

4 0 0 0 00 4 0 0 0 00 −0−

The King Group Post-closing Trial Balance December 31, 2019 ACCOUNT NAME Cash Accounts Receivable Supplies Prepaid Advertising Equipment Accumulated Depreciation—Equipment Accounts Payable Delva King, Capital Totals

DEBIT 93 4 0 0 00 13 0 0 0 00 4 6 0 0 00 28 0 0 0 00 85 0 0 0 00

CREDIT

3 4 0 0 00 13 0 0 0 00 207 6 0 0 00 224 0 0 0 00 224 0 0 0 00

Analyze: Fifteen accounts are listed in the Adjusted Trial Balance section. Eight accounts are listed on the post-closing trial balance.

Chapter 6 n 147

PROBLEM 6.3A PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 Closing Entries 2 2019 3 Dec. 31 Fees Income 4 Income Summary 5 6 31 Income Summary 7 Advertising Expense 8 Depreciation Expense—Equipment 9 Rent Expense 10 Salaries Expense 11 Utilities Expense 12 13 31 Income Summary 14 Emilio Gonzalez, Capital 15 16 31 Emilio Gonzalez, Capital 17 Emilio Gonzalez, Drawing 18

POST. REF.

DEBIT

401 399

327 2 0 0 00

399 511 514 517 519 523

115 8 4 0 00

399 301

211 3 6 0 00

301 302

16 4 0 0 00

CREDIT

327 2 0 0 00

11 6 0 0 00 2 0 0 0 00 9 2 0 0 00 77 6 0 0 00 15 4 4 0 00

211 3 6 0 00

16 4 0 0 00

GENERAL LEDGER ACCOUNT

ACCOUNT NO.

Emilio Gonzalez, Capital

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing 31 Closing

148 n Chapter 6

POST. REF.  J4 J4

DEBIT

CREDIT

211 3 6 0 00 16 4 0 0 00

301

BALANCE DEBIT CREDIT 131 2 4 0 00 3 342 6 0 0 00 326 2 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

148 n Chapter 6

PROBLEM 6.3A (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing

ACCOUNT

POST. REF.

DEBIT

 J4

CREDIT

J4 J4 J4

DEBIT

CREDIT 327 2 0 0 00

115 8 4 0 00 211 3 6 0 00

POST. REF.

DEBIT

 J4

327 2 0 0 00

CREDIT

399

BALANCE DEBIT CREDIT 327 2 0 0 211 3 6 0 − 0 −

ACCOUNT NO.

Fees Income

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing

BALANCE DEBIT CREDIT

ACCOUNT NO. POST. REF.

302

16 4 0 0 00 16 4 0 0 00 − 0 −

Income Summary

DATE DESCRIPTION 2019 Dec. 31 Closing 31 Closing 31 Closing

ACCOUNT

ACCOUNT NO.

Emilio Gonzalez, Drawing

401

BALANCE DEBIT CREDIT 327 2 0 0 − 0 −

Chapter 6 n 149

302 BALANCE CREDIT

399 BALANCE CREDIT 00 00

401 BALANCE CREDIT 00

Chapter 6 n 149

PROBLEM 6.3A (continued) GENERAL LEDGER ACCOUNT

ACCOUNT NO.

Advertising Expense

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing

POST. REF.

DEBIT

 J4

CREDIT

11 6 0 0 00

ACCOUNT Depreciation Expense—Equipment

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing

POST. REF.  J4

DEBIT

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing

150 n Chapter 6

11 6 0 0 00 − 0 −

BALANCE DEBIT CREDIT

2 0 0 0 00

2 0 0 0 00 − 0 −

ACCOUNT NO.

DEBIT

517

CREDIT

BALANCE DEBIT CREDIT

9 2 0 0 00

9 2 0 0 00 − 0 −

ACCOUNT NO.

POST. REF.  J4

514

CREDIT

ACCOUNT Salaries Expense

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing

BALANCE DEBIT CREDIT

ACCOUNT NO.

ACCOUNT Rent Expense

POST. REF.  J4

511

CREDIT

77 6 0 0 00

519

BALANCE DEBIT CREDIT 77 6 0 0 00 − 0 −

511

E CREDIT

514

E CREDIT

517

E CREDIT

519

E CREDIT

150 n Chapter 6

PROBLEM 6.3A (continued) GENERAL LEDGER ACCOUNT Utilities Expense

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing

ACCOUNT NO. POST. REF.

DEBIT

 J4

CREDIT

15 4 4 0 00

523

BALANCE DEBIT CREDIT 15 4 4 0 00 − 0 −

Analyze: The balance in the Salaries Expense account is $0.

Chapter 6 n 151

523 BALANCE CREDIT

Chapter 6 n 151

PROBLEM 6.4A At Home Pet Grooming Service Worksheet Month Ended December 31, 2019 ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Supplies 4 Prepaid Advertising 5 Equipment 6 Accumulated Depreciation/Equip. 7 Accounts Payable 8 Shara Johns, Capital 9 Shara Johns, Drawing 10 Fees Income 11 Supplies Expense 12 Advertising Expense 13 Depreciation Expense—Equipment 14 Salaries Expense 15 Utilities Expense 16 Totals 17 Net Income 18 19

152 n Chapter 6

TRIAL BALANCE DEBIT CREDIT 64 1 0 0 00 10 9 0 0 00 12 0 0 0 00 8 0 0 0 00 42 0 0 0 00

ADJUSTMENTS DEBIT CREDIT

(a) 4 2 0 0 (b) 3 8 0 0 (c) 1 1 6 0

12 0 0 0 00 91 0 0 0 00 6 0 0 0 00 53 2 0 0 00 (a) 4 2 0 0 00 (b) 3 8 0 0 00 (c) 1 1 6 0 00 11 6 0 0 00 1 6 0 0 00 156 2 0 0 00 156 2 0 0 00

9 1 6 0 00

9 1 6 0

TS CREDIT

00 00 00

152 n Chapter 6

PROBLEM 6.4A (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 64 1 0 0 00 10 9 0 0 00 7 8 0 0 00 4 2 0 0 00 42 0 0 0 00 1 1 6 0 00 12 0 0 0 00 91 0 0 0 00 6 0 0 0 00 53 2 0 0 00 4 2 0 0 00 3 8 0 0 00 1 1 6 0 00 11 6 0 0 00 1 6 0 0 00 157 3 6 0 00 157 3 6 0 00

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT 64 1 0 0 00 10 9 0 0 00 7 8 0 0 00 4 2 0 0 00 42 0 0 0 00 1 1 6 0 12 0 0 0 91 0 0 0 6 0 0 0 00

53 2 0 0 00 4 2 0 0 00 3 8 0 0 00 1 1 6 0 00 11 6 0 0 00 1 6 0 0 00 22 3 6 0 00 30 8 4 0 00 53 2 0 0 00

53 2 0 0 00

135 0 0 0 00

53 2 0 0 00

135 0 0 0 00

104 1 6 0 30 8 4 0 135 0 0 0

Chapter 6 n 153

ALANCE SHEET CREDIT 1 2 3 4 5 00 6 00 7 00 8 9 10 11 12 13 14 15 00 16 00 17 00 18 19

Chapter 6 n 153

PROBLEM 6.4A (continued) PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Adjusting Entries

1 2 2019 (a) 3 Dec. 31 Supplies Expense 4 Supplies 5 6 (b) 7 31 Advertising Expense 8 Prepaid Advertising 9 10 (c) 11 31 Depreciation Expense—Equipment 12 Accumulated Depreciation—Equipment 13

POST. REF.

DEBIT

517 121

4 2 0 0 00

526 131

3 8 0 0 00

523 142

1 1 6 0 00

DESCRIPTION Closing Entries

1 2 2019 3 Dec. 31 Fees Income 4 Income Summary 5 6 31 Income Summary 7 Salaries Expense 8 Utilities Expense 9 Supplies Expense 10 Depreciation Expense—Equipment 11 Advertising Expense 12 13 31 Income Summary 14 Shara Johns, Capital 15 16 31 Shara Johns, Capital 17 Shara Johns, Drawing 18

154 n Chapter 6

CREDIT

4 2 0 0 00

3 8 0 0 00

1 1 6 0 00

PAGE

GENERAL JOURNAL

DATE

POST. REF.

DEBIT

401 399

53 2 0 0 00

399 511 514 517 523 526

22 3 6 0 00

399 301

30 8 4 0 00

301 302

6 0 0 0 00

CREDIT

53 2 0 0 0000

11 6 0 0 00 1 6 0 0 00 4 2 0 0 00 1 1 6 0 00 3 8 0 0 00

30 8 4 0 00

6 0 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

154 n Chapter 6

PROBLEM 6.4A (continued) GENERAL LEDGER ACCOUNT Supplies

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Adjusting

ACCOUNT NO. POST. REF.

DEBIT

 J3

CREDIT

ACCOUNT NO. POST. REF.

DEBIT

 J3

CREDIT

3 8 0 0 00

ACCOUNT Accumulated Depreciation—Equipment

DATE DESCRIPTION 2019 Dec. 31 Adjusting

POST. REF.

DEBIT

CREDIT 1 1 6 0 00

8 0 0 0 00 4 2 0 0 00

 J4 J4

DEBIT

CREDIT

30 8 4 0 00 6 0 0 0 00

142

BALANCE DEBIT CREDIT 1 1 6 0 00

ACCOUNT NO.

POST. REF.

131

BALANCE DEBIT CREDIT

ACCOUNT NO.

ACCOUNT Shara Johns, Capital

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing 31 Closing

BALANCE DEBIT CREDIT

12 0 0 0 00 4 2 0 0 00 7 8 0 0 00

ACCOUNT Prepaid Advertising

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Adjusting

121

301

BALANCE DEBIT CREDIT 91 0 0 0 00 121 8 4 0 00 115 8 4 0 00

Chapter 6 n 155

PROBLEM 6.4A (continued) GENERAL LEDGER ACCOUNT Shara Johns, Drawing

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing

ACCOUNT NO.

POST. REF.

DEBIT

 J4

CREDIT

BALANCE DEBIT CREDIT

6 0 0 0 00

6 0 0 0 00 − 0 −

ACCOUNT Income Summary

DATE DESCRIPTION 2019 Dec. 31 Closing 31 Closing 31 Closing

ACCOUNT NO. POST. REF. J4 J4 J4

DEBIT

CREDIT

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing

ACCOUNT NO.

DEBIT

 J4

53 2 0 0 00

CREDIT

156 n Chapter 6

BALANCE DEBIT CREDIT

ACCOUNT NO. POST. REF.  J4

DEBIT

401

53 2 0 0 − 0 −

ACCOUNT Salaries Expense

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing

53 2 0 0 30 8 4 0 − 0 −

22 3 6 0 00 30 8 4 0 00

ACCOUNT Fees Income

399

BALANCE DEBIT CREDIT

53 2 0 0 00

POST. REF.

302

CREDIT

11 1 6 0 00

511

BALANCE DEBIT CREDIT 11 1 6 0 00 − 0 −

If this link does not work with a click, then copy the complete Download link and paste link in internet explorer/ﬁrefox/google chrome and get all ﬁles download successfully.

302

E CREDIT

399

E CREDIT 00 00

401

E CREDIT 00

511

E CREDIT

156 n Chapter 6

PROBLEM 6.4A (continued) GENERAL LEDGER ACCOUNT Utilities Expense

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing

ACCOUNT NO. POST. REF.

DEBIT

 J4

CREDIT

BALANCE DEBIT CREDIT

1 6 0 0 00

1 6 0 0 00 − 0 −

ACCOUNT Supplies Expense

DATE DESCRIPTION 2019 Dec. 31 Adjusting 31 Closing

ACCOUNT NO. POST. REF. J3 J4

DEBIT

DATE DESCRIPTION 2019 Dec. 31 Adjusting 31 Closing

BALANCE DEBIT CREDIT

4 2 0 0 00

4 2 0 0 00 − 0 −

4 2 0 0 00

J3 J4

DEBIT

ACCOUNT NO.

DATE DESCRIPTION 2019 Dec. 31 Adjusting 31 Closing

CREDIT

1 1 6 0 00

1 1 6 0 00 − 0 −

1 1 6 0 00

ACCOUNT NO.

J3 J4

DEBIT

523

BALANCE DEBIT CREDIT

ACCOUNT Advertising Expense POST. REF.

517

CREDIT

ACCOUNT Depreciation Expense—Equipment POST. REF.

514

526

CREDIT

BALANCE DEBIT CREDIT

3 8 0 0 00

3 8 0 0 00 − 0 −

3 8 0 0 00

Chapter 6 n 157

514 BALANCE CREDIT

517 BALANCE CREDIT

523 BALANCE CREDIT

526 BALANCE CREDIT

Chapter 6 n 157

PROBLEM 6.4A (continued) At Home Pet Grooming Service Postclosing Trial Balance December 31, 2019 ACCOUNT NAME Cash Accounts Receivable Supplies Prepaid Advertising Equipment Accumulated Depreciation—Equipment Accounts Payable Clifton Davis, Capital Totals

DEBIT 64 1 0 0 00 10 9 0 0 00 7 8 0 0 00 4 2 0 0 00 42 0 0 0 00

CREDIT

1 1 6 0 00 12 0 0 0 00 115 8 4 0 00 129 0 0 0 00 129 0 0 0 00

Analyze: Total debits of 112,400 were posted to the general ledger to complete the closing entries. PROBLEM 6.1B PAGE

GENERAL JOURNAL

DATE 1 2 3 4 5 6 7 8 9 10 11

2019 Jan.

DESCRIPTION Adjusting Entries

(a) 31 Supplies Expense Supplies (b) 31 Insurance Expense Prepaid Insurance (c) 31 Depreciation Expense—Machinery Accumulated Depreciation—Machinery

158 n Chapter 6

POST. REF.

DEBIT

523 121

8 5 8 0 00

514 134

4 4 4 0 00

511 142

3 3 6 0 00

CREDIT

8 5 8 0 00

4 4 4 0 00

3 3 6 0 00

1 2 3 4 5 6 7 8 9 10 11

158 n Chapter 6

PROBLEM 6.1B PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Closing Entries

1 2 2019 3 Jan. 31 Fees Income 4 Income Summary 5 6 31 Income Summary 7 Depreciation Expense—Machinery 8 Insurance Expense 9 Rent Expense 10 Salaries Expense 11 Supplies Expense 12 Telephone Expense 13 Utilities Expense 14 15 31 Income Summary 16 Erica Williams, Capital 17 18 31 Erica Williams, Capital 19 Erica Williams, Drawing 20

POST. REF.

DEBIT

401 309

98 4 0 0 00

309 511 514 517 520 523 526 529

75 9 3 0 00

309 301

22 4 7 0 00

301 302

7 2 0 0 00

CREDIT

98 4 0 0 00

3 3 6 0 00 4 4 4 0 00 9 0 0 0 00 48 0 0 0 00 8 5 8 0 00 6 3 0 00 1 9 2 0 00

22 4 7 0 00

7 2 0 0 00

Analyze: The adjusting entry for expired insurance created a debit to Insurance Expense, increasing the Insurance Expense account balance to $4,440.

Chapter 6 n 159

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Chapter 6 n 159

PROBLEM 6.2B PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Adjusting Entries

1 2 2019 (a) 3 Dec. 31 Supplies Expense 4 Supplies 5 (b) 6 31 Advertising Expense 7 Prepaid Advertising 8 (c) 9 31 Depreciation Expense—Equipment 10 Accumulated Depreciation—Equipment 11

POST. REF.

DEBIT

517 121

3 0 0 0 00

526 131

1 2 0 0 00

523 142

1 5 0 0 00

DATE DESCRIPTION 1 Closing Entries 2 2019 3 Dec. 31 Fees Income 4 Income Summary 5 6 31 Income Summary 7 Salaries Expense 8 Utilities Expense 9 Supplies Expense 10 Depreciation Expense—Equipment 11 Advertising Expense 12 13 31 Income Summary 14 Scott Jeremy, Capital 15 16 31 Scott Jeremy, Capital 17 Scott Jeremy, Drawing 18

160 n Chapter 6

CREDIT 1 2 3 3 0 0 0 00 4 5 6 1 2 0 0 00 7 8 9 1 5 0 0 00 10 11

PAGE

GENERAL JOURNAL POST. REF.

DEBIT

401 309

46 8 0 0 00

309 511 514 517 523 526

21 9 0 0 00

309 301

24 9 0 0 00

301 302

8 4 0 0 00

CREDIT 1 2 3 46 8 0 0 00 0 4 5 6 14 4 0 0 000 7 1 8 0 0 000 8 3 0 0 0 000 9 1 5 0 0 00 0 10 1 2 0 0 000 11 12 13 24 9 0 0 00 0 14 15 16 8 4 0 0 00 0 17 18

PROBLEM 6.2B (continued) GENERAL LEDGER ACCOUNT Supplies

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Adjusting

ACCOUNT NO. POST. REF.

DEBIT

 J3

CREDIT

BALANCE DEBIT CREDIT

3 0 0 0 00

6 0 0 0 00 3 0 0 0 00

ACCOUNT Prepaid Advertising

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Adjusting

ACCOUNT NO. POST. REF.

DEBIT

 J3

DATE DESCRIPTION 2019 Dec. 31 Adjusting

DEBIT

BALANCE DEBIT CREDIT

1 2 0 0 00

9 0 0 0 00 7 8 0 0 00

ACCOUNT NO.

CREDIT

1 5 0 0

ACCOUNT NO.

POST. REF.  J4 J4

DEBIT

CREDIT

24 9 0 0 00 8 4 0 0 00

142

BALANCE DEBIT CREDIT

1 5 0 0 00

ACCOUNT Scott Jeremy, Capital

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing 31 Closing

131

CREDIT

ACCOUNT Accumulated Depreciation—Equipment POST. REF.

121

301

BALANCE DEBIT CREDIT 82 2 0 0 107 1 0 0 98 7 0 0

Chapter 6 n 161

121 BALANCE CREDIT

131 BALANCE CREDIT

142 BALANCE CREDIT 00

301 BALANCE CREDIT 00 00 00

Chapter 6 n 161

PROBLEM 6.2B (continued) GENERAL LEDGER ACCOUNT Scott Jeremy, Drawing

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing

ACCOUNT NO.

POST. REF.

DEBIT

 J4

CREDIT

BALANCE DEBIT CREDIT

8 4 0 0 00

8 4 0 0 00 − 0 −

ACCOUNT Income Summary

DATE DESCRIPTION 2019 Dec. 31 Closing 31 Closing 31 Closing

ACCOUNT NO. POST. REF. J4 J4 J4

DEBIT

CREDIT

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing

162 n Chapter 6

46 8 0 0 24 9 0 0 − 0 −

21 9 0 0 00 24 9 0 0 00

ACCOUNT Fees Income

ACCOUNT NO.

DEBIT

 J4

46 8 0 0 00

CREDIT

309

BALANCE DEBIT CREDIT

46 8 0 0 00

POST. REF.

302

401

BALANCE DEBIT CREDIT 46 8 0 0 − 0 −

302

E CREDIT

309

E CREDIT 00 00

401

E CREDIT 00

162 n Chapter 6

PROBLEM 6.2B (continued) GENERAL LEDGER ACCOUNT Salaries Expense

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing

ACCOUNT NO. POST. REF.

DEBIT

 J4

CREDIT

14 4 0 0 00

ACCOUNT Utilities Expense

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing

DEBIT

 J4

1 8 0 0 00

1 8 0 0 00 − 0 −

ACCOUNT NO. POST. REF. J3 J4

DEBIT

POST. REF. J3 J4

517

CREDIT

BALANCE DEBIT CREDIT

3 0 0 0 00

3 0 0 0 00 − 0 −

3 0 0 0 00

DEBIT

514

BALANCE DEBIT CREDIT

ACCOUNT Depreciation Expense—Equipment

DATE DESCRIPTION 2019 Dec. 31 Adjusting 31 Closing

14 4 0 0 00 − 0 −

CREDIT

ACCOUNT Supplies Expense

DATE DESCRIPTION 2019 Dec. 31 Adjusting 31 Closing

BALANCE DEBIT CREDIT

ACCOUNT NO. POST. REF.

511

ACCOUNT NO.

523

CREDIT

BALANCE DEBIT CREDIT

1 5 0 0 00

1 5 0 0 00 − 0 −

1 5 0 0 00

Chapter 6 n 163

511 BALANCE CREDIT

514 BALANCE CREDIT

517 BALANCE CREDIT

523 BALANCE CREDIT

Chapter 6 n 163

PROBLEM 6.2B (continued) GENERAL LEDGER ACCOUNT

ACCOUNT NO.

Advertising Expense

DATE DESCRIPTION 2019 Dec. 31 Adjusting 31 Closing

POST. REF. J3 J4

526

BALANCE DEBIT CREDIT

DEBIT

CREDIT

1 2 0 0 00

1 2 0 0 00 1 2 0 0 00 − 0 −

Cedar Valley Nursery and Landscape Post-closing Trial Balance December 31, 2019 ACCOUNT NAME Cash Accounts Receivable Supplies Prepaid Advertising Equipment Accumulated Depreciation—Equipment Accounts Payable Scott Jeremy, Capital Totals

DEBIT 32 4 0 0 00 6 0 0 0 00 3 0 0 0 00 7 8 0 0 00 60 0 0 0 00

CREDIT

1 5 0 0 00 9 0 0 0 00 98 7 0 0 00 109 2 0 0 00 109 2 0 0 00

Analyze: Total credits of $102,000 were posted to the general ledger to complete the closing entries

164 n Chapter 6

PROBLEM 6.3B PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2019 2 Dec. 31 Fees Income 3 Income Summary 5 6 31 Income Summary 7 Advertising Expense 8 Depreciation Expense—Equipment 9 RentRent Expense Expense 10 Salaries Salaries Expense Expense 11 Utilities Utilities Expense Expense 12 13 31 Income Summary 14 Thomas Dexter, Capital 15 16 31 Thomas Dexter, Capital 17 Thomas Dexter, Drawing 18

POST. REF.

DEBIT

CREDIT

401 0 81 0 0 0 00 399

81 0 0 0 00

399 4 31 0 5 0 00 511 514 517 519 523

4 9 5 0 00 1 3 5 0 00 3 1 5 0 00 16 2 0 0 00 5 4 0 0 00

399 6 49 9 5 0 00 301

49 9 5 0 00

301 2 302

5 4 0 0 00

1 2 3 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Chapter 6 n 165

PROBLEM 6.3B (continued) GENERAL LEDGER ACCOUNT Thomas Dexter, Capital

DATE

DESCRIPTION

ACCOUNT NO.

POST. REF. DEBIT

BALANCE CREDIT DEBIT

2019 Dec.

1 Balance 31 Closing 31 Closing

166 n Chapter 6

 J4 J4

49 9 5 0 00 5 4 0 0 00

CREDIT 86 1 7 5 136 1 2 5 130 7 2 5

00 00 00

166 n Chapter 6

PROBLEM 6.3B (continued) GENERAL LEDGER ACCOUNT Thomas Dexter, Drawing

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing

POST. REF.

ACCOUNT NO.

DEBIT

 J4

CREDIT

5 4 0 0 00

ACCOUNT Income Summary

DATE DESCRIPTION 2019 Dec. 31 Closing 31 Closing 31 Closing

J4 J4 J4

DEBIT

CREDIT

5 4 0 0 00 − 0 −

81 0 0 0 49 9 5 0 − 0 −

31 0 5 0 00 49 9 5 0 00

ACCOUNT NO. POST. REF.

DEBIT

 J4

81 0 0 0 00

CREDIT

399

BALANCE DEBIT CREDIT

81 0 0 0 00

ACCOUNT Fees Income

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing

BALANCE DEBIT CREDIT

ACCOUNT NO. POST. REF.

302

401

BALANCE DEBIT CREDIT 81 0 0 0 − 0 −

Chapter 6 n 167

302 BALANCE CREDIT

399 BALANCE CREDIT 00 00

401 BALANCE CREDIT 00

Chapter 6 n 167

PROBLEM 6.3B (continued) GENERAL LEDGER ACCOUNT Advertising Expense

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing

ACCOUNT NO.

POST. REF.

DEBIT

 J4

CREDIT

BALANCE DEBIT CREDIT

4 9 5 0 00

4 9 5 0 00 − 0 −

ACCOUNT Depreciation Expense—Equipment

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing

POST. REF.

DEBIT

 J4

ACCOUNT NO.

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing

BALANCE DEBIT CREDIT

1 3 5 0 00

1 3 5 0 00 − 0 −

ACCOUNT NO.

DEBIT

 J4

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing

CREDIT

3 1 5 0 00

3 1 5 0 00 − 0 −

168 n Chapter 6

ACCOUNT NO.

 J4

DEBIT

517

BALANCE DEBIT CREDIT

ACCOUNT Salaries Expense POST. REF.

514

CREDIT

ACCOUNT Rent Expense POST. REF.

511

CREDIT

16 2 0 0 00

519

BALANCE DEBIT CREDIT 16 2 0 0 00 − 0 −

511

E CREDIT

514

E CREDIT

517

E CREDIT

519

E CREDIT

168 n Chapter 6

PROBLEM 6.3B (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2019 Dec. 31 Balance 31 Closing

Analyze:

ACCOUNT NO.

Utilities Expense POST. REF.  J4

DEBIT

523

CREDIT

BALANCE DEBIT CREDIT

5 4 0 0 00

5 4 0 0 00 − 0 −

Fees Income, Income Summary, Thomas Dexter—Capital, Thomas Dexter—Drawing, Advertising, Depreciation, Rent, Salaries, and Utilities Expense.

Chapter 6 n 169

BALANCE CREDIT

Chapter 6 n 169

PROBLEM 6.4B Roy Anderson, CPA Worksheet Month Ended June 30, 2019

ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Supplies 4 Computers 5 Accumulated Depreciation—Computers 6 Accounts Payable 7 Roy Anderson, Capital 8 Roy Anderson, Drawing 9 Fees Income 10 Salaries Expense 11 Supplies Expense 12 Depreciation Expense—Computers 13 Travel Expense 14 Utilities Expense 15 Totals 16 Net Income 17 18

170 n Chapter 6

TRIAL BALANCE DEBIT CREDIT 31 9 5 0 00 11 3 4 0 00 15 7 5 0 00 28 8 0 0 00 2 8 8 0 00 12 6 0 0 00 62 2 3 5 00 12 0 0 0 00 67 9 5 0 00 37 7 2 5 00

ADJUSTMENTS DEBIT CREDIT

(a) 2 7 0 0 (b)

2 4 0

(a) 2 7 0 0 00 (b) 2 4 0 00 5 4 0 0 00 2 7 0 0 00 145 6 6 0 00 145 6 6 5 00

2 9 4 0 00

2 9 4 0

NTS CREDIT

00 00

170 n Chapter 6

PROBLEM 6.4B (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 31 9 5 0 00 11 3 4 0 00 13 0 5 0 00 28 8 0 0 00 3 1 2 0 00 12 6 0 0 00 62 2 3 5 00 12 0 0 0 00 67 9 5 0 00 37 7 2 5 00 2 7 0 0 00 2 4 0 00 5 4 0 0 00 2 7 0 0 00 145 9 0 5 00 145 9 0 5 00

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT 31 9 5 0 00 11 3 4 0 00 13 0 5 0 00 28 8 0 0 00 3 1 2 0 12 6 0 0 62 2 3 5 12 0 0 0 00

67 9 5 0 00 37 7 2 5 00 2 7 0 0 00 2 4 0 00 5 4 0 0 00 2 7 0 0 00 48 7 6 5 00 19 1 8 5 00 67 9 5 0 00

67 9 5 0 00

97 1 4 0 00

67 9 5 0 00

97 1 4 0 00

77 9 5 5 19 1 8 5 97 1 4 0

Chapter 6 n 171

ALANCE SHEET CREDIT

00 00 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Chapter 6 n 171

PROBLEM 6.4B (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 Adjusting Entries 2 2019 3 Jun. 30 Supplies Expense 4 Supplies 5 6 30 Depreciation Expense—Computers 7 Accumulated Depreciation—Computers 8 9 10 11 12 13

POST. REF.

DEBIT

517 121

2 7 0 0 00

523 142

2 4 0 00

DATE DESCRIPTION 1 Closing Entries 2 2019 3 Jun. 30 Fees Income 4 Income Summary 5 6 30 Income Summary 7 Salaries Expense 8 Supplies Expense 9 Depreciation Expense—Computers 10 Travel Expense 11 Utilities Expense 12 13 30 Income Summary 14 Roy Anderson, Wilson, Capital 15 16 30 Roy Anderson, Capital 17 Roy Anderson, Drawing 18

172 n Chapter 6

CREDIT

2 7 0 0 00

2 4 0 00

PAGE

GENERAL JOURNAL POST. REF.

DEBIT

401 309

67 9 5 0 00

309 511 517 523 519 514

48 7 6 5 00

309 301

19 1 8 5 00

301 302

12 0 0 0 00

CREDIT

67 9 5 0 0000

37 7 2 5 00 2 7 0 0 00 2 4 0 00 5 4 0 0 00 2 7 5 0 00

19 1 8 5 00

12 0 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

172 n Chapter 6

PROBLEM 6.4B (continued) GENERAL LEDGER ACCOUNT

Supplies

ACCOUNT NO.

POST. DESCRIPTION REF.

BALANCE DEBIT CREDIT

DATE 2019 Jun. 30 Balance 30 Adjusting

ACCOUNT

 J3

CREDIT

15 7 5 0 00 2 7 0 0 00 13 0 5 0 00

ACCOUNT NO.

Computers

POST. DESCRIPTION REF.

DATE 2019 Jun. 30 Balance

ACCOUNT

DEBIT

CREDIT



POST. REF.  J3

131

BALANCE DEBIT CREDIT 28 8 0 0 00

Accumulated Depreciation—Computers

DATE DESCRIPTION 2019 Jun. 30 Balance 30 Adjusting

121

DEBIT

ACCOUNT NO.

CREDIT

2 4 0 00

142

BALANCE DEBIT CREDIT 2 8 8 0 00 6 3 1 2 0 00

Chapter 6 n 173

PROBLEM 6.4B (continued) ACCOUNT

ACCOUNT NO.

Roy Anderson, Capital

DATE DESCRIPTION 2019 Jun. 30 Balance 30 Closing 30 Closing

POST. REF.  J4 J4

DEBIT

CREDIT

301

BALANCE DEBIT CREDIT 62 2 3 5 81 4 2 0 69 4 2 0

19 1 8 5 00 12 0 0 0 00

GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2019 Jun. 30 Balance 30 Closing

ACCOUNT

ACCOUNT NO.

Roy Anderson, Drawing POST. REF.

DEBIT

 J4

CREDIT

12 0 0 0 00

DATE DESCRIPTION 2019 Jun. 30 Closing 30 Closing 30 Closing

174 n Chapter 6

BALANCE DEBIT CREDIT 12 0 0 0 00 − 0 −

ACCOUNT NO.

Income Summary POST. REF.

DEBIT

J4 J4 J4

48 7 6 5 00 19 1 8 5 00

CREDIT 67 9 5 0 00

302

309

BALANCE DEBIT CREDIT 67 9 5 0 19 1 8 5 − 0 −

301

E CREDIT 00 00 00

302

E CREDIT

309

E CREDIT 00 00

174 n Chapter 6

PROBLEM 6.4B (continued) ACCOUNT Fees Income

DATE DESCRIPTION 2019 Jun. 30 Balance 30 Closing

ACCOUNT NO. POST. REF.  J4

DEBIT

CREDIT

BALANCE DEBIT CREDIT 67 9 5 0 − 0 −

67 9 5 0 00

ACCOUNT Salaries Expense

DATE DESCRIPTION 2019 Jun. 30 Balance 30 Closing

ACCOUNT NO. POST. REF.

DEBIT

 J4

401

CREDIT

37 7 2 5 00

511

BALANCE DEBIT CREDIT 37 7 2 5 00 − 0 −

GENERAL LEDGER ACCOUNT Utilities Expense

DATE DESCRIPTION 2019 Jun. 30 Balance 30 Closing

ACCOUNT NO. POST. REF.  J4

DEBIT

514

CREDIT

BALANCE DEBIT CREDIT

2 7 0 0 00

2 7 0 0 00 − 0 −

Chapter 6 n 175

401 BALANCE CREDIT 00

511 BALANCE CREDIT

514 BALANCE CREDIT

Chapter 6 n 175

PROBLEM 6.4B (continued) ACCOUNT Supplies Expense

DATE 2010 2019 Jun.

DESCRIPTION 30 Adjusting 30 Closing

ACCOUNT NO. POST. REF. J3 J4

DEBIT

CREDIT

BALANCE DEBIT CREDIT

2 7 0 0 00

2 7 0 0 00 − 0 −

2 7 0 0 00

ACCOUNT Travel Expense

DATE DESCRIPTION 2010 2019 Jun. 30 Balance 30 Closing

ACCOUNT NO. POST. REF.

DEBIT

 J4

Jun.

DESCRIPTION 30 Adjusting 30 Closing

176 n Chapter 6

POST. REF. J3 J4

DEBIT

519

CREDIT

BALANCE DEBIT CREDIT

5 4 0 0 00

5 4 0 0 00 − 0 −

ACCOUNT Depreciation Expense—Computers

DATE 2010 2019

517

ACCOUNT NO.

CREDIT

2 4 0 00 2 4 0 00

523

BALANCE DEBIT CREDIT 2 4 0 00 − 0 −

517

E CREDIT

519

E CREDIT

523

E CREDIT

176 n Chapter 6

PROBLEM 6.4B (continued) Roy Anderson, CPA Postclosing Trial Balance June 30, 2019 ACCOUNT NAME Cash Accounts Receivable Supplies Computers Accumulated Depreciation—Computers Accounts Payable Roy Anderson, Capital Totals

Analyze:

DEBIT 31 9 5 0 00 11 3 4 0 00 13 0 5 0 00 28 8 0 0 00

85 1 4 0 00

CREDIT

3 1 2 0 00 12 6 0 0 00 69 4 2 0 00 85 1 4 0 00

Net Income for Roy Anderson, CPA for the month of June 2019 was $19,185.

Chapter 6 n 177

CRITICAL THINKING PROBLEM 6.1 Contemporary Fashions Worksheet Month Ended December 31, 2019 ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Supplies 4 Prepaid Insurance 5 Machinery 6 Accumulated Depreciation—Machinery 7 Accounts Payable 8 Helen Kennedy, Capital 9 Helen Kennedy, Drawing 10 Fees Income 11 Supplies Expense 12 Insurance Expense 13 Salaries Expense 14 Depreciation Expense—Machinery 15 Utilities Expense 16 Totals 17 Net Income 18 19

178 n Chapter 6

TRIAL BALANCE DEBIT CREDIT 40 8 0 0 00 9 0 0 0 00 7 2 0 0 00 10 8 0 0 00 84 0 0 0 00

ADJUSTMENTS DEBIT CREDIT

(a) 3 (b) 2

6 0 0 4 0 0

(c ) 1

2 0 0

13 5 0 0 00 74 5 8 0 00 6 0 0 0 00 82 5 0 0 00 (a) 3 6 0 0 00 (b) 2 4 0 0 00 11 1 0 0 00 (c ) 1 2 0 0 00 1 6 8 0 00 170 5 8 0 00 170 5 8 0 00

7 2 0 0 00 00

7 2 0 0

ions

r 31, 2019

TS CREDIT

00 00 00

178 n Chapter 6

CRITICAL THINKING PROBLEM 6.1 (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 40 8 0 0 00 9 0 0 0 00 3 6 0 0 00 8 4 0 0 00 84 0 0 0 00 1 2 0 0 00 13 5 0 0 00 74 5 8 0 00 6 0 0 0 00 82 5 0 0 00 3 6 0 0 00 2 4 0 0 00 11 1 0 0 00 1 2 0 0 00 1 6 8 0 00 171 7 8 0 00 171 7 8 0 00

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT 40 8 0 0 00 9 0 0 0 00 3 6 0 0 00 8 4 0 0 00 84 0 0 0 00 1 2 0 0 00 13 5 0 0 00 74 5 8 0 00 6 0 0 0 00

82 5 0 0 00 3 6 0 0 00 2 4 0 0 00 11 1 0 0 00 1 2 0 0 00 1 6 8 0 00 19 9 8 0 00 62 5 2 0 00 82 5 0 0 00

82 5 0 0 00 82 5 0 0 00

151 8 0 0 00

89 2 8 0 00 62 5 2 0 00 151 8 0 0 00 151 8 0 0 00

Chapter 6 n 179

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Chapter 6 n 179

CRITICAL THINKING PROBLEM 6.1 (continued) Contemporary Fashions Income Statement Month Ended December 31, 2019 Revenue Fees Income Expenses Supplies Expense Insurance Expense Salaries Expense Depreciation Expense—Machinery Utilities Expense Total Expenses Net Income

82 5 0 0 00 3 6 0 0 00 2 4 0 0 000 11 1 0 0 00 1 2 0 0 00 1 6 8 0 00 19 9 8 0 00 # 62 5 2 0 00

Contemporary Fashions Statement of Owner's Equity Month Ended December 31, 2019 Helen Kennedy, Capital, December 1, 2019 Net income for December Less Withdrawals for December Increase in Capital Helen Kennedy, Capital, December 1, 2019

180 n Chapter 6

74 5 8 0 00 62 5 2 0 00 6 0 0 0 00 56 5 2 0 00 131 1 0 0 00

0 0

180 n Chapter 6

CRITICAL THINKING PROBLEM 6.1 (continued) Contemporary Fashions Balance Sheet December 31, 2019 Assets Cash Accounts Receivable Supplies Prepaid Insurance Machinery Accumulated Depreciation—Machinery Total Assets

40 8 9 0 3 6 8 4 84 0 1 2

Liabilities and Owner's Equity Liabilities Accounts Payable Owner's Equity Helen Kennedy, Capital Total Liabilities and Owner's Equity

0 0 00 0 0 00

0 0 00 0 0 00 0 0 00 0 0 00

82 8 0 0 00 144 6 0 0 00

13 5 0 0 00 131 1 0 0 00 144 6 0 0 00

Chapter 6 n 181

CRITICAL THINKING PROBLEM 6.1 (continued) PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Adjusting Entries

POST. REF.

1 2 2019 3 Dec. 31 Supplies Expense 4 Supplies 5 6 31 Insurance Expense 7 Prepaid Insurance 8 9 31 Depreciation Expense—Machinery 10 Accumulated Depreciation—Machinery 11

DEBIT

3 6 0 0 00

2 4 0 0 00

1 2 0 0 00

DATE DESCRIPTION 1 Closing Entries 2 2019 3 Dec. 31 Fees Income 4 Income Summary 5 6 31 Income Summary 7 Supplies Expense 8 Insurance Expense 9 Salaries Expense 10 Depreciation Expense—Machinery 11 Utilities Expense 12 13 31 Income Summary 14 Helen Kennedy, Capital 15 16 31 Helen Kennedy, Capital 17 Helen Kennedy, Drawing 18

182 n Chapter 6

CREDIT 1 2 3 3 6 0 0 00 4 5 6 2 4 0 0 00 7 8 9 1 2 0 0 00 10 11

PAGE

GENERAL JOURNAL POST. REF.

DEBIT

82 5 0 0 00

19 9 8 0 00

62 5 2 0 00

6 0 0 0 00

CREDIT 1 2 3 82 5 0 0 0000 4 5 6 3 6 0 0 00 7 2 4 0 0 00 8 11 1 0 0 00 9 1 2 0 0 00 10 1 6 8 0 00 11 12 13 62 5 2 0 00 14 15 16 6 0 0 0 00 17 18

CRITICAL THINKING PROBLEM 6.1 (continued) Contemporary Fashions Post-closing Trial Balance December 31, 2019 ACCOUNT NAME Cash Accounts Receivable Supplies Prepaid Insurance Machinery Accumulated Depreciation—Machinery Accounts Payable Helen Kennedy, Capital Totals

Analyze:

DEBIT 40 8 0 0 00 9 0 0 0 00 3 6 0 0 00 8 4 0 0 00 84 0 0 0 00

CREDIT

1 2 0 0 00 13 5 0 0 00 131 1 0 0 00 145 8 0 0 00 145 8 0 0 00

The net income would be $67,320.

CRITICAL THINKING PROBLEM 6.2 1. Davis made the following errors preparing the closing entries: a. Accumulated Depreciation and Accounts Payable are permanent accounts that continue from accounting period to accounting period and, consequently, are not closed. b.

The Drawing account is not an expense account to be closed to Income Summary but is a reduction of equity and is closed directly to the Capital account.

Demetria Davis closed accounts based on what kind of balance they had (debit/credit) rather than looking at the type of account (permanent/temporary) they were. Only temporary, or nominal, accounts are closed.

1 2 3 4 5 6

PAGE

GENERAL JOURNAL

DATE DESCRIPTION 2019 Dec. 31 Thomas Richey, Capital Accumulated Depreciation Accounts Payable To correct errors made in closing entries

POST. REF.

DEBIT 41 5 0 0 00

CREDIT 1 2 8 5 0 0 00 3 33 0 0 0 00 4 5 6

Chapter 6 n 183

CRITICAL THINKING PROBLEM 6.2 (continued) 3. The proof of this entry is: Fees Income Expenses: Salaries Expense Supplies Expense Depreciation Expense Net Income Withdrawals Increase in Capital Capital, Beginning Capital, Ending

98,000 78,000 5,000 2,400

Capital account balance in general ledger Less debit from correcting entry Corrected ending Capital balance

85,400 12,600 (7,000) 5,600 50,000 55,600 97,100 (41,500) 55,600

Note: It is not necessary to make an entry to correct the closing of the Drawing account to the Income Summary account. Closing the Drawing account to the Income Summary account, which in turn was closed to the Capital account, results in reducing the Capital account by the amount of the withdrawals. So, while incorrect, Davis’s entry with regard to Drawing achieves the correct end result.

The balance of the Capital account after closing entries have been posted must agree with the ending Capital balance as shown. Posting the entry closing the Income Summary account increases the Capital account by the amount of the net income (or decreases it by the amount of a net loss), while posting the entry closing the Drawing account decreases the Capital account. These postings reflect the same changes to Capital that are shown on the statement of owner’s equity and on the balance sheet, and therefore, the ending Capital amount must be the same for both. Note that the errors Davis made in preparing the closing entries would not be revealed by the post-closing trial balance. Since each entry Davis made had equal debits and credits, the post-closing trial balance would be in balance. The errors would not become evident until the next year when postings were made to the Accumulated Depreciation and Accounts Payable accounts or when the ledger account balances were compared to the balance sheet amounts.

184 n Chapter 6

SOLUTIONS TO BUSINESS CONNECTIONS Managerial Focus: 1. No. A thorough analysis of the components of the income statement would reveal how costs directly impact net income. The balance sheet helps determine the amount of the firm’s assets and its liquidity, liabilities, and equity. 2. Current assets compared with current liabilities. 3. Timely preparation of financial statements support future planning, prompt payment of debts, developing effective credit policies. 4. The income statement might help determine the adequacy of profit, how to improve revenue and hold down expenses, how to reduce expenses without decreasing revenue, and how to even out the business operating cycle. Balance sheet data might influence decisions concerning growth of equity, the return on investment, adequacy of the firm’s assets, whether collections on accounts receivable should be accelerated, and whether more capital is needed. Ethical Dilemma: You should wait to verify the invoice is an actual invoice. At the end of the year, Miscellaneous Expense will be closed and the $2,000 expense will be in the previous year and not given the verification it so badly needs. Financial Statement Analysis: 1. Dr. Inc. Summ., $8,277,000; Cr. Labor and Fringe, $3,290,000; Cr. Materials, Supplies, and Other $2,336,000; Cr. Depreciation, $1,208,000; Cr. Fuel, $957,000; Cr. Equipment & Other Rents, $436,,000 2. Dr. Revenue $11,811,000; Cr. Inc. Summ., $11,811,000 Analyze Online: Answers will vary depending on the year. Teamwork: 1) Analyze transactions, 2) journalize the data about transactions, 3) post the data about transactions, 4) prepare a worksheet, 5) prepare financial statements, 6) record adjusting entries, 7) record closing entries, 8) prepare a post-closing trial balance, and 9) interpret the financial information. Internet Connection: 1. Requirements Experience: At least 2 years full-time experience or the part-time or freelance equivalent. 2. Examination: Candidates must pass a 4-part national examination, including 2 parts given at any Prometric Test Center (there are over 300 nationwide). 3. Code of Ethics: Applicants must sign a Code of Ethics.

Chapter 6 n 185

MINI-PRACTICE SET 1 SERVICE BUSINESS ACCOUNTING CYCLE PAGE

GENERAL JOURNAL

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

DATE DESCRIPTION 2020 Jan. 2 Supplies Cash Bought supplies for cash, Check 1015

POST. REF.

DEBIT

121 101

7 0 0 0 00

2 Prepaid Insurance Cash Purchased one year of insurance, Check 1016

134 101

8 4 0 0 00

7 Cash Accounts Receivable Fees Income Performed services for cash and on account

101 111 401

20 0 0 0 00 5 0 0 0 00

12 Cash Accounts Receivable Received cash on account

101 111

4 0 0 0 00

12 Advertising Expense Cash Paid for advertising on radio, Check 1017

526 101

3 6 0 0 00

13 Cash Accounts Receivable Received cash on account

101 111

4 5 0 0 00

14 Cash Supplies Returned damaged supplies for cash refund

101 121

7 5 0 00

15 Cash Accounts Receivable Fees Income Performed services for cash and on account

101 111 401

20 7 0 0 00 2 3 0 0 00

CREDIT

7 0 0 0 00

8 4 0 0 00

25 0 0 0 00

4 0 0 0 00

3 6 0 0 00

4 5 0 0 00

7 5 0 00

23 0 0 0 00

Chapter 6 n 187

ACTICE SET 1 NTING CYCLE 3

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

Chapter 6 n 187

MINI-PRACTICE SET 1 (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2020 2 Jan. 20 Supplies 3 Accounts Payable 4 Bought supplies on account 5 6 20 Cash 7 Accounts Receivable 8 Fees Income 9 Performed services for cash and on account 10 11 20 Cash 12 Accounts Receivable 13 Performed services for cash and on account 14 15 21 Maintenance Expense 16 Cash 17 Paid for maintenance on equipment 18 Check 1018 19 20 22 Advertising Expense 21 Cash 22 Paid cash for newspaper ads, Check 1019 23 24 23 Telephone Expense 25 Cash 26 Paid monthly telephone bill, Check 1020 27 28 26 Cash 29 Accounts Receivable 30 Received cash on account 31 32 27 Accounts Payable 33 Cash 34 Made payment to creditor, Check 1021 35 36 37

188 n Chapter 6

POST. REF.

DEBIT

121 202

5 0 0 0 00

101 111 401

12 5 0 0 00 3 5 0 0 00

101 111

5 6 0 0 00

529 101

7 0 6 5 00

526 101

3 6 0 0 00

532 101

1 0 2 5 00

101 111

1 6 0 0 00

202 101

3 0 0 0 00

CREDIT

5 0 0 0 00

16 0 0 0 00

5 6 0 0 00

7 0 6 5 00

3 6 0 0 00

1 0 2 5 00

1 6 0 0 00

3 0 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37

188 n Chapter 6

MINI-PRACTICE SET 1 (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2020 2 Jan. 28 Utilities Expense 3 Cash 4 Paid monthly utility bill, Check 1022 5 6 29 Cash 7 Accounts Receivable 8 Fees Income 9 Performed services for cash and on account 10 11 31 Salaries Expense 12 Cash 13 Paid monthly salaries, Checks 1023–1027 14 15 31 Trayton Eli, Drawing 16 Cash 17 Owner withdrew cash for personal use, 18 Check 1028 19 20 31 Maintenance Expense 21 Cash 22 Paid for monthly maintenance services, 23 Check 1029 24 25 31 Equipment 26 Cash 27 Accounts Payable 28 Bought equipment for cash and on account, 29 Check 1030 30 31 31 Cash 32 Accounts Receivable 33 Fees Income 34 Performed services for cash and on account 35 36 37

POST. REF.

DEBIT

514 101

2 6 7 5 00

101 111 401

19 0 0 0 00 2 7 5 0 00

511 101

32 8 0 0 00

302 101

12 0 0 0 00

529 101

4 1 5 0 00

141 101 202

15 0 0 0 00

101 111 401

7 6 0 0 00 1 6 2 0 00

CREDIT

2 6 7 5 00

21 7 5 0 00

32 8 0 0 00

12 0 0 0 00

4 1 5 0 00

10 0 0 0 00 5 0 0 0 00

9 2 2 0 00

Chapter 6 n 189

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37

Chapter 6 n 189

MINI-PRACTICE SET 1 (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 Adjusting Entries 2 2020 3 Jan. 31 Supplies Expense 4 Supplies 5 6 31 Insurance Expense 7 Prepaid Insurance 8 9 31 Rent Expense 10 Prepaid Rent 11 12 31 Depreciation Expense—Equipment 13 Accumulated Depreciation—Equipment 14 15 Closing Entries 16 17 31 Fees Income 18 Income Summary 19 20 31 Income Summary 21 Salaries Expense 22 Utilities Expense 23 Supplies Expense 24 Rent Expense 25 Depreciation Expense—Equipment 26 Advertising Expense 27 Maintenance Expense 28 Telephone Expense 29 Insurance Expense 30 31 31 Income Summary 32 Trayton Eli, Capital 33 34 31 Trayton Eli, Capital 35 Trayton Eli, Drawing 36

190 n Chapter 6

POST. REF.

DEBIT

517 121

7 0 5 0 00

535 134

7 0 0 00

520 137

4 0 0 0 00

523 142

1 8 3 00

401 309

94 9 7 0 00

309 511 514 517 520 523 526 529 532 535

66 8 4 8 00

309 301

28 1 2 2 00

301 302

12 0 0 0 00

CREDIT 1 2 3 7 0 5 0 00 4 5 6 7 0 0 00 7 8 9 4 0 0 0 00 10 11 12 1 8 3 00 13 14 15 16 17 94 9 7 0 00 18 19 20 32 8 0 0 00 21 2 6 7 5 00 22 7 0 5 0 00 23 4 0 0 0 00 24 1 8 3 00 25 7 2 0 0 00 26 11 2 1 5 00 27 1 0 2 5 00 28 7 0 0 00 29 30 31 28 1 2 2 00 32 33 34 12 0 0 0 00 35 36

MINI−PRACTICE SET 1 (continued) GENERAL LEDGER ACCOUNT

ACCOUNT NO.

Cash

DATE DESCRIPTION 2020 Jan. 1 Balance 2 2 7 12 12 13 14 15 20 20 21 22 23 26 27 28 29 31 31 31 31 31

POST. REF. ✔ J3 J3 J3 J3 J3 J3 J3 J4 J4 J4 J4 J4 J4 J4 J5 J5 J5 J5 J5 J5 J5 J5

DEBIT

CREDIT

7 0 0 0 00 8 4 0 0 00 20 0 0 0 00 4 0 0 0 00 3 6 0 0 00 4 5 0 0 00 7 5 0 00 20 7 0 0 00 12 5 0 0 00 5 6 0 0 00 7 0 6 5 00 3 6 0 0 00 1 0 2 5 00 1 6 0 0 00 3 0 0 0 00 2 6 7 5 00 19 0 0 0 00 2 32 8 0 0 00 12 0 0 0 00 4 1 5 0 00 10 0 0 0 00 7 6 0 0 00

101

BALANCE DEBIT CREDIT 111 3 5 0 00 104 3 5 0 00 95 9 5 0 00 115 9 5 0 00 119 9 5 0 00 116 3 5 0 00 120 8 5 0 00 121 6 0 0 00 142 3 0 0 00 154 8 0 0 00 160 4 0 0 00 153 3 3 5 00 149 7 3 5 00 148 7 1 0 00 150 3 1 0 00 147 3 1 0 00 144 6 3 5 00 163 6 3 5 00 130 8 3 5 00 118 8 3 5 00 114 6 8 5 00 104 6 8 5 00 112 2 8 5 00

Chapter 6 n 191

MINI−PRACTICE SET 1 (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2020 Jan. 1 Balance 7 12 13 15 20 20 26 29 31

ACCOUNT

ACCOUNT NO.

Accounts Receivable POST. REF. ✔ J3 J3 J3 J4 J4 J4 J4 J5 J5

DEBIT

CREDIT

5 0 0 0 00 4 0 0 0 00 4 5 0 0 00 2 3 0 0 00 3 5 0 0 00 5 6 0 0 00 1 6 0 0 00 2 7 5 0 00 1 6 2 0 00

DATE DESCRIPTION 2020 Jan. 1 Balance 2 14 20 31 Adjusting

192 n Chapter 6

BALANCE DEBIT CREDIT 5 0 10 0 6 0 1 5 3 8 7 3 1 7 1 2 8 4 4

0 0 0 0 0 0 0 0 5 7

0 00 0 00 0 00 0 00 0 00 0 00 0 00 0 00 0 00 0 00

ACCOUNT NO.

Supplies POST. REF. ✔ J3 J3 J4 J6

DEBIT

7 0 0 0 00 5 0 0 0 00

CREDIT

111

121

BALANCE DEBIT CREDIT

1 0 8 0 7 5 0 00 7 2 12 2 7 0 5 0 00 5 2

0 0 5 5 0

0 00 0 00 0 00 0 00 0 00

MINI−PRACTICE SET 1 (continued) GENERAL LEDGER ACCOUNT

ACCOUNT NO.

Accounts Payable

POST. DATE DESCRIPTION REF. 2020 Jan. 1 Balance ✔ 20 J4 27 J5 31 J5

ACCOUNT

DEBIT

CREDIT

5 0 0 0 00

ACCOUNT NO.

POST. DESCRIPTION REF.

194 n Chapter 6

J5 J6

DEBIT

CREDIT

12 0 0 0 00 12 0 0 0 00

301

BALANCE DEBIT CREDIT 128 6 6 7 00 163 2 6 4 00 148 2 6 4 00

ACCOUNT NO.

Trayton Eli, Drawing

DATE 2020 Jan. 31 31 Closing

3 5 0 0 00 8 5 0 0 00 5 5 0 0 00 10 5 0 0 00

5 0 0 0 00

POST. DATE DESCRIPTION REF. DEBIT CREDIT 2020 Jan. 1 Balance ✔ 31 Closing J6 34 5 9 7 00 31 Closing J6 15 0 0 0 00

ACCOUNT

BALANCE DEBIT CREDIT

3 0 0 0 00

Trayton Eli, Capital

202

302

BALANCE DEBIT CREDIT 12 0 0 0 00 − 0 −

MINI−PRACTICE SET 1 (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2020 Jan. 2 31 Adjusting

ACCOUNT

POST. REF. J3 J6

CREDIT

8 4 0 0 00 7 0 0 00

POST. REF.

DEBIT

✔ J6

CREDIT

4 0 0 0 00

DATE 2020 Jan. 1 Balance 31

✔ J5

DEBIT

CREDIT

POST. DESCRIPTION REF. ✔ J6

DEBIT

137

BALANCE DEBIT CREDIT 4 0 0 0 00 − 0−

141

BALANCE DEBIT CREDIT 11 0 0 0 00 26 0 0 0 00

15 0 0 0 00

Accumulated Depreciation—Equipment

DATE 2020 Jan. 1 Balance 31 Adjusting

8 4 0 0 00 7 7 0 0 00

ACCOUNT NO.

Equipment

134

BALANCE DEBIT CREDIT

ACCOUNT NO.

POST. DESCRIPTION REF.

ACCOUNT

DEBIT

Prepaid Rent

DATE DESCRIPTION 2020 Jan. 1 Balance 31 Adjusting

ACCOUNT

ACCOUNT NO.

Prepaid Insurance

ACCOUNT NO.

CREDIT

1 8 3 00

142

BALANCE DEBIT CREDIT 1 8 3 00 3 6 6 00

Chapter 6 n 193

MINI−PRACTICE SET 1 (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2020 Jan. 31 Closing 31 Closing 31 Closing

ACCOUNT

ACCOUNT NO.

Income Summary POST. REF. J6 J6 J6

CREDIT

DATE 2020 Jan. 7 15 20 29 31 31 Closing

94 9 7 0 00 28 1 2 2 00 − 0 −

66 8 4 8 00 28 1 2 2 00

ACCOUNT NO.

J3 J4 J4 J5 J5 J6

DEBIT

CREDIT

25 0 0 0 00 48 0 0 0 00 64 0 0 0 00 85 7 5 0 00 94 9 7 0 00 − 0 −

94 9 7 0 00

ACCOUNT NO.

POST. DESCRIPTION REF. J5 J6

DEBIT

CREDIT

32 8 0 0 00 32 8 0 0 00

401

BALANCE DEBIT CREDIT

25 0 0 0 00 23 0 0 0 00 16 0 0 0 00 21 7 5 0 00 9 2 2 0 00

Salaries Expense

DATE 2020 Jan. 31 31 Closing

BALANCE DEBIT CREDIT

94 9 7 0 00

Fees Income POST. DESCRIPTION REF.

ACCOUNT

DEBIT

309

511

BALANCE DEBIT CREDIT 32 8 0 0 00 − 0 −

Chapter 6 n 195

MINI−PRACTICE SET 1 (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2020 Jan. 28 31 Closing

ACCOUNT

J5 J6

DEBIT

CREDIT

2 6 7 5 00 2 6 7 5 00

POST. REF. J6 J6

DEBIT

CREDIT

7 0 5 0 00 7 0 5 0 00

J6 J6

DEBIT

CREDIT

4 0 0 0 00 4 0 0 0 00

Depreciation Expense—Equipment

DATE DESCRIPTION 2020 Jan. 31 Adjusting 31 Closing

196 n Chapter 6

2 6 7 5 00 − 0 −

POST. REF. J6 J6

DEBIT

517

BALANCE DEBIT CREDIT 7 0 5 0 00 − 0 −

ACCOUNT NO. POST. REF.

514

BALANCE DEBIT CREDIT

ACCOUNT NO.

Rent Expense

DATE DESCRIPTION 2020 Jan. 31 Adjusting 31 Closing

ACCOUNT

POST. REF.

Supplies Expense

DATE DESCRIPTION 2020 Jan. 31 Adjusting 31 Closing

ACCOUNT

ACCOUNT NO.

Utilities Expense

520

BALANCE DEBIT CREDIT 4 0 0 0 00 − 0 −

ACCOUNT NO.

523

CREDIT

BALANCE DEBIT CREDIT

1 8 3 00

1 8 3 00 − 0 −

1 8 3 00

MINI−PRACTICE SET 1 (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2020 Jan. 12 22 31 Closing

ACCOUNT

J3 J4 J6

DEBIT

CREDIT

3 6 0 0 00 3 6 0 0 00 7 2 0 0 00

POST. REF. J4 J5 J6

DEBIT 7 0 6 5 00 4 1 5 0 00

CREDIT

J4 J6

DEBIT

BALANCE DEBIT CREDIT

CREDIT

1 0 2 5 00 1 0 2 5 00

J6 J6

DEBIT

532

BALANCE DEBIT CREDIT 1 0 2 5 00 − 0 −

ACCOUNT NO.

POST. REF.

529

7 0 6 5 00 11 2 1 5 00 11 2 1 5 00 − 0 −

Insurance Expense

DATE DESCRIPTION 2020 Jan. 31 Adjusting 31 Closing

3 6 0 0 00 7 2 0 0 00 − 0 −

ACCOUNT NO.

POST. REF.

526

BALANCE DEBIT CREDIT

ACCOUNT NO.

Telephone Expense

DATE DESCRIPTION 2020 Jan. 23 31 Closing

ACCOUNT

POST. REF.

Maintenance Expense

DATE DESCRIPTION 2020 Jan. 21 31 31 Closing

ACCOUNT

ACCOUNT NO.

Advertising Expense

535

CREDIT

BALANCE DEBIT CREDIT

7 0 0 00

7 0 0 00 − 0 −

7 0 0 00

Chapter 6 n 197

MINI-PRACTICE SET 1 (continued) Eli’s Consulting Services Worksheet Month Ended January 31, 2020

ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Supplies 4 Prepaid Insurance 5 Prepaid Rent 6 Equipment 7 Accumulated Depreciation—Equipment 8 Accounts Payable 9 Trayton Eli, Capital 10 Trayton Eli, Drawing 11 Income Summary 12 Fees Income 13 Salaries Expense 14 Utilities Expense 15 Supplies Expense 16 Insurance Expense 17 Rent Expense 18 Depreciation Expense—Equipment 19 Advertising Expense 20 Telephone Expense 21 Maintenance Expense 22 Totals 23 Net Income 24 25

198 n Chapter 6

TRIAL BALANCE DEBIT CREDIT 112 2 8 5 00 4 4 7 0 00 12 2 5 0 00 8 4 0 0 00 4 0 0 0 00 26 0 0 0 00 1 8 3 00

ADJUSTMENTS DEBIT CREDIT

(a) 7 0 5 0 00 (b) 7 0 0 00 (c) 4 0 0 0 00 (d)

1 8 3 00

10 5 0 0 00 128 6 6 7 00 12 0 0 0 00 94 9 7 0 00 32 8 0 0 00 2 6 7 5 00 (a) 7 0 5 0 00 (b) 7 0 0 00 (c) 4 0 0 0 00 (d) 1 8 3 00 7 2 0 0 00 1 0 2 5 00 11 2 1 5 00 234 3 2 0 00 # 234 3 2 0 00

11 9 3 3 00

MINI-PRACTICE SET 1 (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 112 2 8 5 00 4 4 7 0 00 5 2 0 0 00 − 0 − 7 7 0 0 00 26 0 0 0 00 3 6 6 00

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT 112 2 8 5 00 4 4 7 0 00 5 2 0 0 00 − 0 − 7 7 0 0 00 26 0 0 0 00 3 6 6 00

10 5 0 0 00 128 6 6 7 00

12 0 0 0 00

12 0 0 0 00 94 9 7 0 00

32 8 0 0 00 2 6 7 5 00 7 0 5 0 00 7 0 0 00 4 0 0 0 00 1 8 3 00 7 2 0 0 00 1 0 2 5 00 11 2 1 5 00 234 5 0 3 00

234 5 0 3 00

94 9 7 0 00 32 8 0 0 00 2 6 7 5 00 7 0 5 0 00 7 0 0 00 4 0 0 0 00 1 8 3 00 7 2 0 0 00 1 0 2 5 00 11 2 1 5 00 66 8 4 8 00 28 1 2 2 00 94 9 7 0 00

94 9 7 0 00

167 6 5 5 00

94 9 7 0 00

167 6 5 5 00

139 5 3 3 00 28 1 2 2 00 167 6 5 5 00

Chapter 6 n 199

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Chapter 6 n 199

MINI-PRACTICE SET 1 (continued) Eli's Consulting Services Income Statement Month Ended January 31, 2020 Revenue Fees Income Expenses Salaries Expense Utilities Expense Supplies Expense Rent Expense Insurance Expense Depreciation Expense—Equipment Advertising Expense Telephone Expense Maintenance Expense Total Expenses Net Income

94 9 7 0 00 32 8 0 0 00 2 6 7 5 00 7 0 5 0 00 4 0 0 0 00 7 0 0 00 1 8 3 00 7 2 0 0 00 1 0 2 5 00 11 2 1 5 00 66 8 4 8 00 28 1 2 2 00

Eli's Consulting Services Statement of Owner's Equity Month Ended January 31, 2020 Trayton Eli, Capital, January 1, 2020 Net Income for January Less Withdrawals for January Increase in Capital for January Trayton Eli, Capital, January 31, 2020

200 n Chapter 6

128 6 6 7 00 28 1 2 2 00 12 0 0 0 00 16 1 2 2 00 144 7 8 9 00

MINI-PRACTICE SET 1 (continued) Eli's Consulting Services Balance Sheet January 31, 2020 Assets Cash Accounts Receivable Supplies Prepaid Insurance Equipment Less Accumulated Depreciation—Equipment Total Assets

112 2 8 5 00 4 4 7 0 00 5 2 0 0 00 7 7 0 0 00 26 0 0 0 00 3 6 6 00

25 6 3 4 00 155 2 8 9 00

Liabilities and Owner's Equity Liabilities Accounts Payable Owner's Equity Trayton Eli, Capital Total Liabilities and Owner's Equity

10 5 0 0 00 144 7 8 9 00 # 155 2 8 9 00

Chapter 6 n 201

MINI-PRACTICE SET 1 (continued) Eli's Consulting Services Post-closing Trial Balance January 31, 2020 ACCOUNT NAME Cash Accounts Receivable Supplies Prepaid Insurance Equipment Accumulated Depreciation—Equipment Accounts Payable Carolyn Wells, Capital Totals

Analyze:

DEBIT 112 2 8 5 00 4 4 7 0 00 5 2 0 0 00 7 7 0 0 00 26 0 0 0 00

CREDIT

3 6 6 00 10 5 0 0 00 144 7 8 9 00 155 6 5 5 00 155 6 5 5 00

a. Total assets increased by $23,122 ($155,289 – $132,167). Total liabilities increased by $7,000 ($10,500 – $3,500). Owner’s capital increased by $16,122 ($144,789 – 128,667). b. The balance of Cash increased by $935 ($112,285 – $111,350). The balance of Accounts Receivable decreased by $530 ($4,470 – $5,000). c. Yes. The firm’s financial position improved through the increases in capital of $16,122 ($144,789 – $128,667).

202 n Chapter 6

CHAPTER 7 ACCOUNTING FOR SALES, ACCOUNTS RECEIVABLE, AND CASH RECEIPTS Chapter Opener: Thinking Critically Do you think that McCormick and Company varies the discounts that it offers to its various industrial customers? It is common practice for stores to offer trade and/or cash discounts to its customers. For example, if a store purchases larger quantities of goods, McCormick may offer a trade discount based on the size of its order. It may also offer a store an early payment discount if the store pays its balance owed within a certain period of time. In this way, McCormick can increase its volume of sales as well as collect its accounts receivable quickly. Discussion Questions These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter. 1. Retail: sell goods directly to consumers. Wholesale: sell goods to retailers. 2. Net sales are sales, less sales returns and allowances and less sales discounts. 3. Prove balances, summarize receivables. 4. Separate record of returns and allowances. 5. Contra revenue account. 6. Contra revenue account. 7. Time of sale; Sales Tax Payable. 8. Divide total of Sales account by 105 percent, multiply by sales tax rate. 9. a. Debit Accounts Receivable, credit Sales, b. Debit Accounts Receivable from Credit Card Companies, credit Sales.of credit card sales submitted to the credit card company for payment. 10. Summaries 11. The credit card company. 12. No responsibility for collecting cash from customer exists. 13. Credit Card Expense. 14. Purchase amount to be paid at a later date. 15. A reduction from the list price, offered by wholesalers; attracts customers.

EXERCISE 7.1

Cr Sales Tax Payable Cr Sales Dr Sales Returns and Allowances

Dr Sales Discounts Dr Credit Card Expense

EXERCISE 7.2 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

Post Ref.

1 2019 2 June 5 Accounts Receivable 3 Sales 4 Sold merchandise on account to Benson Company, 5 Sales Slip 1200, terms n/30 6 7 15 Cash 8 Sales 9 Recorded cash sales 10 11 30 Cash 12 Accounts Receivable 13 Received cash from Benson Company on account 14

DEBIT

9 7 5 00

1 9 4 0 00

9 7 5 00

CREDIT 1 2 9 7 5 00 3 4 5 6 7 1 9 4 0 00 8 9 10 11 9 7 5 00 12 13 14

EXERCISE 7.3 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 May 1 Accounts Receivable ($1,200 + $96) 3 Sales 4 Sales Tax Payable ($1,200 x 8%) 5 Sold merchandise on credit to Bill Gomez, 6 Sales Slip 1015, terms n/30 7 8 15 Cash ($5,800 + $464) 9 Sales 10 Sales Tax Payable ($5,800 x 8%) 11 Recorded cash sales 12 13 31 Cash 14 Accounts Receivable 15 Received payment on account from Bill Gomez 16

Post Ref.

DEBIT

1 2 9 6 00

6 2 6 4 00

1 2 9 6 00

CREDIT 1 2 1 2 0 0 00 3 9 6 00 4 5 6 7 8 5 8 0 0 00 9 4 6 4 00 10 11 12 13 1 2 9 6 00 14 15 16

EXERCISE 7.4 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 April 2 Cash ($2,500 + $200) 3 Sales 4 Sales Tax Payable ($2,500 x 8%) 5 Recorded cash sales 6 7 3 Sales Returns and Allowances 8 Sales Tax Payable ($250 x 8%) 9 Cash ($250 + $20) 10 Recorded sales return 11 12 4 Accounts Receivable ($1,050 + $84) 13 Sales 14 Sales Tax Payable ($1,050 × 8%) 15 Sold merchandise on credit to Jordan Clark, 16 Sales Slip 908, terms n/30 17 18 6 Sales Returns and Allowances 19 Sales Tax Payable ($150 x 8%) 20 Accounts Receivable ($150 + $12) 21 Accept a return of defective merchandise, Credit 22 Memorandum 302; original sale made on 23 Sales Slip 908 to Jordan Clark on April 4 24 25 30 Cash ($1,134 - $162) 26 Accounts Receivable 27 Received cash from Jordan Clark, after deducting 28 Credit Memorandum 302 29

Post Ref.

DEBIT

2 7 0 0 00

2 5 0 00 2 0 00

1 1 3 4 00

1 5 0 00 1 2 00

9 7 2 00

CREDIT 1 2 2 5 0 0 00 3 2 0 0 00 4 5 6 7 8 2 7 0 00 9 10 11 12 1 0 5 0 00 13 8 4 00 14 15 16 17 18 19 1 6 2 00 20 21 22 23 24 25 9 7 2 00 26 27 28 29

EXERCISE 7.5 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Feb. 2 Credit Card Expense ($3,800 + $304) × 2% 3 Cash ($3,800 + $304 - $82.08) 4 Sales 5 Sales Tax Payable ($3,800 × 8%) 6 Record sales to customers using bank credit cards 7 8 15 Accounts Receivable ($2,100 + $168) 9 Sales 10 Sales Tax Payable ($2,100 × 8%) 11 Record sales to customers using American Express 12 13 20 Credit Card Expense ($2,268 × 3%) 14 Cash ($2,268 - $68.04) 15 Accounts Receivable 16 Record payment received from American Express 17

Post Ref.

DEBIT

8 2 08 4 0 2 1 92

2 2 6 8 00

6 8 04 2 1 9 9 96

CREDIT 1 2 3 3 8 0 0 00 4 3 0 4 00 5 6 7 8 2 1 0 0 00 9 1 6 8 00 10 11 12 13 14 2 2 6 8 00 15 16 17

EXERCISE 7.6 1.

List price Less discount ($800 × 20%) Invoice price

$ 800.00 160.00 $ 640.00

List price Less discount ($2,080 × 40%) Invoice price

$ 2,080.00 832.00 $ 1,248.00

List price Less discount ($1,500 X 25%) Invoice price

$ 1,500.00 375.00 $ 1,125.00

EXERCISE 7.7 1.

List price Less first discount ($6,000 × 40%) Difference Less second discount ($3,600 × 15%) Invoice price

$6,000.00 2,400.00 $3,600.00 540.00 $3,060.00

List price Less first discount ($7,300 × 25%)

$7,300.00 1,825.00

EXERCISE 7.8 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

Post Ref.

1 2019 2 April 1 Accounts Receivable 3 Sales 4 Sold merchandise on account to Fronke's 5 Franks, Invoice 1001, terms 2/10, n30. 6 7 10 Sales Discounts ($3,500 x 2%) 8 Cash ($3,500 - $70 discount) 9 Accounts Receivable 10 Received payment from Fronke's Franks for 11 Invoice 1001, dated April 1. 12 13

DEBIT

CREDIT 1 2 3 5 0 0 00 3 4 5 6 7 8 3 5 0 0 00 9 10 11 12 13

3 5 0 0 00

7 0 00 3 4 3 0 00

EXERCISE 7.9 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Jan. 8 Cash 3 Accounts Receivable/John Gibrone 4 5 6 7 8 9 10 11 12 13

Post Ref.

DEBIT

6 4 0 00 111

✔

Received partial payment on account from John Gibrone 20 Sales Returns and Allowances Sales Tax Payable Accounts Receivable/Jim Garcia Accept return of defective merchandise, Credit Memorandum 121; original sale made on Sales Slip 11102 of December 27, 2015

2 0 0 00 1 6 00 111

✔

CREDIT 1 2 6 4 0 00 3 4 5 6 7 8 2 1 6 00 9 10 11 12 13

EXERCISE 7.9 (continued) GENERAL LEDGER ACCOUNT NO. 111

ACCOUNT Accounts Receivable DATE

DESCRIPTION

Post Ref.

2019 Jan. 1 Balance 8 20

DEBIT

CREDIT

✔ J40 J40

6 4 0 00 2 1 6 00

BALANCE DEBIT CREDIT 9 8 4 0 00 9 2 0 0 00 8 9 8 4 00

ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME Jim Garcia ADDRESS DATE

DESCRIPTION

2019 Jan. 1 Balance 20

Post Ref.

DEBIT

✔ J40

CREDIT

2 1 6 00

BALANCE

2 2 6 0 00 2 0 4 4 00

NAME John Gibrone ADDRESS DATE

DESCRIPTION

2019 Jan. 1 Balance 8

Post Ref.

DEBIT

✔ J40

CREDIT

6 4 0 00

BALANCE

6 4 0 0 00 5 7 6 0 00

NAME June Lin ADDRESS DATE 2019 Jan. 1 Balance

DESCRIPTION

Post Ref.

DEBIT

CREDIT

✔

BALANCE

1 1 8 0 00

EXERCISE 7.10 1. Calderone Company Schedule of Accounts Receivable January 31, 2019 Jim Garcia John Gibrone June Lin Total

2 0 4 4 00 5 7 6 0 00 1 1 8 0 00 8 9 8 4 00

2. Yes, they should be equal. The balance of the Accounts Receivable control account is also $8,984.00.

PROBLEM 7.1A PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 March 1 Accounts Receivable/Dave Allen ($600 + $36) 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

Sales Sales Tax Payable ($600 × 6%) Sold merchandise on credit to Dave Allen, Sales Slip 101 4 Accounts Receivable/Castor Phan ($900 + $54) Sales Sales Tax Payable ($900 × 6%) Sold merchandise on credit to Castor Phan, Sales Slip 102 12 Accounts Receivable/Chris Hughes ($1,100 + $66) Sales Sales Tax Payable ($1,100 × 6%) Sold merchandise on credit to Chris Hughes, Sales Slip 103

Post Ref. 111

✔

111

✔

9 5 4 00

6 0 0 00 3 3 6 00 4 5 6 7 8

1 1 6 6 00

9 0 0 00 9 5 4 00 10 11 12 13 14

401 221

101 401 221

25 Accounts Receivable/Brian Cooley ($850 + $51)

111

28 Cash Accounts Receivable/Castor Phan

6 3 6 00

401 221

111

✔

8 0 5 6 00

9 0 1 00

401 221

101 111

CREDIT 1 2

401 221

15 Cash ($7,600 + $456) Sales Sales Tax Payable ($7,600 × 6%) Record cash sales, March 1-15

Sales Sales Tax Payable ($850 × 6%) Sold merchandise on credit to Brian Cooley, Sales Slip 104

DEBIT

2 2 0 00

✔

Received partial payment on account from Castor Phan

1 1 0 0 00 15 6 6 00 16 17 18 19 20 7 6 0 0 00 21 4 5 6 00 22 23 24 25 8 5 0 00 26 5 1 00 27 28 29 30 31 2 2 0 00 32 33 34 35 36

PROBLEM 7.1A (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2016 2 March 31 Cash ($4,500 + $270) 3 Sales 4 Sales Tax Payable ($4,500 × 6%) 5 Record cash sales, March 16 - 31 6 7 31 Cash 8 Accounts Receivable/Dave Allen 9 10

Post Ref.

DEBIT

101 401 221

4 7 7 0 00

101

6 3 6 00

111

✔

Received full payment on account from Dave Allen

CREDIT 1 2 4 5 0 0 00 3 2 7 0 00 4 5 6 7 6 3 6 00 8 9 10

PROBLEM 7.1A (continued) GENERAL LEDGER ACCOUNT NO. 101

ACCOUNT Cash DATE

DESCRIPTION

2019 March 15 28 31 31

Post Ref.

DEBIT

J1 J1 J2 J2

8 0 5 6 00 2 2 0 00 4 7 7 0 00 6 3 6 00

CREDIT

8 0 5 6 00 8 2 7 6 00 13 0 4 6 00 13 6 8 2 00

ACCOUNT NO. 111

ACCOUNT Accounts Receivable DATE

DESCRIPTION

2019 March 1 4 12 25 28 31

Post Ref.

DEBIT

J1 J1 J1 J1 J1 J2

6 3 6 00 9 5 4 00 1 1 6 6 00 9 0 1 00

CREDIT

2 2 0 00 6 3 6 00

2019 March 1 4 12 15 25 31

DESCRIPTION

BALANCE DEBIT CREDIT 6 3 6 00 1 5 9 0 00 2 7 5 6 00 3 6 5 7 00 3 4 7 3 00 2 8 0 1 00

ACCOUNT NO. 221

ACCOUNT Sales Tax Payable DATE

BALANCE DEBIT CREDIT

Post Ref. J1 J1 J1 J1 J1 J2

DEBIT

CREDIT

BALANCE DEBIT CREDIT

3 6 00 5 4 00 6 6 00 4 5 6 00 5 1 00 2 7 0 00

3 6 00 9 0 00 1 5 6 00 6 1 2 00 6 6 3 00 9 3 3 00

PROBLEM 7.1A (continued) ACCOUNT NO. 401

ACCOUNT Sales DATE 2019 March 1 4 12 15 25 31

DESCRIPTION

Post Ref.

DEBIT

J1 J1 J1 J1 J1 J2

CREDIT

BALANCE DEBIT CREDIT

6 0 0 00 9 0 0 00 1 1 0 0 00 7 6 0 0 00 8 5 0 00 4 5 0 0 00

Analyze: The total cash receipts during March were $13,682.

6 0 0 00 1 5 0 0 00 2 6 0 0 00 10 2 0 0 00 11 0 5 0 00 15 5 5 0 00

PROBLEM 7.2A PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Sept. 1 Accounts Receivable/Candy Cho ($2,400 + $168) 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37

Sales Sales Tax Payable ($2,400 × 7%) Sold TV on credit to Candy Cho, Sales Slip 101 3 Accounts Receivable/Jim Peterson ($900 + $63) Sales Sales Tax Payable ($900 × 7%) Sold stereo equip. on credit to Jim Peterson, Sales Slip 102 7 Accounts Receivable/Bridgette Huffman ($200 + $14) Sales Sales Tax Payable ($200 × 7%) Sold microwave oven on credit to Bridgette Huffman Sales Slip 103 12 Sales Returns and Allowances Sales Tax Payable ($200 × 7%) Accounts Receivable/Jim Peterson Accepted return of defective merchandise, Credit Memorandum 101; original sale made on Sales Slip 102 of September 3

Post Ref. 111

✔

111

✔

2 5 6 8 00

9 6 3 00

2 4 0 0 00 3 1 6 8 00 4 5 6 7 8

401 221

111

✔

2 1 4 00

401 221

421 221 111

2 0 0 00 1 4 00

✔

101 401 221

16 Accounts Receivable/Kathy Sundstrand ($500 + $35)

111

✔

CREDIT 1 2

401 221

15 Cash ($10,800 + $756) Sales Sales Tax Payable ($10,800 × 7%) Record cash sales, Sept. 1-15

Sales Sales Tax Payable ($500 × 7%) Sold gas dryer on credit to Kathy Sundstrand, Sales Slip 104

DEBIT

11 5 5 6 00

5 3 5 00

401 221

9 0 0 00 9 6 3 00 10 11 12 13 14 2 0 0 00 15 1 4 00 16 17 18 19 20 21 2 1 4 00 22 23 24 25 26 27 10 8 0 0 00 28 7 5 6 00 29 30 31 32 5 0 0 00 33 3 5 00 34 35 36 37

PROBLEM 7.2A (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Sept. 17 Accounts Receivable/Mark Navalta ($2,400 + $168) 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38

Sales Sales Tax Payable ($2,400 × 7%) Sold home entertainment system on credit to Mark Navalta, Sales Slip 105 18 Cash Accounts Receivable/Candy Cho Received partial payment on account from Candy Cho 20 Cash ($963 - $214) Accounts Receivable/Jim Peterson Received payment on account from Jim Peterson for sale of Sept. 3, less return of Sept. 12. 25 Sales Returns and Allowances Sales Tax Payable ($200 × 7%) Accounts Receivable/Mark Navalta Issued Credit Memorandum 102 due to scratches on home entertainment system 27 Cash Accounts Receivable/Bridgette Huffman

Post Ref.

DEBIT

111

2 5 6 8 00

✔

401 221

✔

26 27 28

2 1 4 00

Received payment from Bridgette Huffman 29 Accounts Receivable/Mark Navalta Sales Sales Tax Payable ($600 × 7%) Sold dishwasher on credit to Mark Navalta, Sales Slip 106 30 Cash Sales Sales Tax Payable ($11,100 × 7%) Record cash sales, Sept. 16 – 30

111

1 2

✔

2 0 0 00 1 4 00

✔

101 111

7 4 9 00

✔

421 221 111

7 0 0 00

✔

101 111

CREDIT

2 4 0 0 00 3 1 6 8 00 4 5 6 7 8 7 0 0 00 9 10 11 12 13 7 4 9 00 14 15 16 17 18 19 2 1 4 00 20 21 22 23 24 2 1 4 00 25

101 111

6 4 2 00

221

101 401 221

11 8 7 7 00

Analyze: $5,300 /$28,500 = 18.6%; 18.6% of the sales in September were for entertainment items.

6 0 0 00 29 4 2 00 30 31 32 33 34 11 1 0 0 00 35 7 7 7 00 36 37 38

PROBLEM 7.3A GENERAL LEDGER ACCOUNT NO. 101

ACCOUNT Cash DATE

DESCRIPTION

2019 Sept. 15 18 20 27 30

Post Ref.

DEBIT

J1 J2 J2 J2 J2

11 5 5 6 00 7 0 0 00 7 4 9 00 2 1 4 00 11 8 7 7 00

CREDIT

11 5 5 12 2 5 13 0 0 13 2 1 25 0 9

2019 Sept. 1 3 7 12 16 17 18 20 25 27 29

DESCRIPTION

6 00 6 00 5 00 9 00 6 00

ACCOUNT NO. 111

ACCOUNT Accounts Receivable DATE

BALANCE DEBIT CREDIT

Post Ref.

DEBIT

J1 J1 J1 J1 J1 J2 J2 J2 J2 J2 J2

2 5 6 8 00 9 6 3 00 2 1 4 00

CREDIT

2 1 4 00 5 3 5 00 2 5 6 8 00 7 0 0 00 7 4 9 00 2 1 4 00 2 1 4 00 6 4 2 00

BALANCE DEBIT CREDIT 2 5 6 3 5 3 3 7 4 3 5 3 4 0 6 6 6 3 5 9 3 5 1 8 4 9 7 4 7 5 5 3 9

8 00 1 00 5 00 1 00 6 00 4 00 4 00 5 00 1 00 7 00 9 00

PROBLEM 7.3A (continued) ACCOUNT NO. 221

ACCOUNT Sales Tax Payable DATE

DESCRIPTION

2019 Sept. 1 3 7 12 15 16 17 25 29 30

Post Ref. J1 J1 J1 J1 J1 J1 J2 J2 J2 J2

DEBIT

CREDIT

BALANCE DEBIT CREDIT

1 6 8 00 6 3 00 1 4 00 1 4 00 7 5 6 00 3 5 00 1 6 8 00

1 1 1 1 1

1 4 00 4 2 00 7 7 7 00

1 6 8 00 2 3 1 00 2 4 5 00 2 3 1 00 9 8 7 00 0 2 2 00 1 9 0 00 1 7 6 00 2 1 8 00 9 9 5 00

GENERAL LEDGER ACCOUNT NO. 401

ACCOUNT Sales DATE

DESCRIPTION

2019 Sept. 1 3 7 15 16 17 29 30

Post Ref.

DEBIT

J1 J1 J1 J1 J1 J2 J2 J2

CREDIT

2 4 0 0 00 9 0 0 00 2 0 0 00 10 8 0 0 00 5 0 0 00 2 4 0 0 00 6 0 0 00 11 1 0 0 00

2019 Sept. 12 25

DESCRIPTION

2 3 3 14 14 17 17 28

4 0 0 00 3 0 0 00 5 0 0 00 3 0 0 00 8 0 0 00 2 0 0 00 8 0 0 00 9 0 0 00

ACCOUNT NO. 421

ACCOUNT Sales Returns and Allowances DATE

BALANCE DEBIT CREDIT

Post Ref.

DEBIT

J1 J2

2 0 0 00 2 0 0 00

CREDIT

BALANCE DEBIT CREDIT 2 0 0 00 4 0 0 00

If this link does not work with a click, then copy the complete Download link and paste link in internet explorer/ﬁrefox/google chrome and get all ﬁles download successfully.

PROBLEM 7.3A (continued) ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME Candy Cho ADDRESS DATE

DESCRIPTION

2019 Sept. 1 Sales Slip 101 18

Post Ref.

DEBIT

J1 J2

2 5 6 8 00

Post Ref.

DEBIT

J1 J2

2 1 4 00

Post Ref.

DEBIT

J2 J2 J2

2 5 6 8 00

Post Ref.

DEBIT

J1 J1 J2

9 6 3 00

CREDIT

7 0 0 00

BALANCE

2 5 6 8 00 1 8 6 8 00

NAME Bridgette Huffman ADDRESS DATE

DESCRIPTION

2019 Sept. 7 Sales Slip 103 27

CREDIT

2 1 4 00

BALANCE

2 1 4 00 - 0 -

NAME Mark Navalta ADDRESS DATE

DESCRIPTION

2019 Sept. 17 Sales Slip 105 25 Credit Memorandum 102 29 Sales Slip 106

CREDIT

2 1 4 00 6 4 2 00

BALANCE

2 5 6 8 00 2 3 5 4 00 2 9 9 6 00

NAME Jim Peterson ADDRESS DATE

DESCRIPTION

2019 Sept. 3 Sales Slip 102 12 Credit Memorandum 101 20

CREDIT

2 1 4 00 7 4 9 00

PROBLEM 7.3A (continued) ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME

Kathy Sundstrand

BALANCE

9 6 3 00 7 4 9 00 - 0 -

ADDRESS DATE 2019 Sept. 16 Sales Slip 104

DESCRIPTION

Post Ref.

DEBIT

5 3 5 00

CREDIT

BALANCE

5 3 5 00

Exceptional Electronics Schedule of Accounts Receivable September 30, 2019 Candy Cho Bridgette Huffman Mark Navalta Jim Peterson Kathy Sundstrand Total

Analyze: The amount of sales tax owed at September 30, 2019 is $1,995.

1 8 6 8 00 0 00 2 9 9 6 00 0 00 5 3 5 00 5 3 9 9 00

PROBLEM 7.4A PAGE

GENERAL JOURNAL DATE 1 2019 2 April 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37

DESCRIPTION

1 Accounts Receivable/Alto Music Center Sales Sold merchandise on credit to Alto Music Center, Invoice 3912, 1/10, n/30 3 Sales Discounts Cash Accounts Receivable/Music Supply Store

Post Ref. 111

✔

DEBIT

4 5 0 0 00

401

452 101 111

2 0 00 1 9 8 0 00

✔

Received payment on account from Music Supply Store, Invoice 2718 5 Cash Sales Sold merchandise for cash to a new customer

101 401

1 7 2 5 00

7 Sales Returns and Allowances Cash Issued cash refund for merchandise sold on April 5

451 101

8 0 00

8 Accounts Receivable/Music Warehouse

111

Sales Sold merchandise on credit to Music Warehouse, Invoice 3913, 2/10, n/30 10 Sales Discounts ($4,500 * 1%) Cash ($4,500 - $45) Accounts Receivable/Alto Music Center

✔

6 5 0 0 00

401

452 101 111

4 5 00 4 4 5 5 00

✔

Received payment on account from Alto Music Center, Invoice 3912 15 Sales Returns and Allowances Accounts Receivable/Music Warehouse

451 111

2 3 0 0 00

✔

Accepted return of damaged merchandise, issued Credit Memorandum 105 to Music Warehouse Original sale made on Invoice 3913, April 8

CREDIT 1 2 4 5 0 0 00 3 4 5 6 7 8 2 0 0 0 00 9 10 11 12 13 1 7 2 5 00 14 15 16 17 8 0 00 18 19 20 21 6 5 0 0 00 22 23 24 25 26 27 4 5 0 0 00 28 29 30 31 32 2 3 0 0 00 33 34 35 36 37

PROBLEM 7.4A (continued) DATE

GENERAL JOURNAL DESCRIPTION

1 2019 2 April 17 Sales Discounts (($6,500 - $2,300) * 2%) 3 Cash ($4,200 - $84) 4 Accounts Receivable/Music Warehouse 5 Received payment on account from 6 Music Warehouse, Invoice 3913 7 8 19 Cash 9 Accounts Receivable/Oldies Sounds 10 Received payment on account from Oldies Sounds 11 Invoice 3850 12 13 20 Accounts Receivable/Hawk Music Center 14 Sales 15 Sold merchandise on credit to Hawk Music Center, 16 Invoice 3914, 2/10, n/30 17 18 25 Accounts Receivable/Modern Sounds 19 Sales 20 Sold merchandise on credit to Modern Sounds, 21 Invoice 3915, 2/10, n/30 22 23 26 Accounts Receivable/Country Tunes 24 Sales 25 Sold merchandise on credit to Country Tunes, 26 Invoice 3916, 2/10, n/30 27 28 27 Sales Returns and Allowances 29 Accounts Receivable/Modern Sounds 30 Accepted return of damaged merchandise, issued 31 Credit Memorandum 106 to Modern Sounds. 32 Original sale made on Invoice 3915, April 25 33 34 29 Sales Discounts ($11,200 * 2%) 35 Cash ($11,200 - $224) 36 Accounts Receivable/Hawk Music Center 37 38 39

Post Ref.

✔

1 2 3 4 2 0 0 00 4 5 6 7 8 2 3 0 0 00 9 10 11 12 13 11 2 0 0 00 14 15 16 17 18 10 8 0 0 00 19 20 21 22 23 8 6 0 0 00 24 25 26 27 28 5 0 0 00 29 30 31 32 33 34 35 11 2 0 0 00 36

✔

37 38 39

452 101 111

111

8 4 00 4 1 1 6 00

✔

101 111

DEBIT

2 3 0 0 00

✔

11 2 0 0 00

401

111

✔

10 8 0 0 00

401

111

✔

8 6 0 0 00

401

451 111

5 0 0 00

✔

452 101 111

2 2 4 00 10 9 7 6 00

Received payment on account, Invoice 3914 30 Accounts Receivable/Oldies Sounds

111

PAGE 12 CREDIT

3 2 0 0 00

40 Sales 401 41 Sold merchandise on credit to Oldies Sounds, 42 Invoice 3917, 2/10, n/30 43 Analyze: The amount of the cash discount taken by Hawk Music Center on April 29 was $224.

3 2 0 0 00 40 41 42 43

PROBLEM 7.5A GENERAL LEDGER ACCOUNT NO. 101

ACCOUNT Cash DATE

DESCRIPTION

2019 April 1 Balance 3 5 7 10 17 19 29

Post Ref.

DEBIT

J11 J11 J11 J11 J12 J12 J12

1 9 8 0 00 1 7 2 5 00

CREDIT

8 0 00 4 4 5 5 00 4 1 1 6 00 2 3 0 0 00 10 9 7 6 00

DESCRIPTION

2019 April 1 Balance 1 3 8 10 15 17 19 20 25 26 27 29 30

27 4 0 0 00 29 3 8 0 00 31 1 0 5 00 31 0 2 5 00 35 4 8 0 00 39 5 9 6 00 41 8 9 6 00 52 8 7 2 00 ACCOUNT NO. 111

ACCOUNT Accounts Receivable DATE

BALANCE DEBIT CREDIT

Post Ref.

J11 J11 J11 J11 J11 J12 J12 J12 J12 J12 J12 J12 J12

DEBIT

CREDIT

4 5 0 0 00 2 0 0 0 00 6 5 0 0 00 4 5 0 0 00 2 3 0 0 00 4 2 0 0 00 2 3 0 0 00 11 2 0 0 00 10 8 0 0 00 8 6 0 0 00 5 0 0 00 11 2 0 0 00 3 2 0 0 00

BALANCE DEBIT CREDIT 4 3 0 0 00 8 8 0 0 00 6 8 0 0 00 13 3 0 0 00 8 8 0 0 00 6 5 0 0 00 2 3 0 0 00 - 0 11 2 0 0 00 22 0 0 0 00 30 6 0 0 00 30 1 0 0 00 18 9 0 0 00 22 1 0 0 00

PROBLEM 7.5A (continued) GENERAL LEDGER ACCOUNT NO. 401

ACCOUNT Sales DATE

DESCRIPTION

2019 April 1 5 8 20 25 26 30

Post Ref.

DEBIT

J11 J11 J11 J12 J12 J12 J12

CREDIT

4 5 0 0 00 1 7 2 5 00 6 5 0 0 00 11 2 0 0 00 10 8 0 0 00 8 6 0 0 00 3 2 0 0 00

DESCRIPTION

2019 April 7 15 27

Post Ref.

DEBIT

J11 J11 J12

8 0 00 2 3 0 0 00 5 0 0 00

CREDIT DEBIT

DESCRIPTION

2019 April 3 Balance 10 17 29

BALANCE CREDIT

8 0 00 2 3 8 0 00 2 8 8 0 00

ACCOUNT NO. 452

ACCOUNT Sales Discounts DATE

4 5 0 0 00 6 2 2 5 00 12 7 2 5 00 23 9 2 5 00 34 7 2 5 00 43 3 2 5 00 46 5 2 5 00 ACCOUNT NO. 451

ACCOUNT Sales Returns and Allowances DATE

BALANCE DEBIT CREDIT

Post Ref.

DEBIT

J11 J11 J12 J12

2 0 00 4 5 00 8 4 00 2 2 4 00

CREDIT DEBIT

BALANCE CREDIT

2 0 00 6 5 00 1 4 9 00 3 7 3 00

PROBLEM 7.5A (continued) ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME Alto Music Center ADDRESS DATE

DESCRIPTION

2019 April 1 Invoice 3912 10

Post Ref.

DEBIT

J11 J11

4 5 0 0 00

Post Ref.

DEBIT

J12

8 6 0 0 00

Post Ref.

DEBIT

J12 J12

11 2 0 0 00

Post Ref.

DEBIT

J12 J12

10 8 0 0 00

CREDIT

BALANCE

4 5 0 0 00

4 5 0 0 00 - 0 -

CREDIT

BALANCE

NAME Country Tunes ADDRESS DATE

DESCRIPTION

2019 April 26 Invoice 3916

8 6 0 0 00

NAME Hawk Music Center ADDRESS DATE

DESCRIPTION

2019 April 20 Invoice 3914 29

CREDIT

BALANCE

11 2 0 0 00

11 2 0 0 00 - 0 -

CREDIT

BALANCE

NAME Modern Sounds ADDRESS DATE

DESCRIPTION

2019 April 25 Invoice 3915 27 Credit Memorandum 106

5 0 0 00

10 8 0 0 00 10 3 0 0 00

PROBLEM 7.5A (continued) ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME Music Supply Store ADDRESS DATE

DESCRIPTION

2019 April 1 Balance 3

Post Ref.

DEBIT

✔ J11

CREDIT

BALANCE

2 0 0 0 00

2 0 0 0 00 - 0 -

CREDIT

BALANCE

2 3 0 0 00 4 2 0 0 00

6 5 0 0 00 4 2 0 0 00 - 0 -

CREDIT

BALANCE

2 3 0 0 00

2 3 0 0 00 - 0 3 2 0 0 00

NAME Music Warehouse ADDRESS DATE

DESCRIPTION

2019 April 8 Invoice 3913 15 Credit Memorandum 105 17

Post Ref.

DEBIT

J11 J11 J12

6 5 0 0 00

Post Ref.

DEBIT

NAME Oldies Sounds ADDRESS DATE 2019 April 1 Balance 19 30 Invoice 3917

DESCRIPTION

✔ J12 J12

3 2 0 0 00

PROBLEM 7.5A (continued) Incredible Sounds Schedule of Accounts Receivable April 30, 2019 Alto Music Center Country Tunes Hawk Music Center Modern Sounds Music Supply Store Music Warehouse Oldies Sounds Total

- 0 8 6 0 0 00 - 0 10 3 0 0 00 - 0 - 0 3 2 0 0 00 22 1 0 0 00

Analyze: The total sales on account in April, prior to any returns, allowances, or discounts were $46,525.

PROBLEM 7.6A PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Feb. 1 Accounts Receivable/Lovely Kitchens 3 Sales [$6,000 – ($6,000 × 30%)] 4 Sold crystal goods on credit to Lovely Kitchens, 5 a wholesale customer, Invoice 5950, n/15 6 7 15 Cash ($8,600 + $688) 8 Sales 9 Sales Tax Payable ($8,600 × 8%) 10 Record cash sales, February 1 – 15 11 12 15 Credit Card Expense ($13,000 + $1,040) × 2% 13 Cash ($13,000 + $1,040 - $280.80) 14 Sales 15 Sales Tax Payable ($13,000 × 8%) 16 Record credit card sales, February 1 – 15 17 18 16 Cash 19 Accounts Receivable/Lovely Kitchens 20 Received payment on account, Invoice 5950 21 22 16 Accounts Receivable/American Express 23 Sales 24 Sales Tax Payable ($8,100 × 8%) 25 Sold merchandise to customers using 26 American Express 27 28 17 Accounts Receivable/Beautiful Bedrooms 29 Sales [$12,000 – ($12,000 × 30%)] 30 Sold a set of Roman statues on credit to 31 Beautiful Bedrooms, a wholesale customer, 32 Invoice 5951, n/15 33

Post Ref.

DEBIT

121 401

4 2 0 0 00

101 401 222

9 2 8 8 00

521 101 401 222

2 8 0 80 13 7 5 9 20

101 121

4 2 0 0 00

121 401 222

8 7 4 8 00

121 401

8 4 0 0 00

CREDIT 1 2 4 2 0 0 00 3 4 5 6 7 8 6 0 0 00 8 6 8 8 00 9 10 11 12 13 13 0 0 0 00 14 1 0 4 0 00 15 16 17 18 4 2 0 0 00 19 20 21 22 8 1 0 0 00 23 6 4 8 00 24 25 26 27 28 8 4 0 0 00 29 30 31 32 33

PROBLEM 7.6A (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Feb. 20 Credit Card Expense ($8,748 × 3%) 3 Cash ($8,748 - $262.44) 4 Accounts Receivable/American Express 5 Received payment from American Express for 6 amount billed on February 16 7 8 27 Cash 9 Accounts Receivable/Beautiful Bedrooms 10 Received payment on account, Invoice 5951 11 12 28 Cash ($7,750 + $620) 13 Sales 14 Sales Tax Payable ($7,750 × 8%) 15 Record cash sales, February 16 – 28 16 17 28 Credit Card Expense ($15,000 + $1,200) × 2% 18 Cash ($15,000 + $1,200 - $324) 19 Sales 20 Sales Tax Payable ($15,000 × 8%) 21 Record credit card sales, February 16 – 28 22 23 28 Accounts Receivable/American Express 24 Sales 25 Sales Tax Payable ($12,200 × 8%) 26 Sold merchandise to customers using 27 American Express 28

Post Ref.

DEBIT

521 101 121

2 6 2 44 8 4 8 5 56

101 121

8 4 0 0 00

101 401 222

8 3 7 0 00

521 101 401 222

3 2 4 00 15 8 7 6 00

121 401 222

13 1 7 6 00

CREDIT 1 2 3 8 7 4 8 00 4 5 6 7 8 8 4 0 0 00 9 10 11 12 7 7 5 0 00 13 6 2 0 00 14 15 16 17 18 15 0 0 0 00 19 1 2 0 0 00 20 21 22 23 12 2 0 0 00 24 9 7 6 00 25 26 27 28

PROBLEM 7.6A (continued) GENERAL LEDGER ACCOUNT NO. 101

ACCOUNT Cash DATE

DESCRIPTION

2019 Feb. 1 Balance 15 15 16 20 27 28 28

Post Ref. ✔ J10 J10 J10 J11 J11 J11 J11

DEBIT

CREDIT

23 2 3 0 00 32 5 1 8 00 46 2 7 7 20 50 4 7 7 20 58 9 6 2 76 67 3 6 2 76 75 7 3 2 76 91 6 0 8 76

9 2 8 8 00 13 7 5 9 20 4 2 0 0 00 8 4 8 5 56 8 4 0 0 00 8 3 7 0 00 15 8 7 6 00

ACCOUNT NO. 121

ACCOUNT Accounts Receivable DATE

DESCRIPTION

2019 Feb. 1 16 16 17 20 27 28

Post Ref.

DEBIT

J10 J10 J10 J10 J11 J11 J11

4 2 0 0 00

CREDIT

4 2 0 0 00 8 7 4 8 00 8 4 0 0 00 8 7 4 8 00 8 4 0 0 00 13 1 7 6 00

DESCRIPTION

2019 Feb. 15 15 16 28 28 28

BALANCE DEBIT CREDIT 4 2 0 0 00 - 0 8 7 4 8 00 17 1 4 8 00 8 4 0 0 00 - 0 13 1 7 6 00

ACCOUNT NO. 222

ACCOUNT Sales Tax Payable DATE

BALANCE DEBIT CREDIT

Post Ref. J10 J10 J10 J11 J11 J11

DEBIT

CREDIT

BALANCE DEBIT CREDIT

6 8 8 00 1 0 4 0 00 6 4 8 00 6 2 0 00 1 2 0 0 00 9 7 6 00

6 8 8 00 1 7 2 8 00 2 3 7 6 00 2 9 9 6 00 4 1 9 6 00 5 1 7 2 00

ACCOUNT NO. 401

ACCOUNT Sales DATE

DESCRIPTION

2019 Feb. 1 15 15 16 17 28 28 28

Post Ref.

DEBIT

J10 J10 J10 J10 J10 J11 J11 J11

CREDIT

4 2 0 0 00 8 6 0 0 00 13 0 0 0 00 8 1 0 0 00 8 4 0 0 00 7 7 5 0 00 15 0 0 0 00 12 2 0 0 00

2019 Feb. 15 20 28

DESCRIPTION

4 2 0 0 00 12 8 0 0 00 25 8 0 0 00 33 9 0 0 00 42 3 0 0 00 50 0 5 0 00 65 0 5 0 00 77 2 5 0 00

ACCOUNT NO. 521

ACCOUNT Credit Card Expense DATE

BALANCE DEBIT CREDIT

Post Ref.

DEBIT

J10 J10 J11

2 8 0 80 2 6 2 44 3 2 4 00

CREDIT

BALANCE DEBIT CREDIT 2 8 0 80 5 4 3 24 8 6 7 24

Analyze: The total credit card expense incurred in February is $867.24.

PROBLEM 7.1B PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Oct. 1 Accounts Receivable/Lois Bermudez, CPA ($700 + $35) 3 Sales 4 Sales Tax Payable ($700 × 5%) 5 Sold merchandise on credit to Lois Bermudez, CPA 6 Sales Slip 101 7 8 4 Accounts Receivable/Fontes Consulting ($380 + $19) 9 Sales 10 Sales Tax Payable ($380 × 5%) 11 Sold merchandise on credit to Fontes Consulting 12 Sales Slip 102 13 14 12 Accounts Receivable/Andrew Mitchell ($450 + $22.50) 15 Sales 16 Sales Tax Payable ($450 × 5%) 17 Sold merchandise on credit to Andrew Mitchell, 18 Attorney at Law, Sales Slip 103 19 20 15 Cash ($4,825 + $241.25) 21 Sales 22 Sales Tax Payable ($4,825 × 5%) 23 Record cash sales, October 1 – 15 24 25 25 Accounts Receivable/Bill Keller Realtors ($1,020 + $51) 26 Sales 27 Sales Tax Payable ($1,020 × 5%) 28 Sold merchandise on credit to Bill Keller Realtors, 29 Sales Slip 104 30 31 28 Cash 32 Accounts Receivable/Fontes Consulting 33 Received partial payment on account from 34 Fontes Consulting 35

Post Ref.

DEBIT

111 401 221

7 3 5 00

111 401 221

3 9 9 00

111 401 221

4 7 2 50

101 401 221

5 0 6 6 25

111 401 221

1 0 7 1 00

101 111

1 9 0 00

CREDIT 1 2 7 0 0 00 3 3 5 00 4 5 6 7 8 3 8 0 00 9 1 9 00 10 11 12 13 14 4 5 0 00 15 2 2 50 16 17 18 19 20 4 8 2 5 00 21 2 4 1 25 22 23 24 25 1 0 2 0 00 26 5 1 00 27 28 29 30 31 1 9 0 00 32 33 34 35

PROBLEM 7.1B (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Oct. 31 Cash ($5,348 + $267.40) 3 Sales 4 Sales Tax Payable ($5,348 × 5%) 5 Record cash sales, October 16 – 31 6 7 31 Cash 8 Accounts Receivable/Lois Bermudez, CPA 9 Received full payment on account from 10 Lois Bermudez, CPA 11

Post Ref.

DEBIT

101 401 221

5 6 1 5 40

101 111

7 3 5 00

CREDIT 1 2 5 3 4 8 00 3 2 6 7 40 4 5 6 7 7 3 5 00 8 9 10 11

PROBLEM 7.1B (continued) GENERAL LEDGER ACCOUNT NO. 101

ACCOUNT Cash DATE

DESCRIPTION

2019 Oct. 15 28 31 31

Post Ref.

DEBIT

J1 J1 J2 J2

5 0 6 6 25 1 9 0 00 5 6 1 5 40 7 3 5 00

CREDIT

5 0 6 6 25 5 2 5 6 25 10 8 7 1 65 11 6 0 6 65

ACCOUNT NO. 111

ACCOUNT Accounts Receivable DATE

DESCRIPTION

2019 Oct. 1 4 12 25 28 31

Post Ref.

DEBIT

J1 J1 J1 J1 J1 J2

7 3 5 00 3 9 9 00 4 7 2 50 1 0 7 1 00

CREDIT

1 9 0 00 7 3 5 00

2019 Oct. 1 4 12 15 25 31

DESCRIPTION

BALANCE DEBIT CREDIT 7 3 5 00 1 1 3 4 00 1 6 0 6 50 2 6 7 7 50 2 4 8 7 50 1 7 5 2 50

ACCOUNT NO. 221

ACCOUNT Sales Tax Payable DATE

BALANCE DEBIT CREDIT

Post Ref. J1 J1 J1 J1 J1 J2

DEBIT

CREDIT

BALANCE DEBIT CREDIT

3 5 00 1 9 00 2 2 50 2 4 1 25 5 1 00 2 6 7 40

3 5 00 5 4 00 7 6 50 3 1 7 75 3 6 8 75 6 3 6 15

PROBLEM 7.1B (continued) GENERAL LEDGER ACCOUNT NO. 401

ACCOUNT Sales DATE 2019 Oct. 1 4 12 15 25 31

DESCRIPTION

Post Ref.

DEBIT

J1 J1 J1 J1 J1 J2

CREDIT

BALANCE DEBIT CREDIT

7 0 0 00 3 8 0 00 4 5 0 00 4 8 2 5 00 1 0 2 0 00 5 3 4 8 00

Analyze: At October 31, $636.15 is owed for sales taxes.

7 0 0 00 1 0 8 0 00 1 5 3 0 00 6 3 5 5 00 7 3 7 5 00 12 7 2 3 00

PROBLEM 7.2B PAGE

GENERAL JOURNAL DATE 1 2019 2 Nov. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37

DESCRIPTION

1 Accounts Receivable/Alice Chu ($550 + $33)

Post Ref. 111

✔

Sales Sales Tax Payable ($550 × 6%) Sold a dishwasher on credit to Alice Chu, Sales Slip 101

401 221

2 Accounts Receivable/Jane Peters ($825 + $49.50) Sales Sales Tax Payable ($825 × 6%) Sold stereo equipment on credit to Jane Peters, Sales Slip 102

111

7 Accounts Receivable/Bob Huffington ($410 + $24.60) Sales Sales Tax Payable ($410 × 6%) Sold trash compactor on credit to Bob Huffington, Sales Slip 103

111

12 Sales Returns and Allowances Sales Tax Payable ($95 × 6%) Accounts Receivable/Jane Peters

✔

DEBIT

5 8 3 00

8 7 4 50

401 221

✔

4 3 4 60

401 221

421 221 111

9 5 00 5 70

✔

Accept return of defective merchandise, Credit Memorandum 101; original sales made on Sales Slip 102 of November 2 15 Cash ($10,050 + $603) Sales Sales Tax Payable ($10,050 × 6%) Record cash sales, November 1 – 15

101 401 221

16 Accounts Receivable/Gina Silvestri ($550 + $33)

111

Sales Sales Tax Payable ($550 × 6%) Sold microwave oven on credit to Gina Silvestri, Sales Slip 104

✔

10 6 5 3 00

5 8 3 00

401 221

CREDIT 1 2 5 5 0 00 3 3 3 00 4 5 6 7 8 8 2 5 00 9 4 9 50 10 11 12 13 14 4 1 0 00 15 2 4 60 16 17 18 19 20 21 1 0 0 70 22 23 24 25 26 27 10 0 5 0 00 28 6 0 3 00 29 30 31 32 5 5 0 00 33 3 3 00 34 35 36 37

PROBLEM 7.2B (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Nov. 17 Accounts Receivable/Dennis Newcombe ($1,375 + $82.50) 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37

Sales Sales Tax Payable ($1,375 × 6%) Sold home entertainment system on credit to Dennis Newcombe, Sales Slip 105 18 Cash Accounts Receivable/Alice Chu

Post Ref. 111

✔

DEBIT

1 4 5 7 50

401 221

101 111

3 2 0 00

✔

Received partial payment on account from Alice Chu 20 Cash ($874.50 - $100.70) Accounts Receivable/Jane Peters

101 111

7 7 3 80

✔

Received full payment on account from Jane Peters less return on November 12 24 Sales Returns and Allowances Sales Tax Payable ($120 × 6%) Accounts Receivable/Dennis Newcombe

421 221 111

1 2 0 00 7 20

✔

Issued allowance due to scratches on home entertainment system, Credit Memorandum 102 28 Cash Accounts Receivable/Bob Huffington

101 111

4 3 4 60

✔

Received full payment on acct from Bob Huffington 29 Accounts Receivable/Bob Huffington Sales Sales Tax Payable ($675 × 6%) Sold gas stove on credit to Bob Huffington, Sales Slip 106

111

✔

7 1 5 50

401 221

30 Cash 101 10 9 7 1 00 Sales 401 Sales Tax Payable ($10,350 × 6%) 221 Record cash sales, November 16 – 30 Analyze: The total amount due from Bob Huffington for the November 29 sale is $715.50.

CREDIT 1 2 1 3 7 5 00 3 8 2 50 4 5 6 7 8 3 2 0 00 9 10 11 12 13 7 7 3 80 14 15 16 17 18 19 1 2 7 20 20 21 22 23 24 4 3 4 60 25 26 27 28 6 7 5 00 29 4 0 50 30 31 32 33 34 10 3 5 0 00 35 6 2 1 00 36 37

PROBLEM 7.3B GENERAL LEDGER ACCOUNT NO. 101

ACCOUNT Cash DATE

DESCRIPTION

2019 Nov. 15 18 20 28 30

Post Ref.

DEBIT

J1 J2 J2 J2 J2

10 6 5 3 00 3 2 0 00 7 7 3 80 4 3 4 60 10 9 7 1 00

CREDIT

10 6 5 3 00 10 9 7 3 00 11 7 4 6 80 12 1 8 1 40 23 1 5 2 40

ACCOUNT NO. 111

ACCOUNT Accounts Receivable DESCRIPTION 2019 Nov.

1 2 7 12 16 17 18 20 24 28 29

BALANCE DEBIT CREDIT

Post Ref.

DEBIT

J1 J1 J1 J1 J1 J2 J2 J2 J2 J2 J2

5 8 3 00 8 7 4 50 4 3 4 60

CREDIT

1 0 0 70 5 8 3 00 1 4 5 7 50 3 2 0 00 7 7 3 80 1 2 7 20 4 3 4 60 7 1 5 50

BALANCE DEBIT CREDIT 5 8 3 00 1 4 5 7 50 1 8 9 2 10 1 7 9 1 40 2 3 7 4 40 3 8 3 1 90 3 5 1 1 90 2 7 3 8 10 2 6 1 0 90 2 1 7 6 30 2 8 9 1 80

PROBLEM 7.3B (continued) ACCOUNT NO. 221

ACCOUNT Sales Tax Payable DATE 2019 Nov.

DESCRIPTION

1 2 7 12 15 16 17 24 29 30

Post Ref.

DEBIT

CREDIT DEBIT

J1 J1 J1 J1 J1 J1 J2 J2 J2 J2

BALANCE CREDIT

3 3 00 4 9 50 2 4 60

3 3 00 8 2 50 1 0 7 10 1 0 1 40 7 0 4 40 7 3 7 40 8 1 9 90 8 1 2 70 8 5 3 20 1 4 7 4 20

5 70 6 0 3 00 3 3 00 8 2 50 7 20 4 0 50 6 2 1 00

GENERAL LEDGER ACCOUNT NO. 401

ACCOUNT Sales DATE 2019 Nov.

DESCRIPTION

1 2 7 15 16 17 29 30

Post Ref.

DEBIT

CREDIT DEBIT

J1 J1 J1 J1 J1 J2 J2 J2

5 5 0 00 8 2 5 00 4 1 0 00 10 0 5 0 00 5 5 0 00 1 3 7 5 00 6 7 5 00 10 3 5 0 00

2019 Nov. 12 24

DESCRIPTION

5 5 0 00 1 3 7 5 00 1 7 8 5 00 11 8 3 5 00 12 3 8 5 00 13 7 6 0 00 14 4 3 5 00 24 7 8 5 00 ACCOUNT NO. 421

ACCOUNT Sales Returns and Allowances DATE

BALANCE CREDIT

Post Ref.

DEBIT

J1 J2

9 5 00 1 2 0 00

CREDIT

BALANCE DEBIT CREDIT 9 5 00 2 1 5 00

PROBLEM 7.3B (continued) ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME Alice Chu ADDRESS DATE

DESCRIPTION

2019 Nov. 1 Sales Slip 101 18

Post Ref.

DEBIT

J1 J2

5 8 3 00

Post Ref.

DEBIT

J1 J2 J2

4 3 4 60

Post Ref.

DEBIT

J2 J2

1 4 5 7 50

Post Ref.

DEBIT

J1 J1 J2

8 7 4 50

CREDIT

3 2 0 00

BALANCE

5 8 3 00 2 6 3 00

NAME Bob Huffington ADDRESS DATE

DESCRIPTION

2019 Nov. 7 Sales Slip 103 28 29 Sales Slip 106

CREDIT

4 3 4 60 7 1 5 50

BALANCE

4 3 4 60 - 0 7 1 5 50

NAME Dennis Newcombe ADDRESS DATE

DESCRIPTION

2019 Nov. 17 Sales Slip 105 24 Credit Memorandum 102

CREDIT

1 2 7 20

BALANCE

1 4 5 7 50 1 3 3 0 30

NAME Jane Peters ADDRESS DATE

DESCRIPTION

2019 Nov. 2 Sales Slip 102 12 Credit Memorandum 101 20

CREDIT

1 0 0 70 7 7 3 80

BALANCE

8 7 4 50 7 7 3 80 - 0 -

PROBLEM 7.3B (continued) ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME Gina Silvestri ADDRESS DATE 2019 Nov. 16 Sales Slip 104

DESCRIPTION

Post Ref.

DEBIT

CREDIT

5 8 3 00

BALANCE

5 8 3 00

Appliances for Less Schedule of Accounts Receivable November 30, 2019 Alice Chu Bob Huffington Dennis Newcombe Jane Peters Gina Silvestri Total

Analyze: Damaged or defective goods decreased sales by $215. This is 0.9% of sales ($215/$24,785).

2 6 3 00 7 1 5 50 1 3 3 0 30 - 0 5 8 3 00 2 8 9 1 80

PROBLEM 7.4B PAGE

GENERAL JOURNAL DATE 1 2019 2 May 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37

DESCRIPTION

1 Accounts Receivable/Annie’s Flowers Sales Sold floral arrangements on credit to Annie’s Flowers, Invoice 9312, 2/10, n/30 4 Sales Discounts Cash Accounts Receivable/Orange County Florist

Post Ref. 111

✔

DEBIT

4 5 0 00

401

452 101 111

2 4 00 1 1 7 6 00

✔

Received payment on account from Orange County Florist, Invoice 9299 6 Cash Sales Sold merchandise for cash to a new customer

101 401

9 2 5 00

7 Sales Returns and Allowances Cash Issued cash refund for merchandise sold on May 6

451 101

2 5 00

8 Accounts Receivable/Rosa’s Flowers and Gifts

111

Sales Sold floral arrangements on credit to Rosa’s Flowers and Gifts, Invoice 9313, 2/10, n/30 10 Sales Discounts Cash Accounts Receivable/Annie’s Flowers

✔

1 5 0 0 00

401

452 101 111

9 00 4 4 1 00

✔

Received payment on account from Annie’s Flowers, Invoice 9312 14 Sales Returns and Allowances Accounts Receivable/Rosa’s Flowers and Gifts

451 111

2 0 0 00

✔

Issued allowance due to withered flowers, Credit Memorandum 109; original sale made on Invoice 9313, May 8, to Rosa’s Flowers and Gifts

CREDIT 1 2 4 5 0 00 3 4 5 6 7 8 1 2 0 0 00 9 10 11 12 13 9 2 5 00 14 15 16 17 2 5 00 18 19 20 21 1 5 0 0 00 22 23 24 25 26 27 4 5 0 00 28 29 30 31 32 2 0 0 00 33 34 35 36 37

PROBLEM 7.4B (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 May 17 Sales Discounts 3 Cash 4 Accounts Receivable/Rosa’s Flowers and Gifts 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33

Post Ref.

DEBIT

CREDIT

452 101

2 6 00 1 2 7 4 00

1 2 3 1 3 0 0 00 4

111

✔

Received payment on account from Rosa’s Flowers and Gifts, Invoice 9313 19 Cash Accounts Receivable/White Lily Florists, Inc

101 111

2 9 0 0 00

✔

Received payment on account from White Lily Florists, Inc. Invoice 9279 20 Accounts Receivable/Grand Party Supply Sales Sold table arrangements on credit to Grand Party Supply, Invoice 9314, 2/10, n/30 24 Accounts Receivable/Miyata Floral Designs Sales Sold roses on credit to Miyata Floral Designs, Invoice 9315, 2/10, n/30 26 Accounts Receivable/Cancino’s Flower Shop Sales Sold potted plants on credit to Cancino’s Flower Shop, Invoice 9316, 2/10, n/30 27 Sales Returns and Allowances Accounts Receivable/Miyata Floral Designs

111

✔

5 8 0 00

10 11 12 13

4 8 0 00

5 8 0 00 14 15 16 17 18

8 5 0 00

4 8 0 00 19 20 21 22 23

401

111

✔

401

111

✔

401

451 111

5 6 7 8 2 9 0 0 00 9

✔

Accept a return of damaged roses and issued Credit Memorandum 110 to Miyata Floral Designs. Original sale made on Invoice 9315, May 24

4 8 00

8 5 0 00 24 25 26 27 28 4 8 00 29 30 31 32 33

PROBLEM 7.4B (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 May 29 Sales Discounts 3 Cash 4 Accounts Receivable/Grand Party Supply 5 6 7 8 9 10 11

Post Ref. 452 101 111

DEBIT

1 1 60 5 6 8 40

✔

Received payments on account, Invoice 9314 30 Accounts Receivable/White Lily Flowers, Inc. Sales Sold plants on credit to White Lily Flowers, Inc., Invoice 9317, 2/10, n/30

111

✔

1 2 0 0 00

401

Analyze: The amount of the discount taken by Annie's Flowers on May 10 was $9.00.

CREDIT 1 2 3 5 8 0 00 4 5 6 7 1 2 0 0 00 8 9 10 11

PROBLEM 7.5B GENERAL LEDGER ACCOUNT NO. 101

ACCOUNT Cash DATE

DESCRIPTION

2019 May 1 Balance 4 6 7 10 17 19 29

Post Ref. ✔ J12 J12 J12 J12 J13 J13 J14

DEBIT

CREDIT

1 1 7 6 00 9 2 5 00 2 5 00 4 4 1 00 1 2 7 4 00 2 9 0 0 00 5 6 8 40

DESCRIPTION

2019 May 1 Balance 1 4 8 10 14 17 19 20 24 26 27 29 30

25 8 0 0 00 26 9 7 6 00 27 9 0 1 00 27 8 7 6 00 28 3 1 7 00 29 5 9 1 00 32 4 9 1 00 33 0 5 9 40

ACCOUNT NO. 111

ACCOUNT Accounts Receivable DATE

BALANCE DEBIT CREDIT

Post Ref.

J12 J12 J12 J12 J12 J13 J13 J13 J13 J13 J13 J14 J14

DEBIT

CREDIT

4 5 0 00 1 2 0 0 00 1 5 0 0 00 4 5 0 00 2 0 0 00 1 3 0 0 00 2 9 0 0 00 5 8 0 00 4 8 0 00 8 5 0 00 4 8 00 5 8 0 00 1 2 0 0 00

BALANCE DEBIT CREDIT 4 1 0 0 00 4 5 5 0 00 3 3 5 0 00 4 8 5 0 00 4 4 0 0 00 4 2 0 0 00 2 9 0 0 00 - 0 5 8 0 00 1 0 6 0 00 1 9 1 0 00 1 8 6 2 00 1 2 8 2 00 2 4 8 2 00

PROBLEM 7.5B (continued) GENERAL LEDGER ACCOUNT NO. 401

ACCOUNT Sales DATE

DESCRIPTION

2019 May 1 6 8 20 24 26 30

Post Ref.

DEBIT

J12 J12 J12 J13 J13 J13 J14

CREDIT

4 5 0 00 9 2 5 00 1 5 0 0 00 5 8 0 00 4 8 0 00 8 5 0 00 1 2 0 0 00

DESCRIPTION

2019 May 7 14 27

Post Ref.

DEBIT

J12 J12 J13

2 5 00 2 0 0 00 4 8 00

CREDIT

2019 May 4 10 17 29

DESCRIPTION

BALANCE DEBIT CREDIT 2 5 00 2 2 5 00 2 7 3 00

ACCOUNT NO. 452

ACCOUNT Sales Discounts DATE

4 5 0 00 1 3 7 5 00 2 8 7 5 00 3 4 5 5 00 3 9 3 5 00 4 7 8 5 00 5 9 8 5 00

ACCOUNT NO. 451

ACCOUNT Sales Returns and Allowances DATE

BALANCE DEBIT CREDIT

Post Ref. J12 J12 J13 J14

DEBIT

CREDIT

BALANCE DEBIT CREDIT

2 4 00 9 00 2 6 00 1 1 60

2 4 00 3 3 00 5 9 00 7 0 60

PROBLEM 7.5B (continued) ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME Annie’s Flowers ADDRESS DATE

DESCRIPTION

2019 May 1 Invoice 9312 10

Post Ref.

DEBIT

J12 J12

4 5 0 00

Post Ref.

DEBIT

J13

8 5 0 00

Post Ref.

DEBIT

J13 J14

5 8 0 00

CREDIT

4 5 0 00

BALANCE

4 5 0 00 - 0 -

NAME Cancino’s Flower Shop ADDRESS DATE

DESCRIPTION

2019 May 26 Invoice 9316

CREDIT

BALANCE

8 5 0 00

NAME Grand Party Supply ADDRESS DATE 2019 May 20 Invoice 9314 29

DESCRIPTION

CREDIT

5 8 0 00

BALANCE

5 8 0 00 - 0 -

PROBLEM 7.5B (continued) ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME Miyata Floral Designs ADDRESS DATE

DESCRIPTION

2019 May 24 Invoice 9315 27 Credit Memorandum 110

Post Ref.

DEBIT

J13 J13

4 8 0 00

Post Ref.

DEBIT

CREDIT

4 8 00

BALANCE

4 8 0 00 4 3 2 00

NAME Orange County Florist ADDRESS DATE

DESCRIPTION

2019 May 1 Balance 4

✔ J12

CREDIT

BALANCE

1 2 0 0 00

1 2 0 0 00 - 0 -

CREDIT

BALANCE

2 0 0 00 1 3 0 0 00

1 5 0 0 00 1 3 0 0 00 - 0 -

NAME Rosa’s Flowers and Gifts ADDRESS DATE

DESCRIPTION

2019 May 8 Invoice 9313 14 Credit Memorandum 109 17

Post Ref.

DEBIT

J12 J12 J13

1 5 0 0 00

PROBLEM 7.5B (continued) ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME White Lily Florists, Inc. ADDRESS DATE 2019 May 1 Balance 19 30 Invoice 9317

DESCRIPTION

Post Ref.

J13 J14

DEBIT

CREDIT

BALANCE

2 9 0 0 00

2 9 0 0 00 - 0 1 2 0 0 00

1 2 0 0 00

The Urban Florist Schedule of Accounts Receivable May 31, 2019 Annie’s Flowers Cancino’s Flower Shop Grand Party Supply Miyata Floral Designs Orange County Florist Rosa’s Flowers and Gifts White Lily Florists, Inc. Total

- 0 8 5 0 00 - 0 4 3 2 00 - 0 - 0 1 2 0 0 00 2 4 8 2 00

The balance of the Accounts Receivable control account is $2,482.00. Analyze: The total sales on account in May, prior to any returns, allowances, or discounts is $5,060.00 ($5,985.00 – $925.00).

PROBLEM 7.6B PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 June 1 Accounts Receivable/Sonoma Country Kitchens 3 Sales [$9,000 - ($9,000 × 20%)] 4 Sold crystal goods on credit to Sonoma Country 5 Kitchens, a wholesale customer, Invoice 6920, n/15 6 7 15 Cash ($10,200 + $816) 8 Sales 9 Sales Tax Payable ($10,200 × 8%) 10 Record cash sales, June 1 - 15 11 12 15 Credit Card Expense ($14,200 + $1,136) × 3% 13 Cash ($14,200 + $1,136 - $460.08) 14 Sales 15 Sales Tax Payable ($14,200 × 8%) 16 Record credit card sales, June 1 - 15 17 18 16 Cash 19 Accounts Receivable/Sonoma Country Kitchens 20 Received payment on account, Invoice 6920 21 22 16 Accounts Receivable/American Express 23 Sales 24 Sales Tax Payable ($9,000 × 8%) 25 Sold merchandise to customers using 26 American Express 27 28 17 Accounts Receivable/Victorian Decadence 29 Sales [$18,000 - ($18,000 × 40%)] 30 Sold a set of brass serving trays on credit to 31 Victorian Decadence, a wholesale customer, 32 Invoice 6921, n/15 33 34 35 19 Credit Card Expense ($9,720 × 4%) 36 Cash ($9,720 - $388.80) 37 Accounts Receivable from American Express 38 Received payment from American Express for 39 amount billed on June 16 40 41 29 Cash 42 Accounts Receivable/Victorian Decadence

Post Ref.

DEBIT

121 401

7 2 0 0 00

101 401 222

11 0 1 6 00

521 101 401 222

4 6 0 08 14 8 7 5 92

101 121

7 2 0 0 00

121 401 222

9 7 2 0 00

121 401

10 8 0 0 00

521 101 121

3 8 8 80 9 3 3 1 20

101 121

10 8 0 0 00

CREDIT 1 2 7 2 0 0 00 3 4 5 6 7 10 2 0 0 00 8 8 1 6 00 9 10 11 12 13 14 2 0 0 00 14 1 1 3 6 00 15 16 17 18 7 2 0 0 00 19 20 21 22 9 0 0 0 00 23 7 2 0 00 24 25 26 27 28 10 8 0 0 00 29 30 31 32 33 34 35 36 9 7 2 0 00 37 38 39 40 41 10 8 0 0 00 42

43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61

Received payment on account, Invoice 6921 30 Cash ($9,550 + $764) Sales Sales Tax Payable ($9,550 × 8%) Record cash sales, June 16 - 30

101 401 222

10 3 1 4 00

30 Credit Card Expense ($11,700 + $936) × 3% Cash ($11,700 + $936 - $379.08) Sales Sales Tax Payable ($11,700 × 8%) Record credit card sales, June 16 - 30

521 101 401 222

3 7 9 08 12 2 5 6 92

30 Accounts Receivable/American Express Sales Sales Tax Payable ($18,100 × 8%) Sold merchandise to customers using American Express

121 401 222

19 5 4 8 00

43 44 45 9 5 5 0 00 46 7 6 4 00 47 48 49 50 51 11 7 0 0 00 52 9 3 6 00 53 54 55 56 18 1 0 0 00 57 1 4 4 8 00 58 59 60 61

PROBLEM 7.6B (continued) GENERAL LEDGER ACCOUNT NO. 101

ACCOUNT Cash DATE

DESCRIPTION

2019 June 1 Balance 15 15 16 19 29 30 30

Post Ref. ✔ J15 J15 J15 J16 J16 J16 J16

DEBIT

CREDIT

30 1 5 5 00 41 1 7 1 00 56 0 4 6 92 63 2 4 6 92 72 5 7 8 12 83 3 7 8 12 93 6 9 2 12 105 9 4 9 04

11 0 1 6 00 14 8 7 5 92 7 2 0 0 00 9 3 3 1 20 10 8 0 0 00 10 3 1 4 00 12 2 5 6 92

ACCOUNT NO. 121

ACCOUNT Accounts Receivable DATE

DESCRIPTION

2019 June 1 16 16 17 19 29 30

Post Ref.

DEBIT

J15 J15 J15 J15 J16 J16 J16

7 2 0 0 00

CREDIT

7 2 0 0 00 9 7 2 0 00 10 8 0 0 00 9 7 2 0 00 10 8 0 0 00 19 5 4 8 00

2019 June 15 15 16 30 30 30

DESCRIPTION

BALANCE DEBIT CREDIT 7 2 0 0 00 - 0 9 7 2 0 00 20 5 2 0 00 10 8 0 0 00 - 0 19 5 4 8 00

ACCOUNT NO. 222

ACCOUNT Sales Tax Payable DATE

BALANCE DEBIT CREDIT

Post Ref. J15 J15 J15 J16 J16 J16

DEBIT

CREDIT

BALANCE DEBIT CREDIT

8 1 6 00 1 1 3 6 00 7 2 0 00 7 6 4 00 9 3 6 00 1 4 4 8 00

8 1 6 00 1 9 5 2 00 2 6 7 2 00 3 4 3 6 00 4 3 7 2 00 5 8 2 0 00

PROBLEM 7.6B (continued) GENERAL LEDGER ACCOUNT NO. 401

ACCOUNT Sales DATE

DESCRIPTION

2019 June 1 15 15 16 17 30 30 30

Post Ref.

DEBIT

J15 J15 J15 J15 J15 J16 J16 J16

CREDIT

7 2 0 0 00 10 2 0 0 00 14 2 0 0 00 9 0 0 0 00 10 8 0 0 00 9 5 5 0 00 11 7 0 0 00 18 1 0 0 00

2019 June 15 19 30

DESCRIPTION

7 2 0 0 00 17 4 0 0 00 31 6 0 0 00 40 6 0 0 00 51 4 0 0 00 60 9 5 0 00 72 6 5 0 00 90 7 5 0 00

ACCOUNT NO. 521

ACCOUNT Credit Card Expense DATE

BALANCE DEBIT CREDIT

Post Ref.

DEBIT

J15 J16 J16

4 6 0 08 3 8 8 80 3 7 9 08

CREDIT

BALANCE DEBIT CREDIT 4 6 0 08 8 4 8 88 1 2 2 7 96

Analyze: The total credit card expense incurred in June is $1,227.96.

CRITICAL THINKING PROBLEM 7.1 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 March 1 Accounts Receivable/Mark Everest ($700 + $56) 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

Post Ref. 111

DEBIT

✔

111

✔

7 5 6 00

3 2 4 00

7 0 0 00 3 5 6 00 4 5 6 7 8

Sales Sales Tax Payable ($300 × 8%) Sold merchandise on credit to Emily Ancheta, Sales Slip 102 8 Sales Returns and Allowances Sales Tax Payable Accounts Receivable/Mark Everest

✔

3 0 0 00 9 2 4 00 10 11 12 13 14 15 1 0 8 00 16

✔

17 18 19 20 21 6 4 8 00 22

✔

23 24 25

1 0 0 00 8 00 111

Accept return of defective merchandise, Credit Memorandum 1; original sales made on Sales Slip 101 of March 1 10 Cash ($756 - $108) Accounts Receivable/Mark Everest

6 4 8 00 111

Received cash from Mark Everest on account 12 Accounts Receivable/Annie Han ($450 + $36)

111

4 8 6 00

Sales Sales Tax Payable ($450 × 8%) Sold merchandise on credit to Annie Han, Sales Slip 103 15 Cash ($5,000 + $400) Sales Sales Tax Payable ($5,000 × 8%) Record cash sales, March 1 - 15

CREDIT 1 2

Sales Sales Tax Payable ($700 × 8%) Sold merchandise on credit to Mark Everest, Sales Slip 101 3 Accounts Receivable/Emily Ancheta ($300 + $24)

5 4 0 0 00

4 5 0 00 26 3 6 00 27 28 29 30 31 5 0 0 0 00 32 4 0 0 00 33 34 35

CRITICAL THINKING PROBLEM 7.1 (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 March 15 Credit Card Expense ($7,000 + $560) × 3% 3 Cash ($7,000 + $560 - $226.80) 4 Sales 5 Sales Tax Payable ($7,000 × 8%) 6 Record sales to customers using bank credit cards, 7 March 1 -15 8 9 25 Accounts Receivable / Jason Cataldo ($300 + $24) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38

Post Ref.

DEBIT

3 2 4 00

3 2 4 0 00

3 0 0 00 10 2 4 00 11 12 13 14

✔

Sales Sales Tax Payable ($300 × 8%) Sold merchandise on credit to Jason Cataldo, Sales Slip 104 26 Accounts Receivable / American Express ($3,000 + $240)

111

✔

Sales Sales Tax Payable ($3,000 × 8%) Record sales to customers using American Express 28 Cash Accounts Receivable / Annie Han

✔

3 0 0 0 00 15 2 4 0 00 16 17 18 19 1 0 0 00 20

✔

21 22 23 5 5 0 0 00 24 4 4 0 00 25 26 27 28 29 3 2 4 0 00 30

1 0 0 00 111

Received partial payment on account from Annie Han 31 Cash ($5,500 + $440) Sales Sales Tax Payable ($5,500 × 8%) Record cash sales, March 16 - 31

5 9 4 0 00

31 Credit Card Expense ($3,240 × 4%) Cash ($3,240 - $129.60) Accounts Receivable / American Express

1 2 9 60 3 1 1 0 40 111

Received payment from American Express 31 Credit Card Expense ($4,000 + $320) × 3% Cash ($4,000 + $320 - $129.60) Sales Sales Tax Payable ($4,000 × 8%) Record sales to customers using bank credit cards, March 16 – 31

CREDIT 1 2 3 7 0 0 0 00 4 5 6 0 00 5 6 7 8 9

2 2 6 80 7 3 3 3 20

111

31 1 2 9 60 4 1 9 0 40

32 33 34 4 0 0 0 00 35 3 2 0 00 36 37 38

CRITICAL THINKING PROBLEM 7.1 (continued) GENERAL LEDGER ACCOUNT NO. 111

ACCOUNT Accounts Receivable DATE

DESCRIPTION

2019 March 1 3 8 10 12 25 26 28 31

Post Ref.

DEBIT

CREDIT

J1 J1 J1 J1 J1 J2 J2 J2 J2

7 5 6 00 3 2 4 00 1 0 8 00 6 4 8 00 4 8 6 00 3 2 4 00 3 2 4 0 00 1 0 0 00 3 2 4 0 00

BALANCE DEBIT CREDIT 7 5 6 00 1 0 8 0 00 9 7 2 00 3 2 4 00 8 1 0 00 1 1 3 4 00 4 3 7 4 00 4 2 7 4 00 1 0 3 4 00

ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME Emily Ancheta ADDRESS DATE

DESCRIPTION

2019 March 3 Sales Slip 102

Post Ref.

DEBIT

3 2 4 00

Post Ref.

DEBIT

J2 J2

3 2 4 0 00

CREDIT

BALANCE

3 2 4 00

NAME American Express ADDRESS DATE 2019 March 26 31

DESCRIPTION

CREDIT

BALANCE

3 2 4 0 00

3 2 4 0 00 - 0 -

CRITICAL THINKING PROBLEM 7.1 (continued) ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME Jason Cataldo ADDRESS DATE DESCRIPTION Post DEBIT CREDIT Ref. 2019 March 25 Sales Slip 104 J2 3 2 4 00

NAME Mark Everest ADDRESS DATE DESCRIPTION 2019 March 1 Sales Slip 101 8 CM 1 10

NAME Annie Han ADDRESS DATE

DESCRIPTION

2019 March 12 Sales Slip 103 28

Post Ref.

DEBIT

J1 J1 J1

7 5 6 00

Post Ref.

DEBIT

J1 J2

4 8 6 00

CREDIT

1 0 8 00 6 4 8 00

CREDIT

1 0 0 00

BALANCE

3 2 4 00

BALANCE

7 5 6 00 6 4 8 00 - 0 -

BALANCE

4 8 6 00 3 8 6 00

Athletic X-Press Sporting Goods Schedule of Accounts Receivable March 31, 2019 Emily Ancheta American Express Jason Cataldo Mark Everest Annie Han Total

3 2 4 00 - 0 3 2 4 00 - 0 3 8 6 00 1 0 3 4 00

CRITICAL THINKING PROBLEM 7.2 1.

An electronic system would prevent this mistake because the computer would automatically post and update the customer’s subsidiary ledger account. This mistake would not be identified in a manual system until the Accounts Receivable general ledger account was reconciled to the schedule of accounts receivable.

The use of an electronic scanner should reduce unrecorded sales. Each item has to be passed over the scanner, which automatically records the price. This process reduces the chance that an item is overlooked; but with either system, it is possible for the salesclerk to deliberately not charge a customer for a purchase. The owner and supervisors must be alert to this possibility and need to check the salesclerk’s work on a regular basis Discrepancies in the inventory may identify extensive abuses of this nature.

The computer can be programmed to alert the salesclerk by means of a code number or flashing sign on the register/terminal display screen that a particular credit card number has been reported stolen. The register/ terminal will halt processing the transaction or instruct the salesclerk to check with a supervisor before proceeding with the transaction. With a manual system, the salesclerk would have to consult a separate list of stolen numbers before processing a credit card transaction. Provided the stolen credit card numbers are entered promptly in the computer files, the electronic system would prevent charging a sale on a stolen credit card.

An electronic scanner would prevent customers from being charged an incorrect price. Because the computer would be programmed with the sale prices, the scanner would automatically record the correct price. A manual system depends on the salesclerk’s memory of price changes or requires new price tags to be placed on sale items. An electronic system would be more dependable and efficient in this situation.

Solutions to Business Connections Managerial Focus: 1. Measures damaged or poor quality goods or late deliveries. 2. Advantages: minimized risk of receivable losses; reduced staffing costs. Disadvantages: discount fees; loss of sales if customers do not have credit cards 3. The actual filing of a tax return is procedural, but expert advice is needed to comply with tax laws and minimize taxes. 4. Credit policies, customer account documentation. 5. Increase sales volume. 6. Losses from uncollectible accounts. 7. Aid in extending credit, identify slow-paying customers. 8. Accurate and complete records. Ethical Dilemma: Watch when a customer pays a bill to see if Wes puts the money in the cash register or just puts it in his pocket and writes a credit memo to remove it from the Accounts Receivable Ledger. Financial Statement Analysis: 1. Sales Returns and Allowances or Sales Discounts. 2. Net sales have increased by $9,707 ($88,519 - $78,812), or 12.3% ($9,707 ÷ $78,812 = 12.3%). Analyze Online: Answers will vary depending on the year. Teamwork: Sales associate would not record a transaction. Louisa’s A/P clerk would process a purchase order for $50,000 and record a debit to purchases and a credit to A/P. The A/R clerk would create a sales invoice and record a debit to A/R and credit to Sales. Internet Connection: Auto creation of P.O. from Sales Order, create A/P and A/R Credit memos, quick conversion to other programs, invoice customers, track payments and sales taxes, print checks and create purchase orders from estimates.

Problem EX EX EX EX EX EX EX EX EX EX EX EX EX EX EX EX

8.1 8.2 8.3 8.4 8.5 8.6 8.7 8.8 8.9 8.10 App 8.11 App 8.12 App 8.13 App 8.14 App 8.15 App 8.16 App

Time 5 10 15 15 10 15 10 10 10 5 10 15 15 20 10 20

PR PR PR PR PR PR PR

8.1A 8.2A 8.3A 8.4A 8.5A 8.6A 8.7A App

30 30 30 30 30 35 25

CT CT

8.1 8.2

35 20

Time to Use 5 = 10 = 15 = 20 = 25 = 30 = 35 = 40 = 45 = 50 = 55 = 60 =

1-5 min. 6-10 min. 11-15 min. 16-20 min. 21-25 min. 26-30 min. 31-35 min. 36-40 min. 41-45 min. 46-50 min. 51-55 min. 56-60 min.

CHAPTER 8 ACCOUNTING FOR PURCHASES, ACCOUNTS PAYABLE, AND CASH PAYMENTS Chapter Opener: Thinking Critically Do you think companies such as Bed, Bath & Beyond pay their bills at the last possible minute? Why or why not? No, they do not want to pay their bills at the last minute. Companies want to pay their bills on time to maintain a good relationship with their vendors as well as take advantage of early payment discount opportunities. Managerial Implications: Thinking Critically Answers will vary. Students should recognize the need for checks and balances for avoiding theft and waste. Discussion Questions These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter. 1. Authorization of purchase, check-in of goods, verification of invoice, proper authorization of payment, division of labor and tasks, use of prenumbered forms. 2. Documentation of credit issued. 3. Return of unsatisfactory merchandise. 4. Allowance made for damaged merchandise. 5. The Accounts Payable account is the control account. It summarizes the balances of the creditor accounts. 6. List of all creditors and the balance owed to each. It is prepared so that its total can be proved against the balance of the Accounts Payable account. 7. Individual accounts of all creditors. 8. Helps pay bills promptly and maintain a good credit reputation. 9. Add Freight In to Purchases, then deduct Purchases Returns and Allowances and Purchases Discounts. 10. Equipment. 11. Purchase invoice denotes incoming merchandise, sales invoice denotes outgoing (sold) merchandise. 12. Debit. 13. Income Statement in the Cost of Goods Sold section. 14. Provides a separate record. 15. a. Net amount of the invoice is due 30 days after the date of the invoice. b. If the invoice is paid within 10 days of its date, a 2 percent discount may be taken; otherwise, the total amount is due in 30 days. c. The amount of the invoice is due 10 days after the end of the month in which the invoice is issued. d. Payment in full is due 20 days after date of the invoice. e. If the invoice is paid within 10 days of its date, 1% discount may be taken; otherwise, the total amount is due in 20 days. f. If payment is made within 5 days of its date, a 3 percent discount may be taken; otherwise, the total amount is due in 30 days. g. Payment in full is due 15 days after the end of the month in which the invoice is issued. Questions 16 - 18 relate to the Chapter 8 Appendix. 16.

Merchandise Inventory

EXERCISE 8.1 Dr Freight In Dr Purchases

Cr Purchases Returns and Allowances Cr Purchases Discounts

EXERCISE 8.2 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 June 4 Purchases 3 Accounts Payable/Salinas Company 4 Purchased merchandise on account, 5 Invoice 100, n/30 6 7 15 Purchases 8 Cash 9 Purchased merchandise for cash 10 11 30 Accounts Payable/Salinas Company 12 Cash 13 Paid amount due, Invoice 100 14

Post Ref.

DEBIT

CREDIT

1 0 2 5 00 1 0 2 5 00

1 5 4 0 00 1 5 4 0 00

1 0 2 5 00

EXERCISE 8.3 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Apr. 1 Purchases 3 Cash 4 Purchased merchandise for cash 5 6 2 Cash 7 Purchases Returns and Allowances 8 Returned merchandise purchased April 1 for refund 9 10 4 Purchases 11 Freight In 12 Accounts Payable/Breit Distributors 13 Purchased merchandise on account, 14 Invoice 125, n/30 15 16 7 Accounts Payable/Breit Distributors 17 Purchases Returns and Allowances 18 Received Credit Memo 202 for return of 19 damaged merchandise 20 21 30 Accounts Payable/Breit Distributors ($917 – $58) 22 Cash 23 Paid amount due on Invoice 125 after receipt 24 of Credit Memo 202, check 1458 25

Post Ref.

DEBIT

CREDIT

2 3 1 0 00 2 3 1 0 00

2 1 8 00 2 1 8 00

8 7 1 00 4 6 00 9 1 7 00

5 8 00 5 8 00

8 5 9 00

EXERCISE 8.4 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Apr. 1 Purchases 3 Freight In 4 Accounts Payable/O’Rourke Fabricators 5 Purchased merchandise on account, 6 Invoice 885, 1/10, n/30 7 8 9 Accounts Payable/O’Rourke Fabricators 9 Purchases Discounts (1% x $3,000) 10 Cash ($3,020 - $30) 11 Paid amount due on Invoice 885, Check 457 12 13 15 Purchases 14 Freight In 15 Accounts Payable/Kroll Company 16 Purchased merchandise on account, 17 Invoice 145, 1/10, n/30 18 19 17 Accounts Payable/Kroll Company 20 Purchases Returns and Allowances 21 Received Credit Memo 332 for return of 22 damaged merchandise 23 24 24 Accounts Payable/Kroll Company ($1,325 - $50) 25 Purchases Discounts (1% x ($1,250 - $50)) 26 Cash ($1,275 - $12) 27 Paid amount due on Invoice 145, 28 Check 470 29

Post Ref.

DEBIT

CREDIT

3 0 0 0 00 2 0 00 3 0 2 0 00

3 0 2 0 00 3 0 00 2 9 9 0 00

1 2 5 0 00 7 5 00 1 3 2 5 00

5 0 00 5 0 00

1 2 7 5 00

1 2 00 1 2 6 3 00

EXERCISE 8.5 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

Post Ref.

1 2019 2 March 8 Purchases ($6,000 - $1,800 = $4,200; $4,200 - $630 = $3,570) 3 Accounts Payable/Alenikov Designs 4 Purchased merchandise on account, 5 Invoice 1091, 3/10, n/30 6 7 17 Accounts Payable/Alenikov Designs 8 Purchases Discounts (3% x $3,570) 9 Cash ($3,570 - $107.10) 10 Paid amount due on Invoice 1091, 11 Check 185 12

DEBIT

CREDIT

3 5 7 0 00 3 5 7 0 00

3 5 7 0 00 1 0 7 10 3 4 6 2 90

EXERCISE 8.6 Bushard Company: PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Feb. 10 Purchases 3 Accounts Payable/Schmidt, Inc. 4 Purchased merchandise on account., 5 Invoice 1980, terms 1/10, n/30 6 7 13 Accounts Payable/Schmidt, Inc. 8 Purchases Returns and Allowances 9 Received Credit Memorandum 230 for return 10 of damaged merchandise, Invoice 1980 11 12 19 Accounts Payable/Schmidt, Inc. ($5,000 - $200) 13 Purchases Discounts ($5,000 - $200) x 1% 14 Cash ($4,800 - $48) 15 Paid amount owed on Invoice 1980 16 less return of February 13, Check #2010 17

Post Ref.

DEBIT

CREDIT

5 0 0 0 00 5 0 0 0 00

2 0 0 00 2 0 0 00

4 8 0 0 00

4 8 00 4 7 5 2 00

EXERCISE 8.6 (continued) Schmidt, Inc.: PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Feb. 10 Accounts Receivable/Bushard Company 3 Sales 4 Sold merchandise on account., 5 Invoice 1980, terms 1/10, n/30 6 7 13 Sales Returns and Allowances 8 Accounts Receivable/Bushard Company 9 Accepted return of damaged merchandise, Credit 10 Memorandum 230; original sale made on 11 Invoice 1980, February 10 12 13 19 Sales Discounts 14 Cash 15 Accounts Receivable/Bushard Company 16 Received payment on on Invoice 1980, 17 less sales discount 18

Post Ref.

DEBIT

CREDIT

5 0 0 0 00 5 0 0 0 00

2 0 0 00 2 0 0 00

4 8 00 4 7 5 2 00 4 8 0 0 00

EXERCISE 8.7 Purchases Add freight in Delivered Cost of Purchases Less Purchase Returns and Allowances Purchases Discounts Net Delivered Cost of Purchases

$42,880 2,376 45,256 $2,960 2,050

5,010 $40,246

EXERCISE 8.8 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Jan. 8 Accounts Payable/Stamos Distributors 3 Cash 4 Made partial payment on account, check 1240 5 6 10 Accounts Payable/Evans Enterprises 7 Purchases Returns and Allowances 8 Received Credit Memorandum 123 as allowance 9 for discolored merchandise 10

Post Ref. 202

✔

DEBIT

CREDIT

3 0 0 00 3 0 0 00

202

✔

2 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

1 2 3 4 5 6 7 8 9 10 11 12

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

1 2 3 4 5 6 7 8 9 10

EXERCISE 8.8 (continued) ACCOUNT NO. 202

ACCOUNT Accounts Accounts Payable Payable DATE 2019 Jan.

ITEM

Post Ref. ✔ J40 J40

1 Balance 8 10

DEBIT

CREDIT

6 6 0 0 00 6 3 0 0 00 6 1 0 0 00

3 0 0 00 2 0 0 00

NAME Evans Enterprises ADDRESS DATE 2019 Jan.

DESCRIPTION

TERMS Post Ref. ✔ J40

1 Balance 10 CM 123

DEBIT

2019 Jan.

DESCRIPTION

Post Ref.

DEBIT

2019 Jan.

DESCRIPTION

1 Balance

1 6 0 0 00 1 4 0 0 00

CREDIT

BALANCE

3 1 0 0 00 2 8 0 0 00

3 0 0 00

NAME Tonetta Company ADDRESS DATE

BALANCE

TERMS

✔ J40

1 Balance 8

CREDIT

2 0 0 00

NAME Stamos Distributors ADDRESS DATE

BALANCE DEBIT CREDIT

TERMS Post Ref.

DEBIT

CREDIT

✔

BALANCE

1 9 0 0 00

EXERCISE 8.9 Bioplast Jewelry, Inc. Schedule of Accounts Payable January 31, 2019 Evans Enterprises Stamos Distributors Tonetta Company Total

1 4 0 0 00 2 8 0 0 00 1 9 0 0 00 6 1 0 0 00

2. Does the total of your accounts payable schedule agree with the balance of the accounts payable account in the general ledger at January 31, 2019? Yes. The total of the schedule of accounts payable is $6,100, and the balance of the Accounts Payable account is $6,100.

EXERCISE 8.10 APP Dr Cr Cr Dr

Merchandise Inventory Sales Tax Payable Sales Sales Discounts

Dr Dr Dr

Sales Returns and Allowances Cost of Goods Sold Credit Card Expense

EXERCISE 8.11 APP PAGE

GENERAL JOURNAL DATE

DESCRIPTION

Post Ref.

1 2019 2 June 4 Merchandise Inventory 3 Accounts Payable/Salinas Company 4 Purchased merchandise on account, 5 Invoice 100, n/30 6 7 15 Merchandise Inventory 8 Cash 9 Purchased merchandise for cash 10 11 30 Accounts Payable/Salinas Company 12 Cash 13 Paid amount due, Invoice 100 14

DEBIT

CREDIT

1 0 2 5 00 1 0 2 5

1 5 4 0 00 1 5 4 0

1 0 2 5 00 1 0 2 5

EXERCISE 8.12 APP PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Apr. 1 Merchandise Inventory 3 Accounts Payable/O’Rourke Fabricators 4 Purchased merchandise on account, 5 Invoice 885, 1/10, n/30 6 7 9 Accounts Payable/O’Rourke Fabricators 8 Merchandise Inventory (1% x $3,000) 9 Cash ($3,020 - $30) 10 Paid amount due on Invoice 885, Check 457 11 12 15 Merchandise Inventory ($1,250 + $75) 13 Accounts Payable/Kroll Company 14 Purchased merchandise on account, 15 Invoice 145, 1/10, n/30 16 17 17 Accounts Payable/Kroll Company 18 Merchandise Inventory 19 Received Credit Memo 332 for return of 20 damaged merchandise 21 22 24 Accounts Payable/Kroll Company ($1,325 - $50)

Post Ref.

DEBIT

CREDIT

3 0 2 0 00 3 0 2 0

3 0 2 0 00 3 0 2 9 9 0

1 3 2 5 00 1 3 2 5

5 0 00 5 0

1 2 7 5 00

23 24 25 26 27

Merchandise Inventory (1% x ($1,250 - $50)) Cash ($1,275 - $12) Paid amount due on Invoice 145, Check 470

1 2 1 2 6 3

CREDIT 1 2 00 3 4 5 6 7 00 8 9 10 11 00 12 13 14

CREDIT

00 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

00 23 00 24 25 26 27

EXERCISE 8.13 APP PAGE

GENERAL JOURNAL DATE

DESCRIPTION

Post Ref.

1 2019 2 June 5 Accounts Receivable/Benson Company 3 Sales 4 5 Cost of Goods Sold 5 Merchandise Inventory 6 Sold merchandise on account to Benson Company, 7 Sales Slip 1200, terms n/30 8 9 15 Cash 10 Sales 11 15 Cost of Goods Sold 12 Merchandise Inventory 13 Recorded cash sales 14 15 30 Cash 16 Accounts Receivable/Benson Company 17 Received cash from Benson Company on account 18

DEBIT

CREDIT

9 7 5 00 9 7 5 6 8 3 00 6 8 3

1 9 4 0 00 1 9 4 0 1 3 5 8 00 1 3 5 8

9 7 5 00 9 7 5

EXERCISE 8.14 APP PAGE

GENERAL JOURNAL DATE 1 2019 2 April 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

DESCRIPTION

2 Cash ($2,500 + $200) Sales Sales Tax Payable ($2,500 x 8%) 2 Cost of Goods Sold Merchandise Inventory Recorded cash sales 3 Sales Returns and Allowances Sales Tax Payable ($250 x 8%) Cash ($250 + $20) Merchandise Inventory 3 Cost of Goods Sold Recorded sales return 4 Accounts Receivable/Jordan Clark ($1,050 + $84) Sales Sales Tax Payable ($1,050 × 8%) 4 Cost of Goods Sold

Post Ref.

DEBIT

CREDIT

2 7 0 0 00 2 5 0 0 2 0 0 1 5 0 0 00 1 5 0 0

2 5 0 00 2 0 00 2 7 0 1 5 0 00 1 5 0

1 1 3 4 00 1 0 5 0 8 4 6 3 0 00

20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37

Merchandise Inventory Sold merchandise on credit to Jordan Clark, Sales Slip 908, terms n/30

6 3 0

6 Sales Returns and Allowances Sales Tax Payable ($150 x 8%) Accounts Receivable/Jordan Clark ($150 + $12) 6 Merchandise Inventory Cost of Goods Sold Accept a return of defective merchandise, Credit Memorandum 302; original sale made on Sales Slip 908 to Jordan Clark on April 4

1 5 0 00 1 2 00

30 Cash ($1,134 - $162) Accounts Receivable Received cash from Jordan Clark, after deducting Credit Memorandum 302

9 7 2 00

1 6 2 9 0 00 9 0

9 7 2

EXERCISE 8.15 APP PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 April 1 Accounts Receivable/Fronke's Franks 2 Sales 3 1 Cost of Goods Sold Merchandise Inventory 4 5 Sold merchandise on account to Fronke's 6 Franks, Invoice 1001, terms 2/10, n30. 7 8 10 Sales Discounts ($3,500 x 2%) 9 Cash ($3,500 - $70 discount) 10 Accounts Receivable/Fronke's Franks 11 Received payment from Fronke's Franks for 12 Invoice 1001, dated April 1. 13

Post Ref.

DEBIT

CREDIT

3 5 0 0 00 3 5 0 0 2 0 0 0 00 2 0 0 0

7 0 00 3 4 3 0 00 3 5 0 0

CREDIT 1 2 00 3 4 00 5 6 7 8 9 00 10 11 00 12 13 14 15 00 16 17 18

CREDIT 1 2 00 3 00 4 5 00 6 7 8 9 10 00 11 12 00 13 14 15 16 00 17 00 18 19

00 20 21 22 23 24 25 00 26 27 00 28 29 30 31 32 33 00 34 35 36 37

CREDIT 1 00 2 3 00 4 5 6 7 8 9 00 10 11 12 13

EXERCISE 8.16 APP Bushard Company: PAGE

GENERAL JOURNAL DATE

DESCRIPTION

Post Ref.

1 2019 2 Feb. 10 Merchandise Inventory 3 Accounts Payable/Schmidt, Inc. 4 Purchased merchandise on account., 5 Invoice 1980, terms 1/10, n/30 6 7 13 Accounts Payable/Schmidt, Inc. 8 Merchandise Inventory 9 Received Credit Memorandum 230 for return 10 of damaged merchandise, Invoice 1980 11 12 13 14 15 16 17

DEBIT

CREDIT

5 0 0 0 00 5 0 0 0 00

2 0 0 00 2 0 0 00

19 Accounts Payable/Schmidt, Inc. ($5,000 - $200) Merchandise Inventory ($5,000 - $200) x 1% Cash ($4,800 - $48) Paid amount owed on Invoice 1980 less return of February 13, Check 2010

4 8 0 0 00 4 8 00 4 7 5 2 00

Schmidt, Inc.: PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Feb. 10 Accounts Receivable/Bushard Company 3 Sales 4 10 Cost of Goods Sold Merchandise Inventory 5 6 Sold merchandise on account., 7 Invoice 1980, terms 1/10, n/30 8 9 13 Sales Returns and Allowances 10 Accounts Receivable/Bushard Company 11 13 Merchandise Inventory 12 Cost of Goods Sold 13 Accepted return of damaged merchandise, Credit 14 Memorandum 230; original sale made on 15 Invoice 1980, February 10 16 17 19 Sales Discounts 18 Cash 19 Accounts Receivable/Bushard Company

Post Ref.

DEBIT

CREDIT

5 0 0 0 00 5 0 0 0 00 3 0 0 0 00 3 0 0 0 00

2 0 0 00 2 0 0 00 1 2 0 00 1 2 0 00

4 8 00 4 7 5 2 00 4 8 0 0 00

20 21 22

Received payment on on Invoice 1980, less sales discount

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

20 21 22

PROBLEM 8.1A PAGE 1

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 April 1 Purchases 3 Freight In 4 Accounts Payable/Camera & Film Products 5 Purchased merchandise on account, 6 Invoice 825, n/30 7 8 3 Purchases 9 Accounts Payable/Vision Supplies, Inc. 10 Purchased lenses on account, 11 Invoice 998, n/30 12 13 11 Purchases 14 Accounts Payable/Optical Products 15 Purchased DVD camcorders on account, 16 Invoice 4101, n/30 17 18 15 Purchases 19 Cash 20 Recorded various cash purchases for April 1 – 15. 21 22 26 Purchases 23 Freight In 24 Accounts Payable/Myers Brothers Camera Supplies 25 Purchased lighting equipment on account, 26 Invoice 9288, n/30 27 28 27 Accounts Payable/Vision Supplies, Inc. 29 Cash 30 Issued Check 102 for partial payment of Invoice 998 31 32 30 Purchases 33 Cash 34 Recorded various cash purchases for April 16 – 30. 35 36 30 Accounts Payable/Camera & Film Products 37 Cash 38 Issued Check 103 for full payment of Invoice 825 39

Post Ref.

DEBIT

501 502 205

1 0 1 5 00 2 1 00

501 205

8 6 0 00

501 205

5 7 0 0 00

501 101

2 6 0 0 00

501 502 205

6 5 0 0 00 2 2 8 00

205 101

5 9 0 00

501 101

3 0 7 0 00

205 101

1 0 3 6 00

CREDIT 1 2 3 1 0 3 6 00 4 5 6 7 8 8 6 0 00 9 10 11 12 13 5 7 0 0 00 14 15 16 17 18 2 6 0 0 00 19 20 21 22 23 6 7 2 8 00 24 25 26 27 28 5 9 0 00 29 30 31 32 3 0 7 0 00 33 34 35 36 1 0 3 6 00 37 38 39

PROBLEM 8.1A (continued) GENERAL LEDGER ACCOUNT NO. 101

ACCOUNT Cash Accounts Payable DATE 2019 April

DESCRIPTION

1 Balance 15 27 30 30

Post Ref.

DEBIT

CREDIT

✓ J1 J1 J1 J1

2 6 0 0 00 5 9 0 00 3 0 7 0 00 1 0 3 6 00

2019 April

DESCRIPTION

1 3 11 26 27 30

Post Ref. J1 J1 J1 J1 J1 J1

DEBIT

CREDIT

2019 April

DESCRIPTION

1 3 11 15 26 30

BALANCE DEBIT CREDIT

1 0 3 6 00 8 6 0 00 5 7 0 0 00 6 7 2 8 00

1 0 3 6 00 1 8 9 6 00 7 5 9 6 00 14 3 2 4 00 13 7 3 4 00 12 6 9 8 00

5 9 0 00 1 0 3 6 00

ACCOUNT NO. 501

ACCOUNT Purchases Accounts Payable DATE

11 9 0 0 00 9 3 0 0 00 8 7 1 0 00 5 6 4 0 00 4 6 0 4 00

ACCOUNT NO. 205

ACCOUNT Accounts Accounts Payable Payable DATE

BALANCE DEBIT CREDIT

Post Ref.

DEBIT

J1 J1 J1 J1 J1 J1

1 0 1 5 00 8 6 0 00 5 7 0 0 00 2 6 0 0 00 6 5 0 0 00 3 0 7 0 00

CREDIT DEBIT

BALANCE CREDIT

1 0 1 5 00 1 8 7 5 00 7 5 7 5 00 10 1 7 5 00 16 6 7 5 00 19 7 4 5 00

PROBLEM 8.1A (continued) GENERAL LEDGER ACCOUNT NO. 502

ACCOUNT Freight Accounts InPayable DATE 2019 April

Analyze:

DESCRIPTION

1 26

Post Ref.

DEBIT

J1 J1

2 1 00 2 2 8 00

CREDIT

BALANCE DEBIT CREDIT 2 1 00 2 4 9 00

The total cash payments on account during April were $1,626.

PROBLEM 8.2A PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Sept. 2 Purchases 3 Freight In 4 Accounts Payable/Colorado Ski Shop 5 Purchased ski boots on account, 6 Invoice 6672, n/30 7 8 3 Purchases 9 Accounts Payable/Alaska Supply Company 10 Purchased skis on account, 11 Invoice 5916, terms 3/10, n/30 12 13 7 Accounts Payable/Colorado Ski Shop 14 Purchases Returns and Allowances 15 Received Credit Memorandum 165 for $1,000 16 for damaged ski boots purchased 17 on Sept. 2. 18 19 11 Purchases 20 Accounts Payable/Cold Mountain Clothing Company 21 Purchased ski jackets on account, 22 Invoice 4091, n/30 23 24 12 Accounts Payable/Alaska Supply Company 25 Purchases Discounts ($12,200 x 3%) 26 Cash ($12,200 - $366) 27 Paid amount due on Invoice 5916, Check 104 28 29 22 Purchases 30 Freight In 31 Accounts Payable/Alaska Supply Company 32 Purchased ski poles on account, 33 Invoice 5950, terms 3/10, n/30 34

Post Ref.

DEBIT

501 502

6 6 0 0 00 3 1 0 00

201

✓

501 201

201

12 2 0 0 00

✓

1 0 0 0 00

503

501 201

201

5 0 0 0 00

✓

12 2 0 0 00

504 101

501 502 201

4 7 6 0 00 1 7 0 00

✓

CREDIT 1 2 3 6 9 1 0 00 4 5 6 7 8 12 2 0 0 00 9 10 11 12 13 1 0 0 0 00 14 15 16 17 18 19 5 0 0 0 00 20 21 22 23 24 3 6 6 00 25 11 8 3 4 00 26 27 28 29 30 4 9 3 0 00 31 32 33 34

PROBLEM 8.2A (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Sept. 23 Purchases 3 Accounts Payable/Swenson Ski Goods 4 Purchased ski pants on account, 5 Invoice 528, n/30 6 7 25 Accounts Payable/Swenson Ski Goods 8 Purchases Return and Allowances 9 Received Credit Memorandum 245 for $400 10 for defective ski pants, original purchase 11 made on Sept. 23. 12 13 27 Purchases 14 Freight In 15 Accounts Payable/Colorado Ski Shop 16 Purchased ski sweaters on account, 17 Invoice 6722, n/30 18 19 30 Accounts Payable/Colorado Ski Shop 20 Cash ($6,910 - $1,000) 21 Paid amount due on Invoice 6672 less return of 22 Sept. 7, Check 110 23

Post Ref. 501 201

201

DEBIT 3 2 5 0 00

✓

4 0 0 00

503

501 502 201

201

3 6 0 0 00 1 5 0 00

✓

5 9 1 0 00

101

Analyze: The amount of the cash discount on September 12 was $366.

CREDIT 1 2 3 2 5 0 00 3 4 5 6 7 4 0 0 00 8 9 10 11 12 13 14 3 7 5 0 00 15 16 17 18 19 5 9 1 0 00 20 21 22 23

PROBLEM 8.3A GENERAL LEDGER ACCOUNT Cash DATE 2019 Sept

DESCRIPTION

1 Balance 12 30

ACCOUNT NO. Post Ref.

DEBIT

CREDIT

✓ J1 J2

11 5

8 3 4 00 9 1 0 00

BALANCE DEBIT CREDIT 27 15 9

ACCOUNT Accounts Payable DATE 2019 Sept

DESCRIPTION

2 3 7 11 12 22 23 25 27 30

J1 J1 J1 J1 J1 J1 J2 J2 J2 J2

DEBIT

1 12

CREDIT

6 12

9 1 0 00 2 0 0 00

0 0 0 00

4 3

9 3 0 00 2 5 0 00

7 5 0 00

6 9 1 0 00 19 1 1 0 00 18 1 1 0 00 23 1 1 0 00 10 9 1 0 00 15 8 4 0 00 19 0 9 0 00 18 6 9 0 00 22 4 4 0 00 16 5 3 0 00

0 0 0 00 2 0 0 00

4 0 0 00 5

2019 Sept

DESCRIPTION

9 1 0 00

2 3 11 22 23 27

ACCOUNT NO. Post Ref. J1 J1 J1 J1 J2 J2

DEBIT

6 12 5 4 3 3

6 0 0 00 2 0 0 00 0 0 0 00 7 6 0 00 2 5 0 00 6 0 0 00

201

BALANCE DEBIT CREDIT

ACCOUNT Purchases DATE

0 0 0 00 1 6 6 00 2 5 6 00

ACCOUNT NO. Post Ref.

101

CREDIT

501

BALANCE DEBIT CREDIT 6 18 23 28 31 35

6 0 0 00 8 0 0 00 8 0 0 00 5 6 0 00 8 1 0 00 4 1 0 00

PROBLEM 8.3A (continued) ACCOUNT Freight In DATE 2019 Sept

DESCRIPTION

2 22 27

ACCOUNT NO. Post Ref. J1 J1 J2

DEBIT

CREDIT

3 1 0 00 1 7 0 00 1 5 0 00

2019 Sept

DESCRIPTION

7 25

Post Ref.

ACCOUNT NO. DEBIT

J1 J2

CREDIT

2019 Sept

DESCRIPTION

1 0 0 0 00 1 4 0 0 00

ACCOUNT NO. Post Ref. J1

DEBIT

CREDIT

503

BALANCE DEBIT CREDIT

0 0 0 00 4 0 0 00

ACCOUNT Purchases Discounts DATE

BALANCE DEBIT CREDIT 3 1 0 00 4 8 0 00 6 3 0 00

ACCOUNT Purchases Returns and Allowances DATE

502

504

BALANCE DEBIT CREDIT

3 6 6 00

PROBLEM 8.3A (continued) ACCOUNTS PAYABLE SUBSIDIARY LEDGER NAME Alaska Supply Company ADDRESS DATE 2019 Sept.

DESCRIPTION

3 Invoice 5916 12 22 Invoice 5950

Post Ref. J1 J1 J1

DEBIT

TERMS CREDIT

BALANCE

12 2 0 0 00

12 2 0 0 00 - 0 4 9 3 0 00

12 2 0 0 00 4 9 3 0 00

TERMS

NAME Cold Mountain Clothing Company ADDRESS DATE

DESCRIPTION

2019 Sept. 11 Invoice 4091

Post Ref.

DEBIT

2019 Sept.

DESCRIPTION

BALANCE

5 0 0 0 00

TERMS

2 Invoice 6672 7 CM 165 27 Invoice 6722 30

Post Ref. J1 J1 J2 J2

DEBIT

2019 Sept. 23 Invoice 528 25 CM 245

DESCRIPTION

BALANCE

6 9 1 0 00

6 9 1 0 00 5 9 1 0 00 9 6 6 0 00 3 7 5 0 00

1 0 0 0 00 3 7 5 0 00 5 9 1 0 00

TERMS Post Ref. J2 J2

DEBIT

n/30

CREDIT

NAME Swenson Ski Goods ADDRESS DATE

n/30

CREDIT

NAME Colorado Ski Shop ADDRESS DATE

3/10, n/30

n/30

CREDIT

BALANCE

3 2 5 0 00

3 2 5 0 00 2 8 5 0 00

4 0 0 00

PROBLEM 8.3A (continued) Big Country Ski Shop Schedule of Accounts Payable September 30, 2019 Alaska Supply Company Cold Mountain Clothing Company Colorado Ski Shop Swenson Ski Goods Total

The balance of the Accounts Payable control account is $16,530. Analyze: $6,600 + $5,000 + $3,250 + $3,600 = $18,450. The portion of purchases in September for clothing items is $18,450.

4 9 3 0 00 5 0 0 0 00 3 7 5 0 00 2 8 5 0 00 1 6 5 3 0 00

PROBLEM 8.4A PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 June 1 Purchases 3 Cash 4 Purchased merchandise, Check 101 5 6 3 Purchases 7 Accounts Payable/BioCenter Inc. 8 Purchased merchandise on account, 9 Invoice 606, terms 2/10, n/30 10 11 5 Purchases 12 Freight In 13 Accounts Payable/New Concepts Corporation 14 Purchased merchandise on account, 15 Invoice 1011, terms 2/10, n/30 16 17 9 Accounts Payable/BioCenter Inc. 18 Purchases Discounts ($1,700 x 2%) 19 Cash ($1,700 - $34) 20 Paid amount due to Invoice 606, 21 Check 102 22 23 10 Accounts Payable/New Concepts Corporation 24 Purchases Returns and Allowances 25 Received Credit Memorandum 227 for return 26 of damaged merchandise 27 28 11 Purchases 29 Accounts Payable/BioCenter Inc. 30 Purchased merchandise on account, 31 Invoice 612, terms 2/10, n/30 32 33 14 Accounts Payable/New Concepts Corporation ($5,960 - $150) 34 35 36 37 38 39 40 41

Purchases Discounts (($5,850-$150) x 2%) Cash ($5,810 - $114) Paid amount owed on Invoice 1011, Check 103 15 Purchases ($9,200-$1,840 = $7,360; $7,360-$1,104 = $6,256) Accounts Payable/Park Research Purchased merchandise on account,

Post Ref.

DEBIT

501 101

4 5 0 0 00

501

1 7 0 0 00

201

✓

501 504 201

201

5 8 5 0 00 1 1 0 00

✓

1 7 0 0 00

503

201

✓

1 5 0 00

502

501 201

201

✓

1 6 8 0 00 +

5 8 1 0 00

503 101

501 201

6 2 5 6 00

✓

CREDIT 1 2 4 5 0 0 00 3 4 5 6 1 7 0 0 00 7 8 9 10 11 12 5 9 6 0 00 13 14 15 16 17 3 4 00 18 1 6 6 6 00 19 20 21 22 23 1 5 0 00 24 25 26 27 28 1 6 8 0 00 29 30 31 32 33 1 1 4 00 34 5 6 9 6 00 35 36 37 38 39 6 2 5 6 00 40 41

42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58

Invoice 1029, terms n/30 20 Purchases Cash Purchased merchandise, Check 104

501 101

3 0 0 0 00

25 Cash Purchases Returns and Allowances Received cash for return of defective merchandise purchased June 20

101 502

2 8 0 00

30 Purchases Freight In Accounts Payable/New Concepts Corporation Purchased merchandise on account, Invoice 1080, terms 2/10, n/30

501 504

3 2 0 0 00 8 5 00

201

✓

42 43 44 3 0 0 0 00 45 46 47 48 2 8 0 00 49 50 51 52 53 54 3 2 8 5 00 55 56 57 58

Analyze: The amount of trade discounts received on the June 15 purchase from Park Research was $2,944 (List price, $9,200, less purchase price, $6,256).

PROBLEM 8.5A GENERAL LEDGER ACCOUNT DATE 2019 June

DESCRIPTION

1 Balance 1 9 14 20 25

ACCOUNT

Accounts Payable

DATE

DESCRIPTION

2019 June

3 5 9 10 11 14 15 30

ACCOUNT

Post Ref.

DEBIT

CREDIT

✓ J1 J1 J2 J2 J2

4 5 0 0 00 1 6 6 6 00 5 6 9 6 00 3 0 0 0 00 2 8 0 00

Post Ref.

J1 J1 J1 J1 J1 J2 J2 J2

DESCRIPTION

1 3 5 11 15 20 30

BALANCE DEBIT CREDIT 37 4 0 0 00 32 9 0 0 00 31 2 3 4 00 25 5 3 8 00 22 5 3 8 00 22 8 1 8 00

ACCOUNT NO. 201 DEBIT

CREDIT

BALANCE DEBIT CREDIT

1 7 0 0 00 5 9 6 0 00

1 7 0 0 00 7 6 6 0 00 5 9 6 0 00 5 8 1 0 00 7 4 9 0 00 1 6 8 0 00 7 9 3 6 00 11 2 2 1 00

1 7 0 0 00 1 5 0 00 1 6 8 0 00 5 8 1 0 00 6 2 5 6 00 3 2 8 5 00

ACCOUNT NO. 501

Purchases

DATE 2019 June

ACCOUNT NO. 101

Cash

Post Ref.

J1 J1 J1 J1 J2 J2 J2

DEBIT

4 5 0 0 00 1 7 0 0 00 5 8 5 0 00 1 6 8 0 00 6 2 5 6 00 3 0 0 0 00 3 2 0 0 00

CREDIT

BALANCE DEBIT CREDIT 4 5 0 0 00 6 2 0 0 00 12 0 5 0 00 13 7 3 0 00 19 9 8 6 00 22 9 8 6 00 26 1 8 6 00

PROBLEM 8.5A (continued) ACCOUNT DATE 2019 June

DESCRIPTION

10 25

Purchases Discounts

DATE

DESCRIPTION

9 14

ACCOUNT

DEBIT

CREDIT

5 30

1 5 0 00 4 3 0 00

ACCOUNT NO. 503 Post Ref.

DEBIT

J1 J2

DESCRIPTION

BALANCE DEBIT CREDIT

1 5 0 00 2 8 0 00

CREDIT

BALANCE DEBIT CREDIT

3 4 00 1 1 4 00

3 4 00 1 4 8 00

ACCOUNT NO. 504

Freight In

DATE 2019 June

Post Ref.

J1 J2

ACCOUNT

2019 June

ACCOUNT NO. 502

Purchases Returns and Allowances

Post Ref.

J1 J2

DEBIT

1 1 0 00 8 5 00

CREDIT

BALANCE DEBIT CREDIT 1 1 0 00 1 9 5 00

PROBLEM 8.5A (continued) ACCOUNTS PAYABLE SUBSIDIARY LEDGER NAME BioCenter Inc. ADDRESS DATE 2019 June

DESCRIPTION

3 Invoice 606 9 11 Invoice 612

Post Ref. J1 J1 J1

DEBIT

2019 June

DESCRIPTION

5 Invoice 1011 10 CM 227 14 30 Invoice 1080

BALANCE

1 7 0 0 00

1 7 0 0 00 0 00 1 6 8 0 00

1 7 0 0 00 1 6 8 0 00

TERMS Post Ref. J1 J1 J2 J2

DEBIT

DESCRIPTION

2019 June 15 Invoice 1029

2/10, n/30

CREDIT

BALANCE

5 9 6 0 00

5 9 6 0 00 5 8 1 0 00 0 00 3 2 8 5 00

1 5 0 00 5 8 1 0 00 3 2 8 5 00

TERMS

NAME Park Research ADDRESS DATE

2/10, n/30

CREDIT

NAME New Concepts Corporation ADDRESS DATE

TERMS

Post Ref. J2

DEBIT

n/30

CREDIT

BALANCE

6 2 5 6 00

PROBLEM 8.5A (continued) NewTech Medical Devices Schedule of Accounts Payable June 30, 2019 BioCenter Inc. New Concepts Corporation Park Research Total

1 3 6 11

6 8 0 00 2 8 5 00 2 5 6 00 2 2 1 00

Analyze: The amount of merchandise returned to vendors by NewTech Medical Devices in June was $430.

If this link does not work with a click, then copy the complete Download link and paste link in internet explorer/ﬁrefox/google chrome and get all ﬁles download successfully.

PROBLEM 8.6A Bowden Company PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Jan. 8 Accounts Payable/Song, Inc. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Post Ref. 201

✔

DEBIT 3 0 0 0 00

Purchases Discounts Cash Paid amount owed on Invoice 1885 less cash discount, Check # 2101 10 Purchases Accounts Payable/Song, Inc.

3 5 0 0 00 201

✔

Purchased merchandise on account, Invoice 1920, terms 2/10, n/30 15 Accounts Payable/Song, Inc. Purchases Returns and Allowances Received Credit Memorandum 320 for return of damaged merchandise, Invoice 1920 19 Accounts Payable/Song, Inc. ($3,500 - $300)

201 ✔

201

✔

3 0 0 00

3 2 0 0 00

Purchases Discounts ($3,500 - $300) x 2% Cash Paid amount owed on Invoice 1920 less return of January 15, Check # 2130 30 Purchases Accounts Payable/Song, Inc.

4 4 0 0 00 201

✔

Purchased merchandise on account, Invoice 1950, terms 2/10, n/30

CREDIT 1 2 6 0 00 3 2 9 4 0 00 4 5 6 7 8 3 5 0 0 00 9 10 11 12 13 3 0 0 00 14 15 16 17 18 6 4 00 19 3 1 3 6 00 20 21 22 23 24 4 4 0 0 00 25 26 27 28

PROBLEM 8.6A (continued) Song, Inc. PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Jan. 8 Sales Discounts 3 Cash 4 Accounts Receivable/Bowden Company 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

Post Ref.

111

DEBIT

CREDIT

6 0 00 2 9 4 0 00 ✔

1 2 3 3 0 0 0 00 4

✔

5 6 7 8

Received payment on Invoice 1885, less sales discount 10 Accounts Receivable/Bowden Company

111

3 5 0 0 00

Sales Sold merchandise on account, Invoice 1920, terms 2/10, n/30 15 Sales Returns and Allowances Accounts Receivable/Bowden Company Accepted return of damaged merchandise, Credit Memorandum 320; original sale made on Invoice 1920, January 10

3 0 0 00 111

19 Sales Discounts Cash Accounts Receivable/Bowden Company Received payment on Invoice 1920, less sale discount

111

30 Accounts Receivable/Bowden Company

111

✔

6 4 00 3 1 3 6 00 ✔

✔

4 4 0 0 00

Sales Sold merchandise on account, Invoice 1950, 2/10, n/30

3 5 0 0 00 9 10 11 12 13 3 0 0 00 14 15 16 17 18 19 20 3 2 0 0 00 21 22 23 24 25 4 4 0 0 00 26 27 28 29

PROBLEM 8.6A (continued) GENERAL LEDGER – Bowden Company ACCOUNT Accounts Payable DATE 2019 Jan.

NAME

DESCRIPTION

1 Balance 8 10 15 19 30

ACCOUNT NO. 201 Post Ref.

DEBIT

CREDIT

BALANCE DEBIT CREDIT

✓ J21 J21 J21 J21 J21

3 0 0 0 00 - 0 3 5 0 0 00 3 2 0 0 00 - 0 4 4 0 0 00

3 0 0 0 00 3 5 0 0 00 3 0 0 00 3 2 0 0 00 4 4 0 0 00

ACCOUNTS PAYABLE SUBSIDIARY LEDGER – Bowden Company TERMS 2/10, n/30 Song, Inc.

ADDRESS DATE 2019 Jan.

Post Ref. 1 Balance 8 10 15 19 30

DEBIT

CREDIT

✓ J21 J21 J21 J21 J21

3 0 0 0 00 3 5 0 0 00 3 0 0 00 3 2 0 0 00 4 4 0 0 00

BALANCE

3 0 0 0 00 - 0 3 5 0 0 00 3 2 0 0 00 - 0 4 4 0 0 00

PROBLEM 8.6A (continued) GENERAL LEDGER – Song, Inc. ACCOUNT DATE 2019 Jan.

Accounts Receivable DESCRIPTION Post Ref.

1 Balance 8 10 15 19 30

NAME

DEBIT

ACCOUNT NO. 111 BALANCE DEBIT CREDIT

CREDIT

✓ J21 J21 J21 J21 J21

3 0 0 0 00 - 0 3 5 0 0 00 3 2 0 0 00 - 0 4 4 0 0 00

3 0 0 0 00 3 5 0 0 00 3 0 0 00 3 2 0 0 00 4 4 0 0 00

ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER – Song, Inc. TERMS Bowden Company

ADDRESS DATE 2019 Jan.

1 Balance 8 10 15 19 30

Post Ref.

DEBIT

CREDIT

✓ J21 J21 J21 J21 J21

3 0 0 0 00 3 5 0 0 00 3 0 0 00 3 2 0 0 00 4 4 0 0 00

BALANCE

3 0 0 0 00 - 0 3 5 0 0 00 3 2 0 0 00 - 0 4 4 0 0 00

Analyze: The balance of the accounts payable for Song, Inc. in the Bowden Company accounts payable subsidiary ledger is $4,400. The balance of the accounts receivable for Bowden Company in the Song, Inc. accounts receivable subsidiary ledger is $4,400.

PROBLEM 8.7A APP GENERAL JOURNAL DATE 1 2019 2 July 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44

DESCRIPTION 1 Merchandise Inventory ($4,750 + $250) Accounts Payable/Fashion Expo Purchased dresses on account from Fashion Expo, Invoice 101 dated July 1. Freight charges of $250 added to invoice. Terms 2/10, n/30.

Post Ref.

DEBIT 5 0 0 0 00 5

5 Accounts Receivable/Alice Chu Sales 5 Cost of Goods Sold Merchandise Inventory Sold two dresses to Alice Chu, Sales Slip 788; terms 1/10, n/30. The cost of the dresses was $400.

6 0 0 00

7 Accounts Payable/Fashion Expo Merchandise Inventory Received Credit Memorandum 210 for damaged dresses returned; the goods were originally purchased on Invoice 101 dated July 1.

5 5 0 00

9 Sales Returns and Allowances Accounts Receivable/Alice Chu 9 Merchandise Inventory Cost of Goods Sold Issued Credit Memorandum 89 for $200 to Alice Chu for a returned dress; the dress was originally sold on Sales Slip 788 dated July 5. The cost of the returned dress was $135.

2 0 0 00

Accounts Payable/Fashion Expo ($5,000 - $550) Merchandise Inventory (($5,000 - $250 - $550) * 2%) Cash ($4,450 - $84) Paid amount due on Invoice 101 to Fashion Expo after receipt of Credit Memo 210, Check 1255

CREDIT

4 0 0 00

1 3 5 00

4 4 5 0 00 4

Sales Discounts (($600 - $200) * 1%) Cash ($600 - $200 - $4) Accounts Receivable/Alice Chu ($600 - $200) Received amount due from Alice Chu for sale of July 5, less return of July 9 and less cash discount

4 00 3 9 6 00

Credit Card Expense ($12,000 * 3%)

3 6 0 00

45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61

Cash ($12,000 - $360) Sales Cost of Goods Sold Merchandise Inventory Record sales to customers using bank credit cards

17 Merchandise Inventory ($4,500 - $1,800 - $270) Accounts Payable/Fashion Wholesalers

11 6 4 0 00 12 8 0 0 0 00 8

2 4 3 0 00 2

Purchased merchandise on account, Invoice 2078, terms 1/10, n/30 26 Accounts Payable/Fashion Wholesalers Merchandise Inventory (1% x $2,430) Cash ($2,430 - $24.30) Paid amount due on Invoice 2078, Check 1285

2 4 3 0 00 3 2

Analyze: Freight is 5% of the total amount due to Fashion Expo on the July 1 purchase ($250 ÷ $5,000 = 5%).

PAGE

CREDIT

0 0 0 00

6 0 0 00 4 0 0 00

5 5 0 00

2 0 0 00 1 3 5 00

8 4 00 3 6 6 00

4 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44

000 = 5%).

0 0 0 00 0 0 0 00

4 3 00 00

2 4 30 4 0 5 70

45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61

PROBLEM 8.1B PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 June 1 Purchases 3 Freight In 4 Accounts Payable/Mow Down Corporation 5 Purchased lawn mowers on account, 6 Invoice 925, n/30 7 8 5 Purchases 9 Accounts Payable/Patio Dudes 10 Purchased outdoor chairs and tables on account, 11 Invoice 992, n/30 12 13 9 Purchases 14 Accounts Payable/Sunset Nursery 15 Purchased grass seed on account, 16 Invoice 4001, n/30 17 18 15 Purchases 19 Cash 20 Recorded various cash purchases for June 1 – 15. 21 22 20 Purchases 23 Freight In 24 Accounts Payable/Mason Industries 25 Purchased sprinkler system on account, 26 Invoice 9228, n/30 27 28 27 Accounts Payable/Patio Dudes 29 Cash 30 Issued chk 104 for partial payment of Invoice 992 31 32 30 Purchases 33 Cash 34 Recorded various cash purchases for June 16 – 30. 35 36 30 Accounts Payable/Mow Down Corporation 37 Cash 38 Issued chk 105 for full payment of Invoice 925 39

Post Ref.

DEBIT

501 502 205

6 0 2 5 00 1 3 5 00

501 205

7 6 0 0 00

501 205

7 4 8 00

501 101

3 0 5 5 00

501 502 205

7 2 5 0 00 3 2 0 00

205 101

3 8 0 0 00

501 101

2 9 2 5 00

205 101

6 1 6 0 00

CREDIT 1 2 3 6 1 6 0 00 4 5 6 7 8 7 6 0 0 00 9 10 11 12 13 7 4 8 00 14 15 16 17 18 3 0 5 5 00 19 20 21 22 23 7 5 7 0 00 24 25 26 27 28 3 8 0 0 00 29 30 31 32 2 9 2 5 00 33 34 35 36 6 1 6 0 00 37 38 39

PROBLEM 8.1B (continued) GENERAL LEDGER ACCOUNT Cash DATE 2019 June

DESCRIPTION

1 Balance 15 27 30 30

ACCOUNT NO. 101 Post Ref.

DEBIT

CREDIT

✓ J1 J1 J1 J1

3 0 5 5 00 3 8 0 0 00 2 9 2 5 00 6 1 6 0 00

ACCOUNT Accounts Payable DATE 2019 June

DESCRIPTION

1 5 9 20 27 30

Post Ref. J1 J1 J1 J1 J1 J1

2019 June

DESCRIPTION

1 5 9 15 20 30

20 0 0 0 00 16 9 4 5 00 13 1 4 5 00 10 2 2 0 00 4 0 6 0 00

ACCOUNT NO. 205 DEBIT

CREDIT

BALANCE DEBIT CREDIT

6 1 6 0 00 7 6 0 0 00 7 4 8 00 7 5 7 0 00

6 1 6 0 00 13 7 6 0 00 14 5 0 8 00 22 0 7 8 00 18 2 7 8 00 12 1 1 8 00

3 8 0 0 00 6 1 6 0 00

ACCOUNT Purchases DATE

BALANCE DEBIT CREDIT

ACCOUNT NO. 501 Post Ref.

DEBIT

J1 J1 J1 J1 J1 J1

6 0 2 5 00 7 6 0 0 00 7 4 8 00 3 0 5 5 00 7 2 5 0 00 2 9 2 5 00

CREDIT

BALANCE DEBIT CREDIT 6 0 2 5 00 13 6 2 5 00 14 3 7 3 00 17 4 2 8 00 24 6 7 8 00 27 6 0 3 00

PROBLEM 8.1B (continued) GENERAL LEDGER ACCOUNT Freight In DATE 2019 June

DESCRIPTION

1 20

ACCOUNT NO. 502 Post Ref.

DEBIT

J1 J1

1 3 5 00 3 2 0 00

CREDIT

BALANCE DEBIT CREDIT 1 3 5 00 4 5 5 00

Analyze: The total freight costs incurred during June were $455.

PROBLEM 8.2B PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 April 2 Purchases 3 Freight In 4 Accounts Payable/Mailing and Packing Center 5 Purchased copy paper on account, 6 Invoice 3772, n/30 7 8 8 Purchases 9 Accounts Payable/Special Occasion Cards 10 Purchased gift cards on account, 11 Invoice 9516, terms 1/10, n/30 12 13 9 Accounts Payable/Mailing and Packing Center 14 Purchases Returns and Allowances 15 Received Credit Memorandum 155 for 16 water-damaged copy paper purchased on April 2 17 18 12 Purchases 19 Accounts Payable/Specialty Cards 20 Purchased novelty items on account, 21 Invoice 4901, n/30 22 23 17 Accounts Payable/Special Occasion Cards 24 Purchases Discounts ($1,900 x 1%) 25 Cash ($1,900 - $19) 26 Paid amount due on Invoice 9516, 27 Check 105 28 29 22 Purchases 30 Accounts Payable/Specialty Cards 31 Purchased cards on account, Invoice 4921, 32 n/30 33

Post Ref.

DEBIT

501 502

2 3 0 0 00 2 1 0 00

201

✓

501 201

201

1 9 0 0 00

✓

2 2 0 00

503

501 201

201

1 2 0 0 00

✓

1 9 0 0 00

504 101

501 201

7 5 0 00

✓

CREDIT 1 2 3 2 5 1 0 00 4 5 6 7 8 1 9 0 0 00 9 10 11 12 13 2 2 0 00 14 15 16 17 18 1 2 0 0 00 19 20 21 22 23 1 9 00 24 1 8 8 1 00 25 26 27 28 29 7 5 0 00 30 31 32 33

PROBLEM 8.2B (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 April 23 Purchases 3 Freight In 4 Accounts Payable/Business Forms, Inc. 5 Purchased forms on account, Invoice 2020, n/30 7 8 25 Accounts Payable/Specialty Cards 9 Purchases Returns and Allowances 10 Received Credit Memorandum 225 for return of 11 defective cards originally purchased on April 22 13 14 27 Purchases 15 Freight In 16 Accounts Payable/Business Forms, Inc. 17 Purchased toner and other office supplies on account, 18 Invoice 2029, n/30 19 20 30 Accounts Payable/Mailing and Packing Center 21 Cash ($2,510 - $220) 22 Paid amount due on Invoice 3772 less 23 return of April 9, Check 111 24

Post Ref. 501 502 201

201

DEBIT 1 9 8 0 00 7 0 00

✓

7 5 00

503

501 502 201

201

2 7 7 5 00 8 5 00

✓

2 2 9 0 00

101

Analyze: The cost per card was $1.50 ($750 ÷ 500 cards).

CREDIT 1 2 3 2 0 5 0 00 4 5 7 8 7 5 00 9 10 11 13 14 15 2 8 6 0 00 16 17 18 19 20 2 2 9 0 00 21 22 23 24

PROBLEM 8.3B GENERAL LEDGER ACCOUNT Cash DATE 2019 April

DESCRIPTION

1 Balance 17 30

ACCOUNT NO. 101 Post Ref.

DEBIT

CREDIT

✓ J1 J2

1 8 8 1 00 2 2 9 0 00

ACCOUNT Accounts Payable DATE 2019 April

DESCRIPTION

2 8 9 12 17 22 23 25 27 30

Post Ref. J1 J1 J1 J1 J1 J1 J2 J2 J2 J2

2019 April

DESCRIPTION

2 8 12 22 23 27

12 5 0 0 00 10 6 1 9 00 8 3 2 9 00

ACCOUNT NO. 201 DEBIT

CREDIT

BALANCE DEBIT CREDIT

2 5 1 0 00 1 9 0 0 00

2 5 1 0 00 4 4 1 0 00 4 1 9 0 00 5 3 9 0 00 3 4 9 0 00 4 2 4 0 00 6 2 9 0 00 6 2 1 5 00 9 0 7 5 00 6 7 8 5 00

2 2 0 00 1 2 0 0 00 1 9 0 0 00 7 5 0 00 2 0 5 0 00 7 5 00 2 8 6 0 00 2 2 9 0 00

ACCOUNT Purchases DATE

BALANCE DEBIT CREDIT

ACCOUNT NO. 501 Post Ref.

DEBIT

J1 J1 J1 J1 J2 J2

2 3 0 0 00 1 9 0 0 00 1 2 0 0 00 7 5 0 00 1 9 8 0 00 2 7 7 5 00

CREDIT

BALANCE DEBIT CREDIT 2 3 0 0 00 4 2 0 0 00 5 4 0 0 00 6 1 5 0 00 8 1 3 0 00 10 9 0 5 00

PROBLEM 8.3B (continued) ACCOUNT Freight In DATE 2019 April

DESCRIPTION

2 23 27

ACCOUNT NO. 502 Post Ref.

DEBIT

J1 J2 J2

2 1 0 00 7 0 00 8 5 00

CREDIT

2 1 0 00 2 8 0 00 3 6 5 00

ACCOUNT NO. 503

ACCOUNT Accounts PurchasesPayable Returns and Allowances DATE 2019 April

DESCRIPTION

9 25

Post Ref.

DEBIT

J1 J2

CREDIT

2019 April

DESCRIPTION

BALANCE DEBIT CREDIT

2 2 0 00 7 5 00

2 0 0 00 2 9 5 00

ACCOUNT NO. 504

ACCOUNT Accounts PurchasesPayable Discounts DATE

BALANCE DEBIT CREDIT

Post Ref. J1

DEBIT

CREDIT

BALANCE DEBIT CREDIT

1 9 00

PROBLEM 8.3B (continued) ACCOUNTS PAYABLE SUBSIDIARY LEDGER NAME Business Forms, Inc. ADDRESS DATE

DESCRIPTION

2019 April 23 Invoice 2020 27 Invoice 2029

Post Ref.

DEBIT

J2 J2

2019 April

DESCRIPTION

BALANCE

2 0 5 0 00 2 8 6 0 00

2 0 5 0 00 4 9 1 0 00

TERMS

2 Invoice 3772 9 CM 155 30

Post Ref. J1 J1 J2

DEBIT

2019 April

DESCRIPTION

BALANCE

2 5 1 0 00

2 5 1 0 00 2 2 9 0 00 - 0 -

2 2 0 00 2 2 9 0 00

TERMS

8 Invoice 9516 17

Post Ref. J1 J1

DEBIT

2019 April 12 Invoice 4901 22 Invoice 4921 25 CM 225

DESCRIPTION

BALANCE

1 9 0 0 00

1 9 0 0 00 - 0 -

1 9 0 0 00

TERMS Post Ref. J1 J1 J2

DEBIT

n/30

CREDIT

NAME Specialty Cards ADDRESS DATE

n/30

CREDIT

NAME Special Occasion Cards ADDRESS DATE

1/10, n/30

CREDIT

NAME Mailing and Packing Center ADDRESS DATE

TERMS

n/30

CREDIT

BALANCE

1 2 0 0 00 7 5 0 00

1 2 0 0 00 1 9 5 0 00 1 8 7 5 00

7 5 00

PROBLEM 8.3B (continued) Tara's Card and Novelty Shop Schedule of Accounts Payable April 30, 2019 Business Forms, Inc. Mailing and Packing Center Special Occasion Cards Specialty Cards Total

The balance of the Accounts Payable control account is $6,785. Analyze: The amount of purchase discounts in April was $19.

4 9 1 0 00 - 0 - 0 1 8 7 5 00 6 7 8 5 00

PROBLEM 8.4B PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Aug. 1 Purchases 3 Cash 4 Purchased merchandise, Check 101 5 6 2 Purchases 7 Accounts Payable/Brown Dental Corporation 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32

Post Ref.

DEBIT

501 101

2 5 0 0 00

501

2 2 0 0 00

201

✓

Purchased merchandise on account, Invoice 866, terms 1/10, n/30 5 Purchases Freight In Accounts Payable/Dental Concepts Purchased merchandise on account, Invoice 2111, terms 2/10, n/30

501 504 201

10 Accounts Payable/Brown Dental Corporation Purchases Discounts ($2,200 x 1%) Cash ($2,200 - $22) Paid amount due on Invoice 866, Check 102

201

10 Accounts Payable/Dental Concepts Purchases Returns and Allowances Received Credit Memorandum 272 for return of damaged merchandise purchased on August 5

201

11 Purchases Accounts Payable/Brown Dental Corporation

3 9 0 0 00 1 0 0 00

✓

2 2 0 0 00

503 101

✓

3 0 0 00

502

501 201

1 7 0 0 00

✓

Purchased merchandise on account, Invoice 898, terms 1/10, n/30

CREDIT 1 2 2 5 0 0 00 3 4 5 6 2 2 0 0 00 7 8 9 10 11 12 4 0 0 0 00 13 14 15 16 17 2 2 00 18 2 1 7 8 00 19 20 21 22 23 3 0 0 00 24 25 26 27 28 1 7 0 0 00 29 30 31 32

PROBLEM 8.4B (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Aug. 14 Accounts Payable/Dental Concepts ($4,000 - $300) 3 Purchases Discounts ($3,600 x 2%) 4 Cash 5 Paid amount owed on Invoice 2111, less 6 return of August 10, Check 103 7 8 15 Purchases 9 Accounts Payable/Surgical Supplies 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

Post Ref. 201

✓

DEBIT 3 7 0 0 00

503 101

501 201

2 8 8 0 00

✓

Purchased merchandise on account, Invoice 1902, terms n/30 $4,000 - ($4,000 x 20%) = $3,200 $3,200 - ($3,200 x 10%) = $2,880 20 Purchases Cash Purchased merchandise, Check 104

501 101

1 9 0 0 00

24 Cash Purchases Returns and Allowances Received cash for return of defective merchandise purchased August 20

101 502

1 7 5 00

30 Purchases Freight In Accounts Payable/Dental Concepts

501 504

2 1 2 5 00 7 5 00

201

✓

Purchased merchandise on account, Invoice 2285, terms 2/10, n/30

Analyze: 2.5% ($100 ÷ $4,000).

CREDIT 1 2 7 2 00 3 3 6 2 8 00 4 5 6 7 8 2 8 8 0 00 9 10 11 12 13 14 15 1 9 0 0 00 16 17 18 19 1 7 5 00 20 21 22 23 24 25 2 2 0 0 00 26 27 28 29

PROBLEM 8.5B GENERAL LEDGER ACCOUNT Cash DATE 2019 Aug.

DESCRIPTION

1 Balance 1 10 14 20 24

ACCOUNT NO. 101 Post Ref.

DEBIT

CREDIT

✓ J1 J1 J2 J2 J2

2 5 0 0 00 2 1 7 8 00 3 6 2 8 00 1 9 0 0 00 1 7 5 00

ACCOUNT Accounts Payable DATE 2019 Aug.

DESCRIPTION

2 5 10 10 11 14 15 30

Post Ref. J1 J1 J1 J1 J1 J2 J2 J2

2019 Aug.

DESCRIPTION

1 2 5 11 15 20 30

39 7 0 0 00 37 2 0 0 00 35 0 2 2 00 31 3 9 4 00 29 4 9 4 00 29 6 6 9 00

ACCOUNT NO. 201 DEBIT

CREDIT

BALANCE DEBIT CREDIT

2 2 0 0 00 4 0 0 0 00

2 2 0 0 00 6 2 0 0 00 4 0 0 0 00 3 7 0 0 00 5 4 0 0 00 1 7 0 0 00 4 5 8 0 00 6 7 8 0 00

2 2 0 0 00 3 0 0 00 1 7 0 0 00 3 7 0 0 00 2 8 8 0 00 2 2 0 0 00

ACCOUNT Purchases DATE

BALANCE DEBIT CREDIT

ACCOUNT NO. 501 Post Ref.

DEBIT

J1 J1 J1 J1 J2 J2 J2

2 5 0 0 00 2 2 0 0 00 3 9 0 0 00 1 7 0 0 00 2 8 8 0 00 1 9 0 0 00 2 1 2 5 00

CREDIT

BALANCE DEBIT CREDIT 2 5 0 0 00 4 7 0 0 00 8 6 0 0 00 10 3 0 0 00 13 1 8 0 00 15 0 8 0 00 17 2 0 5 00

PROBLEM 8.5B (continued) ACCOUNT Purchases Returns and Allowances DATE 2019 Aug.

DESCRIPTION

10 24

Post Ref.

DEBIT

J1 J2

ACCOUNT NO. 502 CREDIT

3 0 0 00 1 7 5 00

ACCOUNT Purchases Discounts DATE 2019 Aug.

DESCRIPTION

10 14

Post Ref.

DEBIT

J1 J2

2019 Aug.

DESCRIPTION

5 30

3 0 0 00 4 7 5 00

ACCOUNT NO. 503 CREDIT

BALANCE DEBIT CREDIT

2 2 00 7 2 00

ACCOUNT Freight In DATE

BALANCE DEBIT CREDIT

2 2 00 9 4 00

ACCOUNT NO. 504 Post Ref.

DEBIT

J1 J2

1 0 0 00 7 5 00

CREDIT

BALANCE DEBIT CREDIT 1 0 0 00 1 7 5 00

PROBLEM 8.5B (continued) ACCOUNTS PAYABLE SUBSIDIARY LEDGER NAME Brown Dental Corporation ADDRESS DATE 2019 Aug.

DESCRIPTION

2 Invoice 866 10 11 Invoice 898

Post Ref. J1 J1 J1

DEBIT

2019 Aug.

DESCRIPTION

BALANCE

2 2 0 0 00

2 2 0 0 00 - 0 1 7 0 0 00

2 2 0 0 00 1 7 0 0 00

TERMS

5 Invoice 2111 10 CM 272 14 30 Invoice 2285

Post Ref. J1 J1 J2 J2

DEBIT

2019 Aug. 15 Invoice 1902

DESCRIPTION

BALANCE

4 0 0 0 00

4 0 0 0 00 3 7 0 0 00 - 0 2 2 0 0 00

3 0 0 00 3 7 0 0 00 2 2 0 0 00

TERMS Post Ref. J2

DEBIT

2/10, n/30

CREDIT

NAME Surgical Supplies ADDRESS DATE

1/10, n/30

CREDIT

NAME Dental Concepts ADDRESS DATE

TERMS

n/30

CREDIT

BALANCE

2 8 8 0 00

PROBLEM 8.5B (continued) Dental Supplies, Inc. Schedule of Accounts Payable August 31, 2019 Brown Dental Corporation Dental Concepts Surgical Supplies Total

Analyze: On August 31, Dental Supplies, Inc. owes Dental Concepts $2,200.

1 2 2 6

7 0 0 00 2 0 0 00 8 8 0 00 7 8 0 00

PROBLEM 8.6B Belladonna Company PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Feb. 8 Accounts Payable/Sachi, Inc. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Post Ref. 201

✓

DEBIT 6 0 0 0 00

Purchases Discounts Cash Paid amount owed on Invoice 1985, less cash discount, Check 2001 9 Purchases Accounts Payable/Sachi, Inc.

4 8 0 0 00 201

✓

Purchased merchandise on account, Invoice 1990, terms 2/10, n/30 15 Accounts Payable/Sachi, Inc.

201

✓

201

✓

1 2 0 00 3 5 8 8 0 00 4 5 6 7 8 4 8 0 0 00 9

4 4 0 0 00

4 0 0 00 14 15 16 17 18

7 2 0 0 00 201

1 2

4 0 0 00

Purchases Discounts ($4,400 x 2%) Cash ($4,400 - $88) Paid amount owed on Invoice 1990, less return of February 15, Check 2009 28 Purchases Accounts Payable/Sachi, Inc.

CREDIT

10 11 12 13

Purchases Returns and Allowances Received Credit Memorandum 220 for return of damaged merchandise, Invoice 1990 18 Accounts Payable/Sachi, Inc. ($4,800 - $400)

✓

Purchased merchandise on account, Invoice 2008, terms 2/10, n/30

8 8 00 19 4 3 1 2 00 20 21 22 23 24 7 2 0 0 00 25 26 27 28

PROBLEM 8.6B (continued) Sachi, Inc. PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Feb. 8 Sales Discounts 3 Cash 4 Accounts Receivable/Belladonna Company 5 Received payment for Invoice 1985, 6 less sales discount 7 8 9 Accounts Receivable/Belladonna Company 9 Sales 10 Sold merchandise on account, 11 Invoice 1990, 2/10, n/30 12 13 15 Sales Returns and Allowances 14 Accounts Receivable/Belladonna Company 15 Accepted return for damaged merchandise, Credit 16 Memorandum 220; original sale made on 17 Invoice 1990, February 9. 18 19 18 Sales Discounts 20 Cash 21 Accounts Receivable/Belladonna Company 22 Received payment for Invoice 1990, 23 less sale discount 24 25 28 Accounts Receivable/Belladonna Company 26 Sales 27 Sold merchandise on account, Invoice 2008, 28 2/10, n/30 29

Post Ref.

DEBIT 1 2 0 00 5 8 8 0 00

111

✓

4 8 0 0 00

4 0 0 00 111

✓

8 8 00 4 3 1 2 00 111

111

✓

7 2 0 0 00

CREDIT 1 2 3 6 0 0 0 00 4 5 6 7 8 4 8 0 0 00 9 10 11 12 13 4 0 0 00 14 15 16 17 18 19 20 4 4 0 0 00 21 22 23 24 25 7 2 0 0 00 26 27 28 29

PROBLEM 8.6B (continued) GENERAL LEDGER – Belladonna Company ACCOUNT Accounts Payable DATE 2019 Feb.

DESCRIPTION

1 Balance 8 9 15 18 28

ACCOUNT NO. 201 Post Ref.

DEBIT

CREDIT

BALANCE DEBIT CREDIT

✓ J12 J12 J12 J12 J12

6 0 0 0 00 - 0 4 8 0 0 00 4 4 0 0 00 - 0 7 2 0 0 00

6 0 0 0 00 4 8 0 0 00 4 0 0 00 4 4 0 0 00 7 2 0 0 00

ACCOUNTS PAYABLE SUBSIDIARY LEDGER – Belladonna Company TERMS 2/10, n/30 NAME Sachi, Inc. ADDRESS DATE 2019 Feb.

Post Ref. 1 Balance 8 9 Invoice 1990 15 CM 220 18 28 Invoice 2008

DEBIT

CREDIT

✓ J12 J12 J12 J12 J12

6 0 0 0 00 4 8 0 0 00 4 0 0 00 4 4 0 0 00 7 2 0 0 00

BALANCE

6 0 0 0 00 - 0 4 8 0 0 00 4 4 0 0 00 - 0 7 2 0 0 00

PROBLEM 8.6B (continued) GENERAL LEDGER – Sachi, Inc ACCOUNT Accounts Receivable DATE DESCRIPTION 2019 Feb.

1 Balance 8 9 15 18 28

Post Ref.

DEBIT

CREDIT

✓ J12 J12 J12 J12 J12

6 0 0 0 00 4 8 0 0 00 4 0 0 00 4 4 0 0 00 7 2 0 0 00

ACCOUNT NO. 111 BALANCE DEBIT CREDIT 6 0 0 0 00 - 0 4 8 0 0 00 4 4 0 0 00 - 0 7 2 0 0 00

ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER – Sachi, Inc. NAME Belladonna Company ADDRESS DATE Post DEBIT CREDIT BALANCE Ref. 2019 ✓ Feb. 1 Balance 6 0 0 0 00 8 J12 6 0 0 0 00 - 0 9 J12 4 8 0 0 00 4 8 0 0 00 15 J12 4 0 0 00 4 4 0 0 00 18 J12 4 4 0 0 00 - 0 28 J12 7 2 0 0 00 7 2 0 0 00

Analyze: The balance of the accounts payable for Sachi, Inc. in the Belladonna Company accounts payable subsidiary ledger is $7,200. The balance of the accounts receivable for Belladonna Company in the Sachi, Inc. accounts receivable subsidiary ledger is $7,200.

PROBLEM 8.7B APP GENERAL JOURNAL DATE 1 2019 2 June 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44

DESCRIPTION

Post Ref.

DEBIT

1 Merchandise Inventory ($5,080 + $320) Accounts Payable/Mow Down Corporation Purchased lawn mowers on account from Mow Down Corporation, Invoice 201 dated June 1. Freight charges of $320 added to invoice. Terms 2/10, n/30.

5 4 0 0 00

5 Accounts Receivable/Arthur Gomez Sales 5 Cost of Goods Sold Merchandise Inventory Sold garden supplies to Arthur Gomez, Sales Slip 888; terms 1/10, n/30. The cost of the merchandise was $500.

1 0 0 0 00

1 5 0 0 00

7 Accounts Payable/Mow Down Corporation Merchandise Inventory Received Credit Memorandum 310 for damaged lawn mowers returned; the goods were originally purchased on Invoice 201 dated June 1.

5 5 0 00

9 Sales Returns and Allowances Accounts Receivable/Arthur Gomez 9 Merchandise Inventory Cost of Goods Sold Issued Credit Memorandum 89 for $100 to Arthur Gomez for returned garden supplies; the merchandise was originally sold on Sales Slip 888 dated June 5. The cost of the returned merchandise was $50.

1 0 0 00

Accounts Payable/Mow Down Corporation ($5,400 - $550) Merchandise Inventory (($5,400 - $320 - $550) * 2%) Cash ($4,850 - $90.60) Paid amount due on Invoice 101 to Mow Down Corporation after receipt of Credit Memo 310, Check 1555

CREDIT

5 0 00

4 8 5 0 00 4

Sales Discounts (($1,000 - $100) * 1%) Cash ($1,000 - $100 - $9) Accounts Receivable/Arthur Gomez ($1,000 - $100) Received amount due from Arthur Gomez for sale of June 5, less return of June 9 and less cash discount

9 00 8 9 1 00

Credit Card Expense ($15,000 * 2%)

3 0 0 00

45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61

Cash ($15,000 - $300) Sales Cost of Goods Sold Merchandise Inventory Record sales to customers using bank credit cards

17 Merchandise Inventory ($9,000 - $2,700 - $630) Accounts Payable/Patio Wholesalers

14 7 0 0 00 15 7 5 0 0 00 7

5 6 7 0 00 5

Purchased merchandise on account, Invoice 2178, terms 1/10, n/30 17 Accounts Payable/Patio Wholesalers Merchandise Inventory (1% x $5,670) Cash ($5,670 - $56.70) Paid amount due on Invoice 2178, Check 126

5 6 7 0 00

Analyze: The average cost of the lawn mowers purchased on June 1 was $270 ($5,400 ÷ 20 = $270).

3 5

PAGE

CREDIT

4 0 0 00

0 0 0 00 5 0 0 00

5 5 0 00

1 0 0 00 5 0 00

9 0 60 7 5 9 40

9 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44

0 0 0 00 5 0 0 00

6 7 0 00 0

5 6 70 6 1 3 30

45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61

CRITICAL THINKING PROBLEM 8.1 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Jan. 1 Cash 3 Equipment 4 William Evans, Capital 5 Original investments by owner 6 7 2 Purchases 8 Cash 9 Purchased merchandise, Check 100 10 11 3 Accounts Receivable/Chu Corporation 12 Sales 13 Sold merchandise on account, Invoice 1001, 14 terms 2/10, n/30 15 16 4 Purchases 17 Accounts Payable/Tsang Company 18 Purchased merchandise on account, 19 Invoice 1125, terms 1/10, n/30 20 21 5 Freight In 22 Cash 23 Paid freight charges for January 4 purchase, Check 101 24 25 10 Sales Returns and Allowances 26 Accounts Receivable/Chu Corporation 27 Issued Credit Memorandum 101 for return of 28 merchandise 29 30 11 Sales Discounts ($750 - $100 = $650; $650 x 2% = $13) 31 Cash ($750 - $100 - $13) 32 Accounts Receivable/Chu Corporation ($750 - $100) 33 Received payment for invoice 1001 34 35 13 Accounts Payable/Tsang Company 36 Purchases Discounts ($1,900 x 1%) 37 Cash ($1,900 - $19) 38 Paid amount owed on Invoice 1125, Check 102

Post Ref.

DEBIT 54 0 0 0 00 6 0 0 0 00

10 5 0 0 00

7 5 0 00

1 9 0 0 00

1 2 0 00

1 0 0 00

1 3 00 6 3 7 00

1 9 0 0 00

CREDIT 1 2 3 60 0 0 0 00 4 5 6 7 10 5 0 0 00 8 9 10 11 7 5 0 00 12 13 14 15 16 1 9 0 0 00 17 18 19 20 21 1 2 0 00 22 23 24 25 1 0 0 00 26 27 28 29 30 31 6 5 0 00 32 33 34 35 1 9 00 36 1 8 8 1 00 37 38

CRITICAL THINKING PROBLEM 8.1 (continued)

DATE

GENERAL JOURNAL DESCRIPTION

1 2019 2 Jan. 15 Cash 3 Sales 4 Recorded cash sales, January 1 – 15 5 6 15 Credit Card Expense ($1,200 x 3%) 7 Cash ($1,200 - $36) 8 Sales 9 Recorded sales to customers using bank credit 10 cards, January 1 – 15 11 12 15 Wages Expense 13 Cash 14 Paid wages, Check 103 15 16 16 Equipment 17 Cash 18 Purchased equipment, Check 104 19 20 17 Equipment 21 Cash 22 Paid freight for equipment purchase of January 16, 23 Check 105 24 25 18 Purchases ($4,500 - $1,800) 26 Accounts Payable/Terri Manufacturing 27 Purchased merchandise on account, 28 Invoice 2078, terms 1/10, n/30 29 30 20 Accounts Receivable/Moloney Corp. 31 Sales 32 Sold merchandise on account, 33 Invoice 1002, terms 1/10, n/30 34

PAGE Post Ref.

DEBIT 6 2 5 0 00

3 6 00 1 1 6 4 00

1 5 7 5 00

1 7 5 0 00

3 5 0 00

2 7 0 0 00

2 5 0 0 00

CREDIT 1 2 6 2 5 0 00 3 4 5 6 7 1 2 0 0 00 8 9 10 11 12 1 5 7 5 00 13 14 15 16 1 7 5 0 00 17 18 19 20 3 5 0 00 21 22 23 24 25 2 7 0 0 00 26 27 28 29 30 2 5 0 0 00 31 32 33 34

CRITICAL THINKING PROBLEM 8.1 (continued)

DATE

GENERAL JOURNAL DESCRIPTION

1 2019 2 Jan. 21 Purchases 3 Freight In 4 Accounts Payable/Schmidt Company 5 Purchased merchandise on account, 6 Invoice 3204, terms 1/10, n/30 7 8 27 Accounts Payable/Terri Manufacturing 9 Purchases Discounts ($2,700 x 1%) 10 Cash ($2,700 - $27) 11 Paid amount owed on Invoice 2078, 12 Check 106 13 14 29 Sales Discounts ($2,500 x 1%) 15 Cash ($2,500 - $25) 16 Accounts Receivable/Moloney Corp. 17 Received payment for Invoice 1002 18 19 30 Accounts Payable/Schmidt Company 20 Purchases Discounts ($3,000 x 1%) 21 Cash 22 Paid amount due on Invoice 3204, Check 107 23 24 31 Cash 25 Sales 26 Recorded cash sales, January 16 – 31 27 28 31 Credit Card Expense ($2,200 x 3%) 29 Cash ($2,200 - $66) 30 Sales 31 Recorded sales to customers using bank credit 32 cards, January 16 – 31 33

PAGE Post Ref.

DEBIT 3 0 0 0 00 7 0 00

2 7 0 0 00

2 5 00 2 4 7 5 00

3 0 7 0 00

6 8 2 5 00

6 6 00 2 1 3 4 00

CREDIT 1 2 3 3 0 7 0 00 4 5 6 7 8 2 7 00 9 2 6 7 3 00 10 11 12 13 14 15 2 5 0 0 00 16 17 18 19 3 0 00 20 3 0 4 0 00 21 22 23 24 6 8 2 5 00 25 26 27 28 29 2 2 0 0 00 30 31 32 33

CRITICAL THINKING PROBLEM 8.2 1.

To determine whether Sensual Linens Shop was billed in error: a. Review Sensual Linens Shop's purchase order file for duplicate orders to Passionate Linens Company. If two orders were placed for the same merchandise, check the receiving reports to determine if both shipments were received. If Sensual Linens Shop does not prenumber its purchase orders, two orders may have been issued for the same merchandise. If only one purchase order was placed, check the receiving reports for a duplicate shipment. b. If no duplicate purchase order or duplicate receipt of merchandise is found, ask Passionate Linens Company to identify why they made two shipments of sheets. If Passionate Linens Company made the second shipment in error, they will be obligated to accept return of the sheets.

To prevent this situation from occuring again: a. Prenumber all purchase order forms and periodically check to be sure that all forms can be accounted for. b. Require all purchase orders to have proper authorization before they are issued. Celeste can authorize all purchase orders, or she can designate appropriate personnel to handle this function. c. Require all shipments of merchandise received by the shop to be compared to the corresponding purchase order and the invoice received from the supplier. Any shipment for which there is no purchase order should be questioned immediately. d. Require the purchase order and corresponding receiving report to be attached to the invoice before it is presented for payment. Celeste can establish internal control procedures to reduce the possibility of issuing duplicate purchase orders, but she cannot prevent suppliers from making duplicate shipments in error. If the appropriate documentation accompanies invoices, though, she will know that the error was not commited by Sensual Linens Shop.

SOLUTIONS TO BUSINESS CONNECTIONS Managerial Focus: 1. 2. 3. 4. 5. 6. Ethical Dilemma: Anna’s actions are not ethical. If she cannot get a raise from this company, she should find a new job. When she performs the unethical action of getting money from a fictitious vendor she is stealing dollar for dollar from her company. Her money comes from the net income of this company. When Anna finds how easy it is to perpetrate this fraud, she will create more vendors and more invoices. To prevent these actions, the controller should require each new vendor to receive his/her approval. The procedure to only view the checks over $100 can still be maintained with this one approval process. Financial Statement Analysis: 1. 2.

Analyze Online: Answers will vary depending on the year. Teamwork: The most advantageous would be net 45 days to pay the vendors, with customers on terms of 2/10 net 30. Your customers would then be paying you before you need to pay vendors. Internet Connection: Your Company address and phone number and the vendor’s name and address. The amount of the check or purchase order. Reference for the purchase order number of purchase requisition.

SOLUTIONS TO BUSINESS CONNECTIONS Managerial Focus: Maintenance of good credit reputation, taking advantage of cash discounts. Allows a business to buy on credit, using resources more effectively. It is important to establish a good credit rating for future cash needs. Additionally, cash could be used for other purposes. Creates a storage problem, risks obsolescence of the merchandise, and ties up funds. Ensure authorized-only purchases, verifies receipt of goods and accuracy of invoices, distributes tasks. Protect against fraud and excessive investment in merchandise. Ethical Dilemma: Anna’s actions are not ethical. If she cannot get a raise from this company, she should find a new job. When she performs the unethical action of getting money from a fictitious vendor she is stealing dollar for dollar from her company. Her money comes from the net income of this company. When Anna finds how easy it is to perpetrate this fraud, she will create more vendors and more invoices. To prevent these actions, the controller should require each new vendor to receive his/her approval. The procedure to only view the checks over $100 can still be maintained with this one approval process. Financial Statement Analysis: 2016: 65.8% ($58,254 ÷ $88,519). 2015: 65.9% ($54,787 ÷ $83,176). Answers will vary. Students may suggest price changes on merchandise from suppliers, discounts, or shipping costs variances. Analyze Online: Answers will vary depending on the year. Teamwork: The most advantageous would be net 45 days to pay the vendors, with customers on terms of 2/10 net 30. Your customers would then be paying you before you need to pay vendors. Internet Connection: Your Company address and phone number and the vendor’s name and address. The amount of the check or purchase order. Reference for the purchase order number of purchase requisition.

Problem EX EX EX EX EX EX EX EX

9.1 9.2 9.3 9.4 9.5 9.6 9.7 9.8

Time 10 5 10 15 10 20 15 20

PR PR PR PR PR PR

9.1A 9.2A 9.3A 9.4A 9.5A 9.6A

15 25 25 30 15 25

CT CT

9.1 9.2

20 35

Time to Use 5 = 10 = 15 = 20 = 25 = 30 = 35 = 40 = 45 = 50 = 55 = 60 =

1-5 min. 6-10 min. 11-15 min. 16-20 min. 21-25 min. 26-30 min. 31-35 min. 36-40 min. 41-45 min. 46-50 min. 51-55 min. 56-60 min.

CHAPTER 9 CASH Chapter Opener: Thinking Critically Small businesses often use on line banking to pay taxes, such as payroll and sales taxes, to government agencies. Additionally, payments for routine bills, such as utilities and loan payments, can be processed electronically.

Discussion Questions These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter. 1. Balance of Cash account in the general ledger. 2. To reconcile any difference between depositor’s checkbook, Cash account, and bank statement. 3. Day-by-day checking account activity, as well as beginning and ending balances. 4. Outstanding checks, deposits in transit, service charges. 5. To record items that have not yet been entered in firm’s records. 6. Access to checkbook is restricted; use of prenumbered check forms; checks examined by someone who did not prepare them before they are signed; bank statement reconciled by someone other than employees who handle cash. 7. Signed, authorized written order instructing a bank to pay a specific sum of money to a designated person. 8. Date, amount, payee, current balance, purpose of check. Stub should be prepared before the check so that it will not be forgotten. 9. Electronic processing of documents. 10. Restrictive endorsement. 11. Shortages are debited and overages are credited to the Cash Short or Over account. 12. Use only for minor payments; establishment check made out to person to be in charge of funds; keep funds locked; payments made from funds should be documented with signatures of recipient. 13. At month-end or when petty cash is replenished. 14. Written promise to pay amount on specific date. Dr. Cash, Cr. Notes Rec., Cr. Interest Income. 15. Employees are investigated by an insurance company, and, if their backgrounds are satisfactory, their employer is insured against losses that may occur because of employee theft or mishandling of funds. 16. Only approved employees can handle cash; keep cash in locked location; record cash receipts as they arrive; check funds against receipt log before bank deposits are made; make deposits promptly; separation of cash deposits, recording, reconciliation duties. 17. Payments made by check and issued only with approved invoice; invoices approved only by designated personnel; checks prepared and recorded in the checkbook or check register by someone different from the person who approves the payments; use prenumbered checks. 18. See Glossary for terms and definitions.

EXERCISE 9.1 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

Post Ref.

1 2019 2 Apr. 29 Cash 3 Cash Short and Over 4 Sales 5 Record sales and cash shortage 6 7 30 Cash 8 Cash Short and Over 9 Sales 10 Record sales and cash overage 11

DEBIT

1 5 4 4 00 6 00

1 5 3 2 00

CREDIT 1 2 3 1 5 5 0 00 4 5 6 7 1 00 8 1 5 3 1 00 9 10 11

EXERCISE 9.2 PAGE

GENERAL JOURNAL DATE 1 2019 2 Jan. 3 4 5

DESCRIPTION

Post Ref.

2 Petty Cash Fund Cash Establish Petty Cash Fund, Check No. 2108

DEBIT

CREDIT 1 2 4 5 0 00 3 4 5

4 5 0 00

EXERCISE 9.3 PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Jan. 2 Petty Cash Fund 3 Cash 4 Establish Petty Cash Fund, Check No. 3100 5 6 Jan. 31 Supplies 7 Delivery Expense 8 Miscellaneous Expense 9 Cash 10 Replenish Petty Cash Fund, Check No. 3159 11

Post Ref.

DEBIT

3 0 0 00

6 8 00 1 0 9 00 1 4 00

CREDIT 1 2 3 0 0 00 3 4 5 6 7 8 1 9 1 00 9 10 11

EXERCISE 9.4 Teng Corporation Bank Reconciliation Statement October 31, 2019 Balance on bank statement Additions: Deposit in transit

Deductions for outstanding checks: Check 7017 Check 7098 Check 7107 Total outstanding checks Adjusted bank balance Balance in books Deductions: Bank service charge NSF check from Richard Wolf Adjusted book balance

15 7 0 0 00 9 5 7 00 16 6 5 7 00

1 2 4 00 5 5 00 1 5 6 0 00 1 7 3 9 00 14 9 1 8 00 15 2 6 2 00 1 2 00 3 3 2 00

3 4 4 00 14 9 1 8 00

EXERCISE 9.4 (continued) PAGE 14

GENERAL JOURNAL DATE

DESCRIPTION

Post Ref.

DEBIT

1 2019 2 Oct. 31 Miscellaneous Expense 3 Cash 4 Bank service charge for October 5 6 31 Accounts Receivable/Richard Wolf 7 Cash 8 To record NSF check returned by bank 9

1 2 00

3 3 2 00

EXERCISE 9.5 Book Balance

Accounting Entry

Bank Balance X

6. 7.

CREDIT 1 2 1 2 00 3 4 5 6 3 3 2 00 7 8 9

EXERCISE 9.6 Di Stefano Office Supply Company Bank Reconciliation Statement March 31, 2019 Balance on bank statement Additions: Deposit in transit Check incorrectly charged Deductions for outstanding checks: Check 3782 Check 3840 Total outstanding checks Adjusted bank balance

70 0 0 5 00 4 7 0 0 00 3 4 8 00

2 2 0 0 00 2 5 1 00 2 4 5 1 00 72 6 0 2 00

Balance in books Additions: Noninterest-bearing note collected by bank Deductions: Bank collection fee for note NSF check from Wozniak Construction Company Adjusted book balance

5 0 4 8 00 75 0 5 3 00

71 4 8 7 00 7 3 0 0 00 78 7 8 7 00 4 0 00 6 1 4 5 00

6 1 8 5 00 72 6 0 2 00

EXERCISE 9.6 (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 March 31 Cash 3 Notes Receivable 4 To record receipt of note collected by bank 5 6 31 Miscellaneous Expense 7 Cash 8 To record bank collection fee 9 10 31 Accounts Receivable/Wozniak Construction Company 11 Cash 12 To record NSF check returned by bank 13

Post Ref.

DEBIT

7 3 0 0 00

4 0 00

6 1 4 5 00

CREDIT 1 2 7 3 0 0 00 3 4 5 6 4 0 00 7 8 9 10 6 1 4 5 00 11 12 13

EXERCISE 9.7 Florence Company Bank Reconciliation Statement November 30, 2019 Balance on bank statement Additions: Check incorrectly charged Check 2782 written for $200; paid by bank as $1,200 Check 2920 written for $85 paid by the bank twice

13 5 5 0 00 2 6 5 00 1 0 0 0 00 8 5 00 1 3 5 0 00 14 9 0 0 00

Deductions: November 22 deposit of $580 credited by bank for $850 Outstanding checks Adjusted bank balance

2 7 0 00 2 4 5 0 00

2 7 2 0 00 12 1 8 0 00

EXERCISE 9.8 PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2019 2 Sept. 22 Robert Savage, Drawing 3 Cash 4 To record ATM withdrawal by Robert 5 Savage for personal use. 6 7 22 Cash 8 Accounts Receivable/Edwards UK 9 To record wire-transfer of funds 10 received on account from Edwards UK 11 12 23 Utilities Expense 13 Cash 14 To record on-line payment to Waste 15 Control Trash Services 16 17 24 Note Payable 18 Cash 19 To record loan payment to Central Motors 20

POST. REF.

DEBIT

CREDIT

2 4 0 00 2 4 0 00

8 9 0 0 00 8 9 0 0 00

3 6 05 3 6 05

3 5 0 0 00 3 5 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

PROBLEM 9.1A PAGE

GENERAL JOURNAL DATE 1 2019 2 June 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

DESCRIPTION

25 Cash Cash Short and Over Sales

Post Ref.

DEBIT

620

1 3 2 1 00 6 00

26 Cash Cash Short and Over Sales

620

1 3 8 2 00 8 00

27 Cash Cash Short and Over Sales

620

28 Cash Cash Short and Over Sales

1 3 6 3 00

620

29 Cash Cash Short and Over Sales

620

30 Cash Cash Short and Over Sales

620

1 2 7 4 00 8 00

1 1 3 1 00

1 5 6 0 00 9 00

CREDIT 1 2 3 1 3 2 7 00 4 5 6 7 1 3 9 0 00 8 9 10 5 00 11 1 3 5 8 00 12 13 14 15 1 2 8 2 00 16 17 18 2 00 19 1 1 2 9 00 20 21 22 23 1 5 6 9 00 24 25

PROBLEM 9.1A (continued) GENERAL LEDGER ACCOUNT NO. 620

ACCOUNT Cash Short and Over DATE 2019 June 25 26 27 28 29 30

DESCRIPTION

Post Ref. J1 J1 J1 J1 J1 J1

DEBIT

CREDIT

6 00 8 00 5 00 8 00 2 00 9 00

BALANCE DEBIT CREDIT 6 00 1 4 00 9 00 1 7 00 1 5 00 2 4 00

Analyze: The $24 debit balance in Cash Short and Over will be reported as expense on the Income Statement.

PROBLEM 9.2A PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 June 1 Petty Cash Fund 3 Cash 4 Establish Petty Cash Fund, Check No. 550 5 6 30 Supplies 7 Delivery Expense 8 Miscellaneous Expense 9 Rosa Calderon, Drawing 10 Cash 11 Replenish Petty Cash Fund, Check No. 590 12

Post Ref.

DEBIT

3 5 0 00

5 0 00 9 8 00 9 8 00 6 0 00

CREDIT 1 2 3 5 0 00 3 4 5 6 7 8 9 3 0 6 00 10 11 12

PROBLEM 9.2A (continued) PAGE 1

PETTY CASH ANALYSIS SHEET DATE

2019 June

1 5 8 15 22 25 29 30 30 30 30 30

VOU NO.

DESCRIPTION

— 1 2 3 4 5 6 — —

Establish fund Office supplies Postage stamps Delivery service Personal withdrawal Store windows washed service Delivery Totals Balance on hand

— — —

RECEIPTS

PAYMENTS

DISTRIBUTION OF PAYMENTS SUPPLIES DEBIT

Balance on hand Replenish fund Carried forward

DELIVERY EXPENSE DEBIT

MISC. EXPENSE DEBIT

OTHER ACCOUNTS DEBIT ACCOUNT NAME AMOUNT

3 5 0 00

3 5 0 00 3 5 0 00 4 4 00 3 0 6 00 3 5 0 00

5 0 00 5 1 00 3 8 00 6 0 00 4 7 00 6 0 00 3 0 6 00 4 4 00 3 5 0 00

Analyze: The total payments from the petty cash fund were $306 in June.

5 0 00 5 1 00 3 8 00 Rosa Calderon, Drawing

6 0 00

4 7 00 5 0 00

6 0 00 9 8 00

9 8 00

6 0 00

PROBLEM 9.3A HPF Vacations Bank Reconciliation Statement April 30, 2019 Balance on bank statement Additions: Deposit of April 30 in transit

3 6 3 9 00 2 0 0 00 3 8 3 9 00

Deductions for outstanding checks: Check 1214 of April 28 Check 1215 of April 30 Total outstanding checks Adjusted bank balance

1 8 00 1 5 00 3 3 00 3 8 0 6 00

Balance in books Deductions: NSF check from Doris Fisher Bank charges Adjusted book balance

3 9 7 2 00 1 6 0 00 6 00

PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2019 2 April 30 Accounts Receivable/Doris Fisher 3 Cash 4 To record NSF check returned by bank 5 6 30 Miscellaneous Expense 7 Cash 8 To record bank charges 9

1 6 6 00 3 8 0 6 00

POST. REF.

DEBIT

CREDIT

1 6 0 00 1 6 0 00

6 00

Analyze: Outstanding checks are 1214 and 1215 totaling $33.00.

6 00

1 2 3 4 5 6 7 8 9

PROBLEM 9.4A Dry Creek Bed and Breakfast Bank Reconciliation Statement August 31, 2019 Balance on bank statement Additions: Deposit of August 30 in transit Deposit of August 31 in transit Deductions for outstanding checks: Check 712 Check 713 Check 716 Check 736 Check 739 Check 741 Total outstanding checks Adjusted bank balance Balance in books Additions: Note receivable collected by bank Interest on note receivable Deductions: NSF check from Art Corts Bank service charge Adjusted book balance

13 8 9 7 00 1 5 0 0 00 7 0 1 00

2 2 0 1 00 16 0 9 8 00

1 1 0 00 1 2 5 00 2 3 8 00 5 7 7 00 7 8 00 1 2 0 00 1 2 4 8 00 14 8 5 0 00 12 9 8 1 00 2 0 9 4 00 5 3 00

2 7 0 00 8 00

2 1 4 7 00 15 1 2 8 00

2 7 8 00 14 8 5 0 00

PROBLEM 9.4A (continued) PAGE 10

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Aug. 31 Cash 3 Notes Receivable 4 Interest Income 5 To record receipt of amount due on note 6 plus interest collected by bank in August 7 8 31 Accounts Receivable/Art Corts 9 Cash 10 To record NSF check returned by bank 11 12 31 Miscellaneous Expense 13 Cash 14 To record bank service charge for August 15

Post Ref.

DEBIT

CREDIT

2 1 4 7 00

2 7 0 00

8 00

1 2 2 0 9 4 00 3 5 3 00 4 5 6 7 8 2 7 0 00 9 10 11 12 8 00 13 14 15

Analyze: The net effect on the accounting equation of the journal entries recorded as a result of the bank reconciliation was an increase in assets by $45 and an increase in equity by $45 ($53 - $8).

PROBLEM 9.5A A. Fontes Consultancy Bank Reconciliation Statement April 30, 2019 Balance in books Additions: Check 2206 dated April 17 was recorded as $695; check was actually written for $14 Deductions: Check 2247 dated April 20 was recorded as $130; check was actually written for $164 Adjusted book balance

20 2 7 5 00

6 8 1 00 20 9 5 6 00

3 4 00 20 9 2 2 00

PROBLEM 9.5A (continued) PAGE 11

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Apr. 30 Cash 3 Supplies 4 To correct error in entry for check 2206 5 of April 17 6 7 30 Utilities Expense 8 Cash 9 To correct error in entry for check 2247 10 of April 20 11

Post Ref.

DEBIT

6 8 1 00

3 4 00

Analyze: Net income would have been overstated by $34.

CREDIT 1 2 6 8 1 00 3 4 5 6 7 3 4 00 8 9 10 11

PROBLEM 9.6A Western Imports Bank Reconciliation Statement July 31, 2019 Balance on Bank Statement Additions: Deposit of July 31 in transit Check 1422 for $1,200 incorrectly charged as $1,280 Deductions for outstanding checks: Check 1429 Check 1430 Total outstanding checks Adjusted Bank Balance

28 7 6 0 00 9 0 0 00 8 0 00

1 2 4 9 00 1 4 1 00 1 3 9 0 00 28 3 5 0 00

Balance in Books Additions: EFT received on account from Foncier Ricard Deductions: Check 1425 written for $90; incorrectly recorded as $60 Online payment on July 31 to CentralComm Adjusted Bank Balance

9 8 0 00 29 7 4 0 00

14 0 4 2 00 14 6 0 0 00 28 6 4 2 00 3 0 00 2 6 2 00

2 9 2 00 28 3 5 0 00

PROBLEM 9.6A (continued) PAGE 19

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 July 31 Cash 3 Accounts Receivable/Foncier Ricard 4 EFT received on account from Foncier Ricard 5 on July 31 6 7 31 Supplies 8 Cash 9 To correct error for Check 1425 10 11 31 Telephone Expense 12 Cash 13 To record online payment to CentralComm

Post Ref.

DEBIT

14 6 0 0 00

3 0 00

2 6 2 00

Analyze: Total expenses increased by $262 as a result of the general journal entries recorded.

CREDIT 1 2 14 6 0 0 00 3 4 5 6 7 3 0 00 8 9 10 11 2 6 2 00 12 13

PROBLEM 9.1B PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 April 25 Cash 3 Cash Short and Over 4 Sales 5 6 26 Cash 7 Cash Short and Over 8 Sales 9 10 27 Cash 11 Cash Short and Over 12 Sales 13 14 28 Cash 15 Cash Short and Over 16 Sales 17 18 29 Cash 19 Cash Short and Over 20 Sales 21 22 30 Cash 23 Cash Short and Over 24 Sales 25

Post Ref.

620

DEBIT

1 3 9 9 00 1 00

1 0 5 1 00 620

620

1 2 6 7 00 3 00

1 1 8 6 00 620

1 0 9 3 00 620

1 2 2 0 00 620

CREDIT 1 2 3 1 4 0 0 00 4 5 6 1 00 7 1 0 5 0 00 8 9 10 11 1 2 7 0 00 12 13 14 4 00 15 1 1 8 2 00 16 17 18 1 00 19 1 0 9 2 00 20 21 22 3 00 23 1 2 1 7 00 24 25

PROBLEM 9.1B (continued) GENERAL LEDGER ACCOUNT NO. 620

ACCOUNT Cash Short and Over DATE 2019 April 25 26 27 28 29 30

DESCRIPTION

Post Ref. J1 J1 J1 J1 J1 J1

DEBIT

CREDIT

1 00 1 00 3 00

BALANCE DEBIT CREDIT 1 00 0 00 3 00

4 00 1 00 3 00

Analyze: The $5 credit balance in Cash Short and Over will be reported as revenue on the Income Statement.

1 00 2 00 5 00

PROBLEM 9.2B PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Sept. 4 Petty Cash Fund 3 Cash 4 Establish Petty Cash Fund, Check No. 910 5 6 30 Supplies 7 Delivery Expense 8 Miscellaneous Expense 9 Fred Chin, Drawing 10 Cash 11 Replenish Petty Cash Fund, Check No. 950 12

Post Ref.

DEBIT

2 5 0 00

3 2 00 5 4 00 3 0 00 7 5 00

CREDIT 1 2 2 5 0 00 3 4 5 6 7 8 9 1 9 1 00 10 11 12

PROBLEM 9.2B (continued) PAGE

PETTY CASH ANALYSIS SHEET DATE VOU NO.

2019 Sept. 4 6 12 18 24 28 30 30 30 30 30

— 1 2 3 4 5 — — — — —

DESCRIPTION

RECEIPTS

PAYMENTS

DISTRIBUTION OF PAYMENTS SUPPLIES DEBIT

Establish fund Delivery service Bought office supplies Personal withdrawal Bought stamps Delivery service Totals Balance on hand Balance on hand Replenish fund Carried forward

DELIVERY EXPENSE DEBIT

MISC. EXPENSE DEBIT

OTHER ACCOUNTS DEBIT ACCOUNT NAME

AMOUNT

2 5 0 00

2 5 0 00 2 5 0 00 5 9 00 1 9 1 00 2 5 0 00

2 2 00 3 2 00 7 5 00 3 0 00 3 2 00 1 9 1 00 5 9 00 2 5 0 00

2 2 00 3 2 00 Fred Chin, Drawing

7 5 00

3 0 00 3 2 00

Analyze: The balance of the petty cash fund on September 30, after replenishment, is $250.

3 2 00 5 4 00

3 0 00

7 5 00

PROBLEM 9.3B Peter Chen, Attorney-at-Law Bank Reconciliation Statement September 30, 2019 Balance on bank statement Additions: Deposit of September 28 in transit Deductions for outstanding checks: Check 108 of September 15 Check 112 of September 27 Total outstanding checks Adjusted bank balance Balance in books Deductions: NSF check Bank service charge Adjusted book balance

7 3 2 3 50 9 0 0 00 8 2 2 3 50 7 5 00 1 4 0 00 2 1 5 00 8 0 0 8 50 8 1 3 4 00 1 1 8 00 7 50

1 2 5 50 8 0 0 8 50

PROBLEM 9.3B (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Sept. 30 Accounts Receivable/Annette Cole 3 Cash 4 To record NSF check returned by bank 5 6 30 Miscellaneous Expense 7 Cash 8 To record bank service charge for September 9

Post Ref.

DEBIT

CREDIT

1 1 8 00

7 50

Analyze: Seven checks were paid.

1 2 1 1 8 00 3 4 5 6 7 50 7 8 9

PROBLEM 9.4B Bay City Kitchen Appliances Bank Reconciliation Statement July 31, 2019 Balance on bank statement Additions: Deposit of July 31 in transit

Deductions for outstanding checks: Check 533 Check 535 Check 537 Total outstanding checks Adjusted bank balance Balance in books Additions: Note receivable collected by bank Interest on note receivable Deductions: NSF check from Roberta Follette Bank service charge Adjusted book balance

9 4 4 2 03 9 9 4 07 10 4 3 6 10

1 5 1 95 1 2 2 50 6 2 5 40 8 9 9 85 9 5 3 6 25 8 3 1 8 59 1 4 4 7 00 3 0 00

2 4 5 00 1 4 34

1 4 7 7 00 9 7 9 5 59

2 5 9 34 9 5 3 6 25

PROBLEM 9.4B (continued) PAGE

GENERAL JOURNAL

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

DATE 2019 July 31 Cash

DESCRIPTION

POST. REF.

DEBIT

CREDIT

1 4 4 7 00 Notes Receivable Interest Income To record receipt of amount due on note plus interest collected

1 4 4 7 00 3 0 00

31 Accounts Receivable/Roberta Follette Cash To record NSF check returned by bank

2 4 5 00

31 Miscellaneous Expense Cash To record bank service charge for July

1 4 34

2 4 5 00

Analyze: After all journal entries have been posted, the balance in the Cash account is $9,536.25.

1 4 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

PROBLEM 9.5B Wimpy Dudes Moving Corporation Bank Reconciliation Statement February 28, 2019 Balance in books Additions: Check 1301 dated February 18 was recorded as $328; check was actually written for $308 Deductions: Check 1322 dated February 24 was recorded as $504; check was actually written for $540 Adjusted book balance

20 5 5 1 00

2 0 00 20 5 7 1 00

3 6 00 20 5 3 5 00

PROBLEM 9.5B (continued) PAGE

GENERAL JOURNAL DATE

DESCRIPTION

Post Ref.

1 2019 2 Feb. 28 Cash 3 Hauling Expense 4 To correct error in entry for check 1301 5 of February 18 6 7 28 Telephone Expense 8 Cash 9 To correct error in entry for check 1322 10 of February 24 11

DEBIT

2 0 00

3 6 00

Analyze: The net change to the Cash account was an decrease of $16 ($20 - $36).

CREDIT 1 2 2 0 00 3 4 5 6 7 3 6 00 8 9 10 11

PROBLEM 9.6B Euro Specialty Products Bank Reconciliation Statement November 30, 2019 Balance on Bank Statement Additions: Deposit of November 30 in transit Deductions: Deductions for outstanding checks: Check 4129 Check 4130 Total outstanding checks Check 4122 written for $1,200, paid by bank as $1,000 Adjusted Bank Balance Balance in Books Additions: EFT received on account from Cantori Cucine Check 4125 written for $890; incorrectly recorded as $980

29 7 3 4 00 1 2 2 4 00 30 9 5 8 00

1 3 2 2 00 2 3 9 00 1 5 6 1 00 2 0 0 00 29 1 9 7 00 16 6 3 0 00 12 8 0 0 00 9 0 00

Deductions: Online payment on November 30 to ClearComm Adjusted book balance

12 8 9 0 00 29 5 2 0 00 3 2 3 00 29 1 9 7 00

PROBLEM 9.6B (continued) PAGE 44

GENERAL JOURNAL DATE

DESCRIPTION

1 2019 2 Nov 30 Cash 3 Accounts Receivable/Cantori Cucine 4 EFT received on account from Cantori Cucine 5 6 30 Cash 7 Equipment 8 To correct error for Check 4125 9 10 30 Telephone Expense 11 Cash 12 To record online payment to ClearComm

Post Ref.

DEBIT

12 8 0 0 00

9 0 00

3 2 3 00

Analyze: Total assets decreased by $323 as a result of the general journal entries recorded.

CREDIT 1 2 12 8 0 0 00 3 4 5 6 9 0 00 7 8 9 10 3 2 3 00 11 12

CRITICAL THINKING PROBLEM 9.1 1. DATE

CASH COUNT

BANK DEPOSIT

SALES, PER CASH REGISTER TAPE

AMOUNT SHORT

$2,486.20

LESS: CHANGE FUND $400.00

August 1

$2,086.20

$2,222.50

($136.30)

August 2

2,352.80

$400.00

1,952.80

2,135.90

(183.10)

August 3

2,471.45

$400.00

2,071.45

2,303.45

(232.00)

August 4

2,597.20

$400.00

2,197.20

2,287.30

(90.10)

August 5

2,644.05

$400.00

2,244.05

2,335.45

(91.40)

August 6

2,450.10

$400.00

2,050.10

2,155.50

(105.40)

August 7

2,492.40

$400.00

2,092.40

2,255.90

(163.50)

Totals

$17,494.20

$14,694.20

$15,696.00

($1,001.80)

CRITICAL THINKING PROBLEM 9.1 (continued) 2. PAGE 56

GENERAL JOURNAL DATE 1 2019 2 Aug. 7 Cash 3 Cash Short and Over 4 Sales 5

DESCRIPTION

Post Ref.

DEBIT

14 6 9 4 20 1 0 0 1 80

CREDIT 1 2 3 15 6 9 6 00 4 5

3. Jim should count the cash in the cash register with George at the end of his shift. Jim should print a cash register tape and compare it with the amount of cash in the cash register, less the $400 change fund. Jim should perform the same procedure with Alice at the end of her shift. Jim should also compare the amount of the sales for the day per the cash register tape with the amount of the bank deposit, and investigate any significant variances.

CRITICAL THINKING PROBLEM 9.2 Lucci Contractors Bank Reconciliation Statement August 31, 2019 Balance on bank statement Addition: Deposit in transit, August 28 Deductions for outstanding checks Check 1590 Check 1680 Check 1724 Check 1780 Check 1784 Check 1806 Total outstanding checks Adjusted bank balance Balance in books Deduction: Bank service charge Adjusted book balance Less: Cash shortage Corrected adjusted book balance

16 5 8 9 00 4 8 8 2 00 21 4 7 1 00 2 6 3 00 1 2 1 8 00 4 8 6 00 7 9 2 00 1 8 1 9 00 3 8 4 00 4 9 6 2 00 16 5 0 9 00 18 7 8 6 00 1 0 00 18 7 7 6 00 2 2 6 7 00 16 5 0 9 00

The cash shortage is the difference between the adjusted bank balance of $16,509 and the adjusted book balance of $18,776. This is the amount needed to have both parts of the bank reconciliation equal. Gloria concealed her theft by omitting checks 1590 ($263), 1680 ($1,218), and 1724 ($486). The total amount of these checks is $1,967. Additionally, Gloria purposely understated the total outstanding checks on her bank reconiliation by $300. The ommision of the three outstanding checks, added with the $300 error, equals the total cash shortage of $2,267. Since Gloria handled all cash records, it was relatively easy for her to conceal her theft. Mike should separate the jobs of receiving cash, making disbursements, maintaining accounting records, and preparing bank reconciliations. If the company is not large enough to permit different people to handle these jobs, then Mike should oversee the cash/accounting functions more closely, including reconciliation of the bank account. If Mike does not have the time to do this, he should consider hiring an independent accountant to review the cash/accounting records on a monthly basis and then report any discrepancies to him.

SOLUTIONS TO BUSINESS CONNECTIONS Managerial Focus: 1. a. No assurance money taken actually accounted for. b. A gap in the control of cash exists, and unauthorized expenditures can be made. c. Increases the opportunity for theft; no current cash position is known. d. Increases risk of theft. e. Weakens internal control over cash receipts. 2. Payment of bills in timely fashion, anticipation of fund shortages or overages, take advantage of investment opportunities. 3. Loss of control and check-and-balance system. 4. a. Yes. Blank endorsements are not secure. b. Yes. Checkbook should be kept in a locked drawer and should be available only to specified employee. c. Yes. To deter fraud, different tasks should be assigned to different employees. d. Yes. Reconciliation should be done soon after receiving bank statement. e. Yes. Financial records should be maintained for a reasonable number of years in case of a tax audit or if records are destroyed. f. No. The task would be impractical for a large firm. 5. Essential assets should be safeguarded against loss and theft. 6. Up-to-date cash position; information for day-to-day business decisions. 7. Insures again losses. 8. Control of cash; audit trail. Ethical Dilemma: Daniel should be sure to pay this $30 to petty cash immediately. He can then record cash short/over the next month. Daniel should be sure to never borrow money from petty cash, as it is not his money. Financial Statement Analysis: 1. 5.2% ($2,216 ÷ $42,549) 2. Increased by $493 million ($2,216 - $1,723) 3. The balance reported for "Cash and cash equivalents" would be understated by $150,000. Teamwork: A sales invoice for each job should be given to each customer with a place to incorporate any additions or subtractions for service. Any changes must be communicated to the home office and an approval number will be given. The Sales Invoice, as well as each change, should be signed by the customer. Only cash and money orders should be allowed since the families have just moved and do not currently have a local bank. Internet Connection: Each bank should list the possible interest rates, both variable and fixed. Most banks will be within a few tenths of points of each other.

Problem EX EX EX EX EX EX EX

10.1 10.2 10.3 10.4 10.5 10.6 10.7

Time 5 10 10 10 10 10 10

PR PR PR PR

10.1A 10.2A 10.3A 10.4A

15 25 25 20

CT CT

10.1 10.2

25 20

Time to Use 5 = 10 = 15 = 20 = 25 = 30 = 35 = 40 = 45 = 50 = 55 = 60 =

1-5 min. 6-10 min. 11-15 min. 16-20 min. 21-25 min. 26-30 min. 31-35 min. 36-40 min. 41-45 min. 46-50 min. 51-55 min. 56-60 min.

CHAPTER 10 PAYROLL COMPUTATIONS, RECORDS, AND PAYMENT Chapter Opener: Thinking Critically The required payroll deductions are federal income taxes, social security taxes, Medicare taxes, and if appropriate state income taxes. Other payroll deductions may include health insurance, retirement contributions, or charitable contributions. Managerial Implications: Thinking Critically Answers will vary, but students may suggest payroll audits, monitoring of cards, and division of labor for payroll tasks. Discussion Questions Note to instructor: These questions are designed to check students’ understanding of new concepts, and procedures presented in the chapter. 1. Sets minimum hourly wages and maximum work hours per week. Applies to firms engaged directly or indirectly in interstate commerce. 2. Earnings during the pay period, length of pay period, marital status, number of allowances. 3. Fair Labor Standards Act sets the minimum hourly rate of pay and maximum hours of work per week. It is also referred to as the Wage and Hour Law. 4. Salaried employees who hold supervisory or managerial positions, not subject to maximum hours and overtime. 5. The Federal amounts can be reduced by amount charged by the state government. 6. No, levied on the employer only. 7. Two common payroll frauds are overstating hours worked and the issuance of checks to nonexistent employees. 8. Number of hours worked is multiplied by the hourly wage. For hours above 40 in a week, the rate used is one and one-half times the regular hourly rate. 9. To provide medical care for the employee and the employee’s spouse after each has reached 65 years of age. 10. Used to finance retirement benefits for the employee, benefits for dependents of the retired employee, and benefits for a disabled employee. 11. Funds are automatically deposited in the employee’s account from the employer’s bank. 12. Hourly-rate, salary, commission, piece-rate. 13. Withholding tables 14. Circular E 15. One depends solely on the number of hours worked each week; the other is a fixed amount per month, per week, or other pay period.

368 n Chapter 10

EXERCISE 10.1 EMPLOYEE NO.

HOURLY RATE

HOURS WORKED

GROSS EARNINGS

1 2 3 4

$9.71 9.25 9.92 9.13

38 30 33 32

$368.98 $277.50 $327.36 $292.16

OVERTIME RATE

REGULAR HOURS WORKED

OVERTIME HOURS WORKED

46 47 38 48

6 7 0 8

DECEMBER SALARY

YEAR TO DATE EARNINGS THROUGH NOVEMBER 30

SOC. SEC. TAXABLE EARNINGS DECEMBER

SOCIAL SECURITY TAX 6.2%

$9,900.00 10,000.00 10,709.00 10,000.00

$99,000.00 70,000.00 117,799.00 100,000.00

$9,900.00 10,000.00 4,901.00 10,000.00

$613.80 620.00 303.86 620.00

EXERCISE 10.2

HOURLY RATE

$11.00 10.62 10.46 10.80

$16.50 15.93 15.69 16.20

REGULAR PAY

OVERTIME PAY

GROSS PAY

$440.00 424.80 397.48 432.00

$99.00 111.51 0.00 129.60

$539.00 536.31 397.48 561.60

EXERCISE 10.3

EMPLOYEE NO.

1 2 3 4

Chapter 10 n 369

EXERCISE 10.4

EMPLOYEE NO. 1 2 3 4

DECEMBER SALARY

MEDICARE TAXABLE EARNINGSDECEMBER

MEDICARE TAX 1.45%

$9,900.00 10,000.00 10,709.00 10,000.00

$143.55 145.00 155.28 145.00

EMPLOYEE NO.

MARITAL STATUS

WITHHOLDING ALLOWANCES

WEEKLY SALARY

INCOME TAX WITHHOLDING

1 2 3 4

M S M S

2 1 2 1

$675 565 665 495

$47 61 45 51

EXERCISE 10.5

EXERCISE 10.6 GENERAL JOURNAL

1 2 3 4 5 6 7 8 9 10 11 12 13

DATE 2019 Aug.

DESCRIPTION 7 Office Salaries Expense Social Security Tax Payable Medicare Tax Payable Employee Income Tax Payable Salaries Payable Payroll for week 7 Salaries Payable Cash Issued checks, weekly payroll

370 n Chapter 10

PAGE POST. REF.

DEBIT

CREDIT

1 2 1 6 8 02 3 3 9 30 4 6 1 2 48 5 1 8 9 0 20 6 7 8 1 8 9 0 20 9 1 8 9 0 20 10 11 12 13 2 7 1 0 00

EXERCISE 10.7 PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2019 2 July 31 Sales Salaries Expense 3 Office Salaries Expense 4 Social Security Tax Payable 5 Medicare Tax Payable 6 Employee Income Tax Payable 7 Salaries Payable 8 Payroll for month ended July 31, 2016 9 10 11 12 13 14 15

POST. REF.

DEBIT

CREDIT

30 5 0 0 00 8 4 5 0 00 2 4 1 4 90 5 6 4 78 5 8 4 2 00 30 1 2 8 32

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Chapter 10 n 371

PROBLEM 10.1A 1. EMPLOYEE NO.

REGULAR HOURS, HOURLY RATE

HOURS WORKED

REGULAR TIME EARNINGS

OVERTIME EARNINGS

GROSS EARNINGS

Kathy Burnett

$13.44

$537.60

$40.32

$577.92

Gross Pay Less: Social Security Tax Medicare Tax Income Tax Withholding Health & Disability Charitable Contribution U.S. Savings Bond Net Pay 2.

1 2 3 4 5

$577.92 35.83 8.38 24.00 161.00 18.00 100.00 $230.71 GENERAL JOURNAL

DATE DESCRIPTION 2019 Dec. 31 Salaries Payable Cash Issued check for weekly payroll

372 n Chapter 10

PAGE POST. REF.

DEBIT

CREDIT

2 3 0 71 2 3 0 71

1 2 3 4 5

PROBLEM 10.1A (continued) Analyze: Kathy earned overtime pay of $1,622.72, calculated as follows: Cumulative earnings, prior to December 31 payroll Add: gross pay for week ending December 31 Gross pay for the year Less: regular pay (40 hrs X 52 weeks X $13.44) Overtime pay for the year

$29,000.00 577.92 $29,577.92 27,955.20 $1,622.72

Chapter 10 n 373

PROBLEM 10.2A WEEK BEGINNING

PAYROLL REGISTER

June 24, 2019 EARNINGS

NAME Andy Anderson Roma Benson Frank Cortez Winter Wise

NO. OF ALLOW. 1 4 1 2

MARITAL STATUS M M M S

CUMULATIVE NO. OF EARNINGS HRS. 17 6 4 0 00 48 16 9 7 5 00 48 16 0 8 0 00 40 14 6 6 0 00 50 65 3 5 5 00

RATE $12.70 11.50 11.20 10.70

REGULAR TIME EARNINGS 5 0 8 00 4 6 0 00 4 4 8 00 4 2 8 00 1 8 4 4 00

OVERTIME GROSS EARNINGS AMOUNT 1 5 2 40 6 6 0 40 1 3 8 00 5 9 8 00 0 00 4 4 8 00 1 6 0 50 5 8 8 50 4 5 0 90 2 2 9 4 90

CUMULATIVE EARNINGS 18 3 0 0 40 17 5 7 3 00 16 5 2 8 00 15 2 4 8 50 67 6 4 9 90

PROBLEM 10.2A (continued) AND ENDING

June 30, 2019

TAXABLE WAGES SOCIAL SECURITY MEDICARE FUTA 6 6 0 40 6 6 0 40 5 9 8 00 5 9 8 00 4 4 8 00 4 4 8 00 5 8 8 50 5 8 8 50 2 2 9 4 90 2 2 9 4 90

PAID July 3, 2019

DEDUCTIONS DISTRIBUTION CHECK SOCIAL INCOME NET WAGES NO. SECURITY MEDICARE TAX AMOUNT EXPENSE 4 0 94 9 58 5 4 00 5 5 5 88 6 6 0 40 3 7 08 8 67 2 0 00 5 3 2 25 5 9 8 00 2 7 78 6 50 2 3 00 3 9 0 72 4 4 8 00 3 6 49 8 53 5 5 00 4 8 8 48 5 8 8 50 1 4 2 29 3 3 28 1 5 2 00 1 9 6 7 33 2 2 9 4 90

If this link does not work with a click, then copy the complete Download link and paste link in internet explorer/ﬁrefox/google chrome and get all ﬁles download successfully.

PROBLEM 10.2A (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2019 2 June 30 Wages Expense 3 Social Security Tax Payable 4 Medicare Tax Payable 5 Employee Income Tax Payable 6 Wages Payable 7 Weekly payroll 8 9 July 3 Wages Payable 10 Cash 11 Issued check for weekly payroll 12

POST. REF.

DEBIT

CREDIT

2 2 9 4 90 1 4 2 29 3 3 28 1 5 2 00 1 9 6 7 33

1 9 6 7 33 1 9 6 7 33

1 2 3 4 5 6 7 8 9 10 11 12

Analyze: Andy Anderson’s cumulative earnings at June 30, 2019 are $18,300.40.

376 n Chapter 10

PROBLEM 10.3A WEEK BEGINNING

PAYROLL REGISTER

December 15, 2019 EARNINGS

NAME Gloria Bahamon Alex Garcia Ron Price Sara Russell

NO. OF ALLOW. 4 1 3 0

MARITAL STATUS M S M S

CUMULATIVE NO. OF RATE EARNINGS HRS. 32 8 6 0 00 47 $16.70 57 3 0 0 00 43 28.50 53 9 7 2 00 49 26.90 26 6 2 0 00 40 13.70 170 7 5 2 00

REGULAR TIME EARNINGS 6 6 8 00 1 1 4 0 00 1 0 7 6 00 5 4 8 00 3 4 3 2 00

OVERTIME EARNINGS 1 7 5 35 1 2 8 25 3 6 3 15 0 00 6 6 6 75

GROSS CUMULATIVE AMOUNT EARNINGS 8 4 3 35 33 7 0 3 35 1 2 6 8 25 58 5 6 8 25 1 4 3 9 15 55 4 1 1 15 5 4 8 00 27 1 6 8 00 4 0 9 8 75 174 8 5 0 75

PROBLEM 10.3A (continued) AND ENDING

December 21, 2019

TAXABLE WAGES SOCIAL MEDICARE SECURITY 8 4 3 35 8 4 3 35 1 2 6 8 25 1 2 6 8 25 1 4 3 9 15 1 4 3 9 15 5 4 8 00 5 4 8 00 4 0 9 8 75 4 0 9 8 75

PAID December 23, 2019 DEDUCTIONS

FUTA

SOCIAL SECURITY 5 2 29 7 8 63 8 9 23 3 3 98 2 5 4 13

MEDICARE 1 2 23 1 8 39 2 0 87 7 95 5 9 44

INCOME TAX 1 1 2 00 3 2 3 00 2 5 8 00 6 7 00 7 6 0 00

NET AMOUNT 6 6 6 83 8 4 8 23 1 0 7 1 05 4 3 9 07 3 0 2 5 18

DISTRIBUTION CHECK OFFICE NO. WAGES 8 4 3 35

DELIVERY WAGES 1 2 6 8 25 1 4 3 9 15

5 4 8 00 1 1 3 9 1 35

2 7 0 7 40

PROBLEM 10.3A (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2019 2 Dec. 21 Office Wages 3 Delivery Wages 4 Social Security Tax Payable 5 Medicare Tax Payable 6 Employee Income Tax Payable 7 Wages Payable 8 Weekly payroll 9 10 23 Wages Payable 11 Cash 12 Payment of payroll 13

POST. REF.

DEBIT

CREDIT

1 3 9 1 35 2 7 0 7 40 2 5 4 13 5 9 44 7 6 0 00 3 0 2 5 18

3 0 2 5 18 3 0 2 5 18

1 2 3 4 5 6 7 8 9 10 11 12 13

Analyze: Delivery wages were 66.1% of total taxable wages.

Chapter 10 n 379

PROBLEM 10.4A

EMPLOYEE CUMULATIVE NAME. EARNINGS

Paul Parker Carolyn Wells James Wu Totals

$160,000 150,000 60,000 $370,000

MONTHLY PAY

EMPLOYEE INCOME TAX SOCIAL SECURITY MEDICARE WITHHOLDING

$20,000 15,000 6,000 $41,000

0.00 0.00 $372.00 $372.00

$290.00 217.50 87.00 $594.50

GENERAL JOURNAL

DATE DESCRIPTION 1 2019 2 Oct. 31 Salaries Expense 3 Social Security Tax Payable 4 Medicare Tax Payable 5 Employee Income Tax Payable 6 Salaries Payable 7 8 31 Salaries Payable 9 Cash 10 11 Analyze:

$5,600 4,200 1,320 $11,120 PAGE

POST. REF.

DEBIT

NET PAY

$14,110.00 $10,582.50 $4,221.00 $28,913.50

CREDIT

1 41 0 0 0 00 2 3 7 2 00 3 5 9 4 50 4 11 1 2 0 00 5 28 9 1 3 50 6 7 28 9 1 3 50 8 28 9 1 3 50 9 10 11

An employee is hired by and works under the control and direction of the employer. An independent contractor is paid by the company to carry out a specific task but is not under the direct supervision or control of the company.

380 n Chapter 10

PROBLEM 10.1B 1. EMPLOYEE NO.

REGULAR HOURS, HOURLY RATE

HOURS WORKED

Juan Padronas

$13.00

Gross Pay Less: Social Security Tax Medicare Tax Income Tax Withholding Health Insurance Charitable Contribution Credit Union Savings Net Pay 2.

1 2 3 4 5 6

REGULAR TIME OVERTIME EARNINGS EARNINGS $520.00

$156.00

GROSS EARNINGS $676.00

$676.00 41.91 9.80 38.00 150.00 20.00 25.00 $391.29 GENERAL JOURNAL

DATE DESCRIPTION 2019 Dec. 31 Salaries Payable Cash Issued check for weekly payroll

PAGE POST. REF.

DEBIT 3 9 1 29

CREDIT 1 2 3 9 1 29 3 4 5 6

Chapter 10 n 381

PROBLEM 10.1B (continued) Analyze:

Juan earned overtime pay of $1,636.00, calculated as follows: Cumulative earnings, prior to December 31 payroll Add: gross pay for week ending December 31 Gross pay for the year Less: regular pay (40 hrs. X 52 weeks X $13.00) Overtime pay for the year

382 n Chapter 10

$28,000.00 676.00 $28,676.00 27,040.00 $1,636.00

PROBLEM 10.2B PAYROLL REGISTER

WEEK BEGINNING

December 25, 2019 EARNINGS

NAME Betty Brooks Cynthia Carter Mary Easley James Periot

NO. OF ALLOW. 3 2 4 2

MARITAL STATUS M M M S

CUMULATIVE NO. OF RATE EARNINGS HRS. 44 1 7 9 00 45 $12.80 53 0 1 5 00 48 13.40 82 7 4 8 00 44 29.50 104 4 8 6 00 30 37.00 284 4 2 8 00

REGULAR TIME EARNINGS 5 1 2 00 5 3 6 00 1 1 8 0 00 1 1 1 0 00 3 3 3 8 00

OVERTIME EARNINGS 9 6 00 1 6 0 80 1 7 7 00 0 00 4 3 3 80

GROSS CUMULATIVE AMOUNT EARNINGS 6 0 8 00 44 7 8 7 00 6 9 6 80 53 7 1 1 80 1 3 5 7 00 84 1 0 5 00 1 1 1 0 00 105 5 9 6 00 3 7 7 1 80 288 1 9 9 80

PROBLEM 10.2B (continued) AND ENDING

December 31, 2019

PAID December 31, 2019

TAXABLE WAGES SOCIAL MEDICARE SECURITY 6 0 8 00 6 0 8 00 6 9 6 80 6 9 6 80 1 3 5 7 00 1 3 5 7 00 1 1 1 0 00 1 1 1 0 00 3 7 7 1 80 3 7 7 1 80

DEDUCTIONS FUTA

SOCIAL SECURITY 3 7 70 4 3 20 8 4 13 6 8 82 2 3 3 85

MEDICARE 8 82 1 0 10 1 9 68 1 6 10 5 4 70

INCOME TAX 2 7 00 5 0 00 2 3 5 00 2 3 8 00 5 5 0 00

NET AMOUNT 5 3 4 48 5 9 3 50 1 0 1 8 19 7 8 7 08 2 9 3 3 25

DISTRIBUTION CONSULTIN CHECK G WAGES NO. EXPENSE

OFFICE WAGES 6 0 8 00 6 9 6 #

1 3 5 7 00 1 1 1 0 00 2 4 6 7 00 1 3 0 4 #

PROBLEM 10.2B (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2019 2 Dec. 31 Consulting Wages Expense 3 Office Wages Expense 4 Social Security Tax Payable 5 Medicare Tax Payable 6 Employee Income Tax Payable 7 Wages Payable 8 Payroll for week ending December 31 9 10 31 Wages Payable 11 Cash 12 Paid wages for week ending December 31 13

POST. REF.

DEBIT

CREDIT

2 4 6 7 00 1 3 0 4 80 2 3 3 5 4 5 5 0 2 9 3 3

2 9 3 3 25 2 9 3 3

1 2 3 85 4 70 5 00 6 25 7 8 9 10 25 11 12 13

Analyze: The difference is the total deductions of $838.55, which must be remitted to the IRS.

Chapter 10 n 385

PROBLEM 10.3B PAYROLL REGISTER

WEEK BEGINNING

November 6, 2019 EARNINGS

NAME Kathryn Allen Calvin Cooke Maria Vasquez Hollie Visage

NO. OF ALLOW. 3 2 4 2

MARITAL STATUS M S M S

CUMULATIVE NO. OF EARNINGS HRS. RATE 26 5 6 5 00 43 10.50 25 9 3 3 00 36 10.25 75 2 6 8 00 45 29.75 82 8 5 8 00 41 32.75 210 6 2 4 00

REGULAR TIME EARNINGS 4 2 0 00 3 6 9 00 1 1 9 0 00 1 3 1 0 00 3 2 8 9 00

OVERTIME EARNINGS 4 7 25 2 2 3 13 4 9 13 3 1 9 51

GROSS CUMULATIVE AMOUNT EARNINGS 4 6 7 25 27 0 3 2 25 3 6 9 00 26 3 0 2 00 1 4 1 3 13 76 6 8 1 13 1 3 5 9 13 84 2 1 7 13 3 6 0 8 51 214 2 3 2 51

PROBLEM 10.3B (continued) AND ENDING

November 12, 2019

TAXABLE WAGES SOCIAL SECURITY 4 6 7 25 3 6 9 00 1 4 1 3 13 1 3 5 9 13 3 6 0 8 51

MEDICARE 4 6 7 25 3 6 9 00 1 4 1 3 13 1 3 5 9 13 3 6 0 8 51

PAID November 12, 2019 DEDUCTIONS

FUTA

SOCIAL SECURITY MEDICARE 2 8 97 6 78 2 2 88 5 35 8 7 61 2 0 49 8 4 27 1 9 71 2 2 3 73 5 2 33

DISTRIBUTION CHECK INCOME NET NO. TAX AMOUNT 1 3 00 4 1 8 50 2 2 00 3 1 8 77 1 9 2 00 1 1 1 3 03 2 6 7 00 9 8 8 15 4 9 4 00 2 8 3 8 45

OFFICE WAGES 4 6 7 25 3 6 9 00

8 3 6 25

CONSULTING WAGES

1 1 2

4 3 7

1 3 13 5 9 13 7 2 26

PROBLEM 10.3B (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2019 2 Nov. 12 Office Wages 3 Consulting Wages 4 Social Security Tax Payable 5 Medicare Tax Payable 6 Employee Income Tax Payable 7 Wages Payable 8 Record weekly Payroll 9 10 15 Wages Payable 11 Cash 12 Paid payroll 13 14 Analyze:

POST. REF.

DEBIT

CREDIT

8 3 6 25 2 7 7 2 26 2 2 3 73 5 2 33 4 9 4 00 2 8 3 8 45

2 8 3 8 45 2 8 3 8 45

1 2 3 4 5 6 7 8 9 10 11 12 13 14

Total deductions of $770.06 were taken from employee paychecks for the period ended November 12.

388 n Chapter 10

PROBLEM 10.4B

CUMULATIVE MONTHLY EMPLOYEE NAME EARNINGS PAY

Tony Orlando Chris Stamos Clare Hayakawa Totals

$170,000 120,000 57,600 $347,600

$17,000 12,000 6,400 $35,400

SOCIAL SECURITY

$0.00 167.40 396.80 $564.20

EMPLOYEE INCOME TAX MEDICARE WITHHOLDING NET PAY

$246.50 $174.00 $92.80 $513.30

GENERAL JOURNAL

1 2 3 4 5 6 7 8 9 10 11

$4,760 $11,993.50 3,000 $8,658.60 1,200 $4,710.40 $8,960 $25,362.50

PAGE

POST. REF. DATE DESCRIPTION DEBIT CREDIT 2019 Nov. 30 Salaries Expense 35 4 0 0 00 Social Security Tax Payable 5 6 4 20 Medicare Tax Payable 5 1 3 30 Employee Income Tax Payable 8 9 6 0 00 Salaries Payable 25 3 6 2 50 30 Salaries Payable Cash

25 3 6 2 50 25 3 6 2 50

1 2 3 4 5 6 7 8 9 10 11

Analyze: Chris Stamos reached the limit for social security withholdings in November 2019.

Chapter 10 n 389

CRITICAL THINKING PROBLEM 10.1

EMPLOYEE INCOME TAX WITH HOLDING

CUMULATIVE EARNINGS

MONTHLY PAY

SOCIAL SECURITY

MEDICARE

Charlie Fisher Carol Swartz

$121,000.00 100,000.00

$11,000.00 10,000.00

$105.40 620.00

159.50 145.00

$3,080.00 2,500.00

$7,655.10 $6,735.00

Henry House

71,500.00

6,500.00

403.00

94.25

1,300.00

$4,702.75

$292,500.00

$27,500.00

$1,128.40

$398.75

$6,880.00

$19,092.85

EMPLOYEE NAME

Totals

GENERAL JOURNAL

1 2 3 4 5 6 7 8 9 10 11 12

DATE 2019 Dec.

PAGE

POST. REF.

DESCRIPTION

DEBIT

31 Salaries Expense Social Security Tax Payable Medicare Tax Payable Employee Income Tax Payable Salaries Payable Monthly payroll

27 5 0 0 00

31 Salaries Payable Cash Payment of Monthly Payroll

19 0 9 2 85

NET PAY

CREDIT

1 1 2 8 3 9 8 6 8 8 0 19 0 9 2

40 75 00 85

19 0 9 2 85

1 2 3 4 5 6 7 8 9 10 11 12

Analyze: The balance after all entries have been posted is zero.

390 n Chapter 10

CRITICAL THINKING PROBLEM 10.2 1. Some of the weaknesses in Casa Tacos payroll system include: a. Managers are able to add new employees to the payroll without written authorization or verification. There is no check on the qualifications of employees hired and managers could add bogus employees to the payroll. b. Employees should not have access to blank time cards. c. Payroll functions should be allocated to more than one employee; there are no checks on the accuracy of Anna’s work. d. Anna should not sign the payroll checks. The person who prepares the checks should not sign the checks. 2. Since there are no checks on who the managers hire, it would be possible for a manager to add a fictitious employee to the payroll. This fraud would be further aided because the manager is responsible for sending time cards to headquarters and distributes the paychecks. 3. To prevent fictitious employees from being placed on the payroll: a. New employees should not be added to the payroll without written authorization from headquarters. b. Payroll checks should not be distributed by the managers. The paychecks could be mailed directly to the employees or someone from headquarters could distribute the checks.

Chapter 10 n 391

SOLUTIONS TO BUSINESS CONNECTIONS Managerial Focus: 1. If overtime is excessive, profits are drastically reduced. 2. Paying by check would eliminate security risk and reduce work involved in preparing pay envelopes. 3. Various federal, state, and local payroll laws require that detailed payroll records be maintained. These records provide management with information needed to make decisions about the firm’s needs. 4. Used by management to see that operations meet previously established goals and that related outlays for wages are within previously established limits. Ethical Dilemma: It is ethical for the company to offer the promotion, but they should allow the managers to decide whether to accept it. The managers should not accept the promotion since they will be receiving $24 less per day from $224 to $200. Please note that as this revision is taking place, there is a proposal to greatly increase the numbers of those eligible for overtime!

Financial Statement Analysis: 1. 12.1% ($1,515/$12,526). 2. Increased by $124 million. Teamwork: Employee signs the time card and gives it to the manager. The manager approves the hours and gives it to the payroll clerk. The payroll clerk runs the payroll and prints the checks. The treasurer signs the checks and gives them back to the payroll clerk who gives them to the manager. The controller enters any necessary adjusting entry. The manager gives the check to the employee. Internet Connection: Experience necessary is 3 out of 5 years preceding the date of the exam. There are other experience requirements and a variety of ways to qualify to sit for this exam. Exam is offered in Spring and Fall at several testing sites--testing is accomplished through a third-party vendor. The fee for the CPP exam in September 2015 is $370. The exam fee is subject to change, so check website for current fee.Testing includes: Core Payroll Concepts, Compliance, Principles of Paycheck Calculations, Payroll Process and Systems, Management and Administration, and Accounting.

392 n Chapter 10

Problem EX EX EX EX EX EX EX EX

11.1 11.2 11.3 11.4 11.5 11.6 11.7 11.8

Time 10 5 10 5 5 5 5 10

PR PR PR PR PR PR

11.1A 11.2A 11.3A 11.4A 11.5A 11.6A

15 20 50 30 50 25

CT CT

11.1 11.2

20 30

Time to Use 5 = 10 = 15 = 20 = 25 = 30 = 35 = 40 = 45 = 50 = 55 = 60 =

1-5 min. 6-10 min. 11-15 min. 16-20 min. 21-25 min. 26-30 min. 31-35 min. 36-40 min. 41-45 min. 46-50 min. 51-55 min. 56-60 min.

CHAPTER 11 PAYROLL TAXES, DEPOSITS, AND REPORTS Chapter Opener: Thinking Critically Payroll accountants are responsible for keeping accurate records of all employees so paychecks can be processed properly and so that wage and tax statements can be prepared. A lower staff turnover rate means fewer new employees to enter into the accounting system—a time saver for payroll accountants. Fast Facts • New Castle Hotels and Resorts has been in business over 25 years. • New Castle’s management services group has engineered the financial turnaround of over 60 hotels. • New Castle Hotels & Resorts’ 32-hotel portfolio of both owned and managed hotels, includes upscale, upper upscale, and select-service properties that are branded as well as independent. Managerial Implications: Thinking Critically The 941 is prepared from the Quarterly Summary of Earnings. Discussion Questions Note to instructor : These questions are designed to check students’ understanding of the new Questions terms, concepts, and procedures presented in the chapter. 1. b, c, d 2. Federal deposits are due on the 15th day of the following month. 3. Federal deposits are due on either Wednesdays or Fridays, depending on the employer’s payday. 4. Electronic Federal Tax Payment System; use if the annual federal tax deposits are more than $200,000. 5. Unique ID number assigned by the federal government to employers. 6. SUTA, FUTA, social security, and Medicare 7. A four-quarter period ending June 30 of the preceding year. 8. Summarizes employees’ earnings and deductions for the year; sent with W-2 forms to Social Security Administration by last day of February following close of calendar year. 9. To each employee by January 31 following the close of the calendar year. 10. Employer is responsible and must pay any taxes due that were deliberately not withheld from employee pay. 11. Circular E 12. Start of the year 13. Employer

394 n Chapter 11

Discussion Questions (continued) 14. Reports employee earnings subject to federal income, social security, and Medicare taxes. Filed quarterly. 15. Yes, if FUTA payable is $500 or more, deposit by last day of month following end of quarter. 16. 5.4 percent 17. Filed once a year, it reports net federal unemployment tax; indicates amount of additional tax due. 18. Intended to encourage states to adopt state unemployment tax programs. 19. To alleviate hardship on employees who lose their jobs.

Chapter 11 n 395

EXERCISE 11.1 1. No deposit is necessary at this time since tax due is less than $2,500. 2. No deposit is necessary at this time since the tax due is less than $2,500. 3. No deposit is necessary at this time since tax due is less than $2,500. 4. March 15, 2019. A deposit is required by the 15th of the month following the period where $2,500 or more in tax is owed. In 1, 2, and 3, the taxes may be paid with Form 941 on or before the due date of the Form 941.

EXERCISE 11.2 PAGE

GENERAL JOURNAL

1 2 3 4 5 6 7

DATE DESCRIPTION 2019 July 16 Social Security Tax Payable Medicare Tax Payable Employee Income Tax Payable Cash Deposit payroll taxes

POST. REF.

DEBIT

CREDIT

20 7 0 0 00 4 2 4 6 00 19 2 6 0 00 44 2 0 6 00

1 2 3 4 5 6 7

EXERCISE 11.3 TAX

BASE

RATE

AMOUNT

Social Security Medicare FUTA SUTA Total

$62,500.00 62,500.00 35,000.00 35,000.00

6.2% 1.45% 0.6% 5.4%

$3,875.00 906.25 210.00 1,890.00 $6,881.25

396 n Chapter 11

EXERCISE 11.4 PAGE

GENERAL JOURNAL

1 2 3 4 5

DATE DESCRIPTION 2019 Apr. 30 Federal Unemployment Tax Payable Cash FUTA deposit

POST. REF.

DEBIT

CREDIT

1 5 0 7 00 1 5 0 7 00

1 2 3 4 5

EXERCISE 11.5 SUTA = $1,400.70 ($100,050 x 0.014)

EXERCISE 11.6 PAGE

GENERAL JOURNAL

1 2 3 4 5

DATE DESCRIPTION 2019 July 31 State Unemployment Tax Payable Cash SUTA deposit

POST. REF.

DEBIT

CREDIT

2 1 4 8 00 2 1 4 8 00

1 2 3 4 5

EXERCISE 11.7 Gross tax (0.006 × $98,000) Less Deposit Net tax payable

= = =

$588.00 300.00 $288.00

Chapter 11 n 397

EXERCISE 11.8 WORK CLASSIFICATION

ESTIMATED EARNINGS

Office Factory Total

RATE

$215,000 970,000

ESTIMATED PREMIUM

$ .60/$100 $8.40/$100

$1,290.00 81,480.00 $82,770.00

PROBLEM 11.1A TAX Social Security Medicare FUTA SUTA Total

BASE

RATE $4,500.00 4,500.00 4,500.00 4,500.00

AMOUNT

6.2% 1.45% 0.6% 5.4%

PAGE

GENERAL JOURNAL

1 2 3 4 5 6 7 8

DATE DESCRIPTION 2019 July 14 Payroll Taxes Expense Social Security Tax Payable Medicare Tax Payable Federal Unemployment Tax Payable State Unemployment Tax Payable Record employer’s payroll taxes

Analyze:

$279.00 65.25 27.00 243.00 $614.25

POST. REF.

DEBIT

CREDIT

6 1 4 25 2 7 9 00 6 5 25 2 7 00 2 4 3 00

1 2 3 4 5 6 7 8

Social Security and Medicare taxes are withheld from the employee paycheck and matched by the employer.

398 n Chapter 11

PROBLEM 11.2A PAGE

GENERAL JOURNAL

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

DATE DESCRIPTION 2019 April 8 Payroll Taxes Expense Social Security Tax Payable Medicare Tax Payable Federal Unemployment Tax Payable State Unemployment Tax Payable Payroll tax expense

POST. REF.

DEBIT 4 6 4 10

May 15 Social Security Tax Payable Medicare Tax Payable Employee Income Tax Payable Cash Deposit payroll taxes for April

1 9 3 4 40 4 5 2 40 1 4 7 7 00

June 17 Social Security Tax Payable Medicare Tax Payable Employee Income Tax Payable Cash Deposit payroll taxes for May

1 7 8 5 60 4 1 7 60 1 4 3 0 00

Analyze:

CREDIT 1 2 2 1 0 80 3 4 9 30 4 2 0 40 5 1 8 3 60 6 7 8 9 10 11 3 8 6 3 80 12 13 14 15 16 17 3 6 3 3 20 18 19 20

The amounts of income tax withheld were determined based on tables for the filing status and withholding allowances claimed by each employee.

Chapter 11 n 399

PROBLEM 11.3A PAGE

GENERAL JOURNAL

1 2 3 4 5 6 7

DATE DESCRIPTION 2019 July 15 Social Security Tax Payable Medicare Tax Payable Employee Income Tax Payable Cash Deposit payroll taxes for June

Analyze:

POST. REF.

DEBIT

CREDIT

2 2 4 4 40 5 2 4 90 1 7 9 5 00 4 5 6 4 30

The balance of the Employee Income Tax Payable account is zero.

400 n Chapter 11

1 2 3 4 5 6 7

400 n Chapter 11

PROBLEM 11.3A (continued)

Chapter 11 n 401

PROBLEM 11.3A (continued)

402 n Chapter 11

PROBLEM 11.4A State unemployment insurance

0.017 × $27,500.00

$467.50

PAGE

GENERAL JOURNAL

1 2 3 4 5

DATE DESCRIPTION 2019 April 30 State Unemployment Tax Payable Cash Payment of quarterly SUTA

Analyze:

POST. REF.

DEBIT

CREDIT

4 6 7 50 4 6 7 50

1 2 3 4 5

An employer’s experience rating determines the amount of state unemployment taxes paid. Generally, a more favorable rating will result in a lower state unemployment tax rate for the business.

PROBLEM 11.5A PAGE

GENERAL JOURNAL

1 2 3 4 5

DATE DESCRIPTION 2020 Jan. 28 Federal Unemployment Tax Payable Cash Pay balance of tax due

Analyze:

POST. REF.

DEBIT

CREDIT

2 4 00 2 4 00

1 2 3 4 5

The total debits made to liability accounts were $318.00.

Chapter 11 n 403

PROBLEM 11.5A (continued)

404 n Chapter 11

PROBLEM 11.5A (continued)

Chapter 11 n 405

PROBLEM 11.6A 1. WORK CLASSIFICATION

Office work Shop work Total

ESTIMATED EARNINGS

INSURANCE RATE

$64,000 $308,000

ESTIMATED PREMIUMS

$0.30/$100 $6.00/$100

$192.00 18,480.00 $18,672.00

2. PAGE

GENERAL JOURNAL

1 2 3 4 5 6

DATE DESCRIPTION 2019 Jan. 15 Prepaid Workers’ Compensation Insurance Cash Pay estimated workers’ compensation for year

3. WORK CLASSIFICATION

Office work Shop work Total Estimated premiums paid Additional premium due

406 n Chapter 11

POST. REF.

DEBIT

CREDIT

18 6 7 2 00 18 6 7 2 00

ACTUAL EARNINGS

INSURANCE RATE

$69,960 $315,320

$0.30/$100 $6.00/$100

ACTUAL PREMIUMS $209.88 18,919.20 19,129.08 18,672.00 $457.08

ATED IUMS

1 2 3 4 5 6

CTUAL EMIUMS $209.88 18,919.20 19,129.08 18,672.00 $457.08

406 n Chapter 11

PROBLEM 11.6A (continued) 4. PAGE

GENERAL JOURNAL

1 2 3 4 5 6 7 8 9 10

DATE DESCRIPTION 2019 Dec. 31 Workers’ Compensation Insurance Expense Workers’ Compensation Insurance Payable Adjust workers’ compensation insurance expense

POST. REF.

31 Workers’ Compensation Insurance Expense Prepaid Workers' Compensation Insurance Adjust prepaid workers’ compensation insurance

DEBIT 4 5 7 08

18 6 7 2 00

CREDIT 1 2 4 5 7 08 3 4 5 6 7 18 6 7 2 00 8 9 10

Analyze: The premium estimate would have been $22,320=($64,000+$308,000) x ($6.00/$100).

PROBLEM 11.1B TAX Social Security Medicare FUTA SUTA Total

BASE

RATE $4,000 4,000 4,000 4,000

6.2% 1.45% 0.6% 2.2%

AMOUNT $248.00 58.00 24.00 88.00 $418.00

Chapter 11 n 407

PROBLEM 11.1B (continued) PAGE

GENERAL JOURNAL

1 2 3 4 5 6 7 8

DATE DESCRIPTION 2019 April 8 Payroll Taxes Expense Social Security Tax Payable Medicare Tax Payable Federal Unemployment Tax Payable State Unemployment Tax Payable Record taxes on payroll

Analyze:

POST. REF.

DEBIT

CREDIT

4 1 8 00 2 4 8 00 5 8 00 2 4 00 8 8 00

1 2 3 4 5 6 7 8

The total employer's payroll taxes would be $378.00 ($248 + $58 + $24 FUTA + $48 SUTA).

408 n Chapter 11

PROBLEM 11.2B PAGE

GENERAL JOURNAL

DATE DESCRIPTION 2019 July 7 Payroll Taxes Expense Social Security Tax Payable Medicare Tax Payable Federal Unemployment Tax Payable State Unemployment Tax Payable Payroll taxes for week ended July 7

POST. REF.

1 2 3 4 5 6 7 8 9 Aug. 15 Employee Income Tax Payable 10 Social Security Tax Payable 11 Medicare Tax Payable 12 Cash 13 Deposit of payroll taxes for July 14 15 Sept. 15 Employee Income Tax Payable 16 Social Security Tax Payable 17 Medicare Tax Payable 18 Cash 19 Deposit of payroll taxes for August 20

DEBIT 2 0 9 00

7 0 0 00 1 0 0 1 92 2 3 4 32

8 4 0 00 1 1 7 8 00 2 7 5 50

CREDIT 1 2 1 2 4 00 3 2 9 00 4 1 2 00 5 4 4 00 6 7 8 9 10 11 1 9 3 6 24 12 13 14 15 16 17 2 2 9 3 50 18 19 20

Analyze: A SUTA rate of .015 would reduce the amount of tax by $14.00 [(0.022 – 0.015) x $2,000].

Chapter 11 n 409

PROBLEM 11.3B PAGE

GENERAL JOURNAL

1 2 3 4 5 6 7

DATE DESCRIPTION 2019 Oct. 15 Employee Income Tax Payable Social Security Tax Payable Medicare Tax Payable Cash Deposit payroll taxes for September

POST. REF.

DEBIT

CREDIT

9 1 5 00 1 2 7 7 20 2 9 8 70 2 4 9 0 90

1 2 3 4 5 6 7

Analyze: The total taxes deposited with the IRS for the quarter ended September 30 was $6,720.64 determined as follows: Social Security - employer Social Security - employee Medicare - employer Medicare - employee Income tax withheld

410 n Chapter 11

$1,728.56 1,728.56 404.26 404.26 2,455.00 $6,720.64

PROBLEM 11.3B (continued)

Chapter 11 n 411

PROBLEM 11.3B (continued)

412 n Chapter 11

PROBLEM 11.4B State unemployment insurance

0.023 × $21,200.00

PAGE

GENERAL JOURNAL

1 2 3 4 5

DATE DESCRIPTION 2019 April 30 State Unemployment Tax Payable Cash Paid state unemployment tax

$487.60

POST. REF.

DEBIT

CREDIT

4 8 7 60 4 8 7 60

1 2 3 4 5

Analyze: If Brian Morris made the same amount for the quarter ended June 30, 2019, $3,000 ($7,000 - $4,000) would be subject to the federal unemployment tax.

PROBLEM 11.5B PAGE

GENERAL JOURNAL

1 2 3 4 5

DATE DESCRIPTION 2020 Jan. 27 Federal Unemployment Tax Payable Cash Pay balance of tax due

POST. REF.

DEBIT

CREDIT

3 3 8 70 3 3 8 70

1 2 3 4 5

Analyze: The balance of the Federal Unemployment Tax Payable account is zero.

Chapter 11 n 413

PROBLEM 11.5B (continued)

414 n Chapter 11

PROBLEM 11.5B (continued)

Chapter 11 n 415

PROBLEM 11.6B 1. WORK CLASSIFICATION Office work Delivery work Total

ESTIMATED EARNINGS $50,000 $308,000

INSURANCE RATE

ESTIMATED PREMIUMS

$0.50/$100 $6.00/$100

$250.00 18,480.00 $18,730.00

2. PAGE

GENERAL JOURNAL

1 2 3 4 5 6

DATE DESCRIPTION 2019 Jan. 17 Prepaid Workers’ Compensation Insurance Cash Pay estimated workers' compensation for year

POST. REF.

DEBIT

CREDIT

18 7 3 0 00 18 7 3 0 00

1 2 3 4 5 6

3. WORK CLASSIFICATION

ACTUAL EARNINGS

INSURANCE RATE

ACTUAL PREMIUMS

Office work Delivery work Total actual premiums Estimated premiums paid Additional premium due

$52,970 $316,240

$0.50/$100 $6.00/$100

$264.85 18,974.40 19,239.25 18,730.00 $509.25

416 n Chapter 11

PROBLEM 11.6B (continued) 4. PAGE

GENERAL JOURNAL

1 2 3 4 5 6 7 8 9 10 11

DATE DESCRIPTION 2019 Dec. 31 Workers’ Compensation Insurance Expense Workers' Compensation Insurance Payable Adjust workers’ compensation insurance expense

POST. REF.

31 Workers’ Compensation Insurance Expense Prepaid Worker's Compensation Insurance Adjust prepaid workers’ compensation insurance

DEBIT

CREDIT

1 2 5 0 9 25 3 4 5 6 18 7 3 0 00 7 18 7 3 0 00 8 9 10 11 5 0 9 25

Analyze: The balance of the Workers’ Compensation Insurance Expense account is $19,239.25 ($18,730.00 + $509.25).

Chapter 11 n 417

CRITICAL THINKING PROBLEM 11.1 1. 2. 3.

Toni is not an employee. A self-employed person cannot be his or her own employee. Sam is probably not an employee. He has the right to refuse jobs, which is not characteristic of an employee’s rights. Ken is an employee, paid on an hourly basis by Dr. Sue, who provides all facilities, supplies, and equipment. He is not hired by the patients for professional services.

Lisa is not an employee. The employer does not provide a work place or tools, or meet other conditions for her to be classified as an employee.

5. Analyze:

John is definitely a part-time employee. The titles of president, secretary, and treasurer make him officially an employee. The employees are hired and work under the control and direction of the employer. The employer determines how the employee completes the job.

CRITICAL THINKING PROBLEM 11.2 1.

Payroll information needed: the hourly rate paid the truck drivers; the rates for social security, medicare, and federal and state unemployment taxes; and the employer’s obligations for workers’ compensation insurance and fringe benefits such as health insurance, pension contributions, and group life insurance.

YEARLY COST—CURRENT SYSTEM

Truck Drivers: Wages (100 × $42,000) Social Security Tax ($4,200,000 × 0.062) Medicare Tax ($4,200,000 × 0.0145) State Unemployment Tax (100 × $7,000 × .05) Federal Unemployment Tax (100 × $7,000 × .006) Workers’ Compensation Insurance ($4,200,000 × $.70 ÷ 100) Health Insurance (100 × $300 × 12) Pensions (100 × $250 × 12) Total Payroll Costs Teenage Carriers: Payment per paper (90,000 × $0.04 × 5 days × 52 weeks) Liability Insurance Total Cost

YEARLY COST—PROPOSED SYSTEM Truck Drivers: Wages (20 × $42,000) Social Security Tax ($840,000 × 0.0620) Medicare Tax ($840,000 × 0.0145) State Unemployment Tax (20 × $7,000 × 0.05) Federal Unemployment Tax (20 × $7,000 × .006) Workers’ Compensation Insurance ($840,000 × $0.70 ÷ 100) Health Insurance (20 × $300 × 12) Pensions (20 × $250 × 12) Total Payroll Costs Independent Contractor Payments (90,000 × $0.20 × 5 days × 52 weeks) Total Cost

HARLEY would save $555,920 if the proposed system were adopted ($6,285,900-$5,729,980). NOTE:

418 n Chapter 11

Federal income tax withholding is not a factor in this analysis since it is the employees' obligation, not the employer’s.

In addition to analyzing payroll costs, Turkey should consider costs of operating the fleet of delivery trucks. What is the current cost to operate the trucks? How much would be saved by reducing the fleet? He should also consider the effect on employee morale of terminating 80 truck drivers and the commitments the paper has to union contracts. He should also assess the dependability and stability of the independent contractors; it may be worthwhile to spend more in order to have control of the paper’s distribution system through its own employees and trucks.

418 n Chapter 11

for social security, bligations for workers’ on contributions,

$4,200,000 260,400 60,900 35,000 4,200 29,400 360,000 300,000 $5,249,900 936,000 100,000 $6,285,900

$840,000 52,080 12,180 7,000 840 5,880 72,000 60,000 $1,049,980 4,680,000 $5,729,980

418 n Chapter 11

of delivery trucks. What is the hould also consider the effect o union contracts. He should while to spend more in order to

418 n Chapter 11

SOLUTIONS TO BUSINESS CONNECTIONS Managerial Focus: 1. Only authorized persons able to add new employees to payroll; review of payroll by different employee; distribution of paychecks by yet another person. 2. Premiums for workers’ compensation insurance are based on the amount earned by classes of employees. 3. 4.

Penalties and fines for the employer. Experience rating is a potential source of tax savings.

Ethical Dilemma: Johan is paying $1,720 more per month for wages. The extra expense represents an additional employee that he did not hire. He should consult his accountant to find the approval for an additional sales associate. To prevent this from happening in the future, he should pass out the paychecks personally to match the paycheck to the person.

Financial Statement Analysis: 1. $186,000,000/385,000 employees = $483.12 Teamwork: Hire temporary employees for jobs that occur seasonally. Only pay 98% of deposit required. The IRS states that 98% is considered in compliance. Stop any unnecessary overtime by requiring management approval for all overtime. Find less expensive benefits. Internet Connection: The 940 and 941 form is available to download and use. Generally, the W-2, W-3, W-4 and W-5 must be original or approved forms.

420 n Chapter 11

yroll by different employee;

ned by classes of employees.

nal employee that he did not hire. He ent this from happening in the

d. The IRS states that 98% is val for all overtime. Find less

d W-5 must be original or approved

420 n Chapter 11

Problem EX EX EX EX EX EX EX

12.1 12.2 12.3 12.4 12.5 12.6 12.7

Time 5 5 15 15 10 5 15

PR PR PR PR PR PR

12.1A 12.2A 12.3A 12.4A 12.5A 12.6A

30 40 50 70 70 70

CT CT

12.1 12.2

90 20

5 10 15 20 25 30 35 40 45 50 55 60 70 80 90

= = = = = = = = = = = = = = =

1-5 min. 6-10 min. 11-15 min. 16-20 min. 21-25 min. 26-30 min. 31-35 min. 36-40 min. 41-45 min. 46-50 min. 51-55 min. 56-60 min. 61-70 min. 71-80 min. 81-90 min.

CHAPTER 12 ACCRUALS, DEFERRALS, AND THE WORKSHEET Chapter Opener: Thinking Critically Starbucks needs to evaluate which items are selling well and which are not. They need to consider the selling price of each of their products to determine if adjustments in prices need to be made. They also must decide what to do with items that didn’t sell. Furthermore, each store will need to take a physical count to verify that their accounting records match what is actually on the shelf. They made need to recognize some loss due to inventory shrinkage (theft, damage or obsolescence). Each store will need to use both the beginning inventory count as well as the ending inventory count in order to prepare their income statement at period end. Discussion Questions Note to instructor : These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter. 1. Dr. Uncollectible Accounts Expense, Cr. Allowance for Doubtful Accounts. 2. Debiting Allowance for Doubtful Accounts and Crediting Accounts Receivable. 3. To the Income Statement columns. 4. Transfers cost of asset to expense over life of asset. 5. Long-term assets whose usefulness is consumed over the life of the assets. (Buildings, furniture and fixtures, machinery.) 6. a. Estimated selling price upon disposal of an asset. b. Cost of asset less salvage value. c. Number of years that asset will be used. d. Equal amount of depreciation taken in each year of the asset’s useful life. 7. Dr. Depreciation Exp.— Office Equipment., Cr. Accum. Depr.—Office Equipment.

Discussion Questions (continued) 8.

An expense that does not yet appear in the accounts. (Accrued salaries, accrued payroll taxes, and accrued interest on notes payable.)

9. 10.

Dr. Salaries Expense, Cr. Salaries Payable. Item that has been paid for and recorded in the accounts in advance of its use. (Prepaid rent, prepaid insurance, prepaid interest on notes payable.) Dr. Prepaid Insurance, Cr. Cash. Dr. Insurance Expense, Cr. Prepaid Insurance Charge cost to expense account at the time cost is incurred. At end of period, amount still prepaid is debited to prepaid expense account and credited to the expense account. Income earned but not yet received in cash or recorded as a receivable. (Interest on notes receivable.) Dr. Interest Receivable, Cr. Interest Income. Income for which payment has been received in advance, but which has not been earned. (Rent income received in advance; magazine subscriptions income received in advance.)

11. 12. 13. 14. 15. 16.

17. 18. 19. 20. 21.

Dr. Cash, Cr. Unearned Income. Dr. Unearned Income, Cr. Income. Record amount received in advance as income at the time it is received in cash. At period end, unearned amount debited to Income and credited to Unearned Income. Liability. Provides a single location for all information necessary to journalize adjusting entries and to prepare the financial statements.

EXERCISE 12.1 PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2019 2 Dec. 31 Income Summary 3 Merchandise Inventory 4 5 31 Merchandise Inventory 6 Income Summary 7

POST. REF.

DEBIT

CREDIT

141 0 0 0 00 #141 0 0 0 00 118 5 1 9 00 118 5 1 9 00

1 2 3 4 5 6 7

EXERCISE 12.2 Beginning Merchandise Inventory is $199,000 and ending Merchandise Inventory is $215,345.

EXERCISE 12.3 PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2019 2 Dec. 31 Uncollectible Accounts Expense 3 Allowance for Doubtful Accounts 4 5 31 Depreciation Expense—Equipment 6 Accumulated Depreciation—Equipment 7 8 31 Wages Expense 9 Wages Payable 10 11 31 Payroll Taxes Expense 12 Social Security Tax Payable 13 Medicare Tax Payable 14 15 31 Payroll Taxes Expense 16 Federal Unemployment Tax Payable 17 State Unemployment Tax Payable 18

POST. REF.

DEBIT

CREDIT

29 2 5 0 00 29 2 5 0 00 3 5 5 2 00 3 5 5 2 00 11 4 0 0 00 11 4 0 0 00 8 7 2 10 7 0 6 80 1 6 5 30 6 8 4 00 6 8 40 6 1 5 60

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

EXERCISE 12.4 PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2019 2 Dec. 31 Interest Expense 3 Interest Payable 4 5 31 Supplies Expense 6 Supplies 7 8 31 Insurance Expense 9 Prepaid Insurance 10 11 31 Advertising Expense 12 Prepaid Advertising 13

POST. REF.

DEBIT

CREDIT

2 0 0 00 2 0 0 00 3 6 4 0 00 3 6 4 0 00 4 8 8 0 00 4 8 8 0 00 7 2 0 0 00 7 2 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13

EXERCISE 12.5 PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2019 2 Dec. 1 Cash 3 Prepaid Interest 4 Notes Payable 5 6 31 Interest Expense 7 Prepaid Interest 8

POST. REF.

DEBIT

CREDIT

49 0 0 0 00 1 0 0 0 00 50 0 0 0 00 2 5 0 00 2 5 0 00

1 2 3 4 5 6 7 8

EXERCISE 12.6 PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2019 2 Dec. 31 Interest Expense 3 Interest Payable 4

POST. REF.

DEBIT

CREDIT

6 0 0 00 6 0 0 00

1 2 3 4

EXERCISE 12.7 PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2019 2 Dec. 31 Interest Receivable 3 Interest Income 4 5 31 Unearned Subscription Revenue 6 Subscription Revenue 7 8 31 Unearned Rent 9 Rent Income 10 11 31 Unearned Season Tickets Income 12 Season Tickets Income 13

POST. REF.

DEBIT

CREDIT

5 0 0 00 5 0 0 00 37 5 0 0 00 37 5 0 0 00 12 0 0 0 00 12 0 0 0 00 900 0 0 0 00 900 0 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13

PROBLEM 12.1A PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2019 2 June 30 (Adjustment a) 3 Income Summary 4 Merchandise Inventory 5 6 30 (Adjustment b) 7 Merchandise Inventory 8 Income Summary 9 10 30 (Adjustment c) 11 Unearned Seminar Fees 12 Seminar Fees Income 13 14 30 (Adjustment d) 15 Insurance Expense 16 Prepaid Insurance 17 18 30 (Adjustment e) 19 Depreciation Expense - Store Equipment 20 Accumulated Depreciation - Store Equipment 21 22 30 (Adjustment f) 23 Wages Expense 24 Wages Payable 25 26 30 (Adjustment g) 27 Payroll Taxes Expense 28 State Unemployment Taxes Payable 29 Federal Unemployment Taxes Payable 30 Medicare Taxes Payable 31 Social Security Taxes Payable 32 33 30 (Adjustment h) 34 Uncollectible Accounts Expense 35 Allowance for Doubtful Accounts 36 37 30 (Adjustment i) 38 Rent Expense 39 Prepaid Rent

POST. REF.

DEBIT

CREDIT

8 3 0 0 00 8 3 0 0 00

8 8 0 0 00 8 8 0 0 00

2 7 2 0 00 2 7 2 0 00

5 6 0 0 00 5 6 0 0 00

6 7 5 00 6 7 5 00

3 3 0 00 3 3 0 00

3 7 13 9 90 1 98 4 79 2 0 46

28 0 0 0 00 28 0 0 0 00

5 2 0 0 00 5 2 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39

PROBLEM 12.1A (continued) PAGE

GENERAL JOURNAL

41 42 43 44 45 46 47

DATE DESCRIPTION 30 (Adjustment j) Supplies Expense Supplies 30 (Adjustment k) Interest Expense Interest Payable

POST. REF.

DEBIT 2 9 0 00

4 1 00

CREDIT 41 42 2 9 0 00 43 44 45 46 4 1 00 47

Notes on calculations: a.-b. Amounts given. c. $6,800 cash received/5 seminars = $1,360/seminar. $1,360/seminar  2 seminars conducted = $2,720 earned. d. $16,800/6 months in policy = $2,800/month. $2,800/month  2 months expired (May and June) = $5,600 insurance expense. e. ($11,380 cost - $580 salvage value)/48 months = $225/month depreciation. $225/month  3 months of use (April, May and June) = $675. f. Amounts given. g. Amounts given. h. $2,800,000  1% = $28,000 i. $7,800/6 months in policy = $1,300/month; $1,300  4 months expired = $5,200. j. $480 balance - $190 supplies on hand = $290 of supplies used. k. $8,200 principal  6% interest rate  1/12 time factor = $41 . Analyze: The balance of the Prepaid Rent account will be $2,600 ($7,800 - $5,200 expired).

PROBLEM 12.2A 1. PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2019 2 July 1 Prepaid Rent 3 Cash 4 5 1 Cash 6 Prepaid Interest 7 Notes Payable 8 9 1 Cash 10 Unearned Accounting Fees 11 12 1 Office Equipment 13 Notes Payable 14 15 1 Prepaid Insurance 16 Cash 17 18 3 Office Furniture 19 Cash 20 Accounts Payable 21 22 5 Supplies 23 Cash 24

POST. REF.

DEBIT

CREDIT

14 4 0 0 00 14 4 0 0 00 32 9 2 8 00 6 7 2 00 33 6 0 0 00 81 6 0 0 00 81 6 0 0 00 20 4 0 0 00 20 4 0 0 00 1 7 1 6 00 1 7 1 6 00 23 2 0 0 00 13 4 0 0 00 9 8 0 0 00 1 9 7 0 00 1 9 7 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

PROBLEM 12.2A (continued) 2. PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 Adjusting Entries 2 2019 3 July 31 Rent Expense 4 Prepaid Rent 5 6 31 Interest Expense 7 Prepaid Interest 8 9 31 Unearned Accounting Fees 10 Accounting Fees 11 12 31 Interest Expense 13 Interest Payable 14 15 31 Depreciation Expense—Office Equipment 16 Accumulated Depreciation—Office Equipment 17 18 31 Insurance Expense 19 Prepaid Insurance 20 21 31 Depreciation Expense—Office Furniture 22 Accumulated Depreciation—Office Furniture 23 24 31 Supplies Expense 25 Supplies 26

Analyze:

POST. REF.

DEBIT

CREDIT

2 4 0 0 00 2400 1 6 8 00 168 6 8 0 0 00 6800 1 5 3 00 153 3 8 0 00 380 1 4 3 00 143 3 0 0 00 300 1 0 9 0 00

The Unearned Accounting Fees account would be $74,800 ($81,600 - $6,800).

1090

CREDIT

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

PROBLEM 12.3A Michael Domenici, Consultant Worksheet Month Ended July 31, 2019 ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Supplies 4 Prepaid Rent 5 Prepaid Insurance 6 Prepaid Interest 7 Office Furniture 8 Accumulated Depreciation— 9 Office Furniture 10 Office Equipment 11 Accumulated Depreciation—Equipment 12 Notes Payable 13 Accounts Payable 14 Interest Payable 15 Unearned Consulting Fees 16 Michael Domenici, Capital 17 Michael Domenici, Drawing 18 Consulting Fees 19 Salaries Expense 20 Utilities Expense 21 Telephone Expense 22 Supplies Expense 23 Rent Expense 24 Insurance Expense 25 Depreciation Expense—Furniture 26 Depreciation Expense—Equipment 27 Interest Expense 28 29 Totals 30

Analyze:

TRIAL BALANCE DEBIT CREDIT 25 5 1 0 00 1 4 4 0 00 9 6 0 00 10 5 0 0 00 2 2 2 0 00 4 0 0 00 14 7 6 0 00

ADJUSTMENTS DEBIT CREDIT

(a) 3 3 0 00 (b) 1 7 5 0 00 (c) 1 8 5 00 (d) 1 0 0 00

ADJUSTED TRIAL BALANCE DEBIT CREDIT 25 5 1 0 00 1 4 4 0 00 6 3 0 00 8 7 5 0 00 2 0 3 5 00 3 0 0 00 14 7 6 0 00

(e)

1 3 5 00

(f)

9 0 00

4 9 00

17 7 0 0 00 5 5 0 0 00 4 9 00 5 5 0 0 00 32 5 2 0 00

7 2 5 0 00

1 3 5 00 7 2 5 0 00

17 7 0 0 00 5 5 0 0 00 (g) 6 0 0 0 00 (h) 32 5 2 0 00

5 0 0 00

3 0 0 0 00

3 0 0 0 00 9 0 0 0 00

(h)

5 0 0 00

4 2 0 0 00 2 7 0 00 2 1 0 00 (a) 3 3 0 00 (b) 1 7 5 0 00 (c) 1 8 5 00 (e) 1 3 5 00

70 7 2 0 00 70 7 2 0 00

(f)

9 0 00

(d) (g)

1 0 0 00 4 9 00 3 1 3 9 00

9 5 0 0 00 4 2 0 0 00 2 7 0 00 2 1 0 00 3 3 0 00 1 7 5 0 00 1 8 5 00 1 3 5 00 9 0 00

3 1 3 9 00

The expense accounts of the business were adjusted by $2,639 ($3,139 - $500).

1 0 0 00 4 9 00 70 9 9 4 00 70 9 9 4 00

PROBLEM 12.4A The Green Thumb Gardener Worksheet Year Ended December 31, 2019

1 Cash

TRIAL BALANCE DEBIT CREDIT 6 7 0 0 00

2 Accounts Receivable

3 6 0 0 00

ACCOUNT NAME

3 Allowance for Doubtful Accounts

ADJUSTMENTS DEBIT CREDIT

6 2 00

(c)

4 Merchandise Inventory

12 3 0 0 00

5 Supplies

1 3 0 0 00

(d)

9 7 5 00

6 Prepaid Advertising 7 Store Equipment 8 Accumulated Depr.—Store Equipment

1 0 8 0 00 8 7 0 0 00

(e)

5 4 0 00

1 6 0 0 00

(f) 1

6 0 0 00

9 Office Equipment 10 Accumulated Depr.—Office Equipment

2 2 0 0 00 3 8 0 00

(g)

3 8 0 00

5 3 0 00

(i)

1 1 9 66

8 8 00

(i)

2 7 99

14 Federal Unemployment Tax Payable

(j)

1 1 58

15 State Unemployment Tax Payable

(j)

1 0 4 22

16 Salaries Payable

(h)

1 9 3 0 00

11 Accounts Payable

(b) 13 3 2 1 00

2 2 5 00

2 7 2 5 00

12 Social Security Tax Payable 13 Medicare Tax Payable

17 Beth Argo, Capital

30 6 7 7 00

18 Beth Argo, Drawing 19 Sales 20 Sales Returns & Allowances

21 0 0 0 00

21 Purchases 22 Purchases Returns & Allowances

49 4 0 0 00

23 Rent Expense 24 Telephone Expense 25 Salaries Expense 26 Payroll Taxes Expense 27

7 0 0 0 00 6 9 0 00 15 1 0 0 00 1 3 7 0 00

95 0 4 8 00 1 2 0 0 00 5 3 0 00

(h) 1 9 3 0 00 (i) 1 4 7 65 (j) 1 1 5 80

28 Income Summary 29 Supplies Expense 30 Advertising Expense 31 Depreciation expense—Store Equipment

(a) 12 3 0 0 00 (d) 9 7 5 00 (e) 5 4 0 00 (f) 1 6 0 0 00

32 Depreciation expense—Office Equipment

(g)

33 Uncollectible accounts expense 34

(a) 12 3 0 0 00

(b) 13 3 2 1 00

3 8 0 00 2 2 5 00 31 5 3 4 45

31 5 3 4 45

35 Net income

PROBLEM 12.4A (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 6 7 0 0 00 3 6 0 0 00 2 8 7 00 13 3 2 1 00 3 2 5 00 5 4 0 00 8 7 0 0 00 3 2 0 0 00 2 2 0 0 00 7 6 0 00 2 7 2 5 00 6 4 9 66 1 1 5 99 1 1 58 1 0 4 22 1 9 3 0 00 30 6 7 7 00 21 0 0 0 00 95 0 4 8 00 1 2 0 0 00 49 4 0 0 00 5 3 0 00 7 0 0 0 00 6 9 0 00 17 0 3 0 00 1 6 3 3 45 12 3 9 5 1 6 3 2 149 3

Analyze:

0 7 4 0 8 2 5

0 00 5 00 0 00 0 00 0 00 5 00 9 45

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT 6 7 0 0 00 3 6 0 0 00 2 8 7 00 13 3 2 1 00 3 2 5 00 5 4 0 00 8 7 0 0 00 3 2 0 0 00 2 2 0 0 00 7 6 0 00 2 7 2 5 00 6 4 9 66 1 1 5 99 1 1 58 1 0 4 22 1 9 3 0 00 30 6 7 7 00 21 0 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 95 0 4 8 00 19 1 2 0 0 00 20 49 4 0 0 00 21 5 3 0 00 22 7 0 0 0 00 23 6 9 0 00 24 17 0 3 0 00 25 1 6 3 3 45 26 27 13 3 2 1 00 12 3 0 0 00 13 3 2 1 00 28 9 7 5 00 29 5 4 0 00 30 1 6 0 0 00 31 3 8 0 00 32 2 2 5 00 33 149 3 5 9 45 92 9 7 3 45 108 8 9 9 00 56 3 8 6 00 # 40 4 6 0 45 34 15 9 2 5 55 15 9 2 5 55 35 108 8 9 9 00 108 8 9 9 00 56 3 8 6 00 56 3 8 6 00

Adjustments decreased total assets (assets less accumulated depreciation) by $2,699.

PROBLEM 12.5A Healthy Eating Foods Company Worksheet Year Ended December 31, 2019 ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Allowance for Doubtful Accounts 4 Merchandise Inventory 5 Supplies 6 Prepaid Insurance 7 Office Equipment 8 Accumulated Depr.—Office Equipment 9 Warehouse Equipment 10 Accumulated Depr.—Warehouse Equipment 11 Notes Payable—Bank 12 Accounts Payable 13 Interest Payable 14 Social Security Tax Payable 15 Medicare Tax Payable 16 Federal Unemployment Tax Payable 17 State Unemployment Tax Payable 18 Salaries Payable 19 Phillip Tucker, Capital 20 Phillip Tucker, Drawing 21 Sales 22 Sales Returns and Allowances 23 Purchases 24 Purchases Returns and Allowance 25 Income Summary 26 Rent Expenses 27 Telephone Expense 28 Salaries Expense 29 Payroll Taxes Expense 30 31 Supplies Expense 32 Insurance Expense 33 Totals Carried Forward 34

TRIAL BALANCE ADJUSTMENTS DEBIT CREDIT DEBIT CREDIT 30 1 0 0 00 35 2 0 0 00 4 2 0 00 (c) 2 8 0 0 00 86 0 0 0 00 (b) 78 0 0 0 00 (a) 86 0 0 0 00 10 4 0 0 00 (d) 9 2 2 0 00 5 4 0 0 00 (e) 3 6 0 0 00 8 3 0 0 00 2 6 5 0 00 (f) 1 3 2 5 00 28 0 0 0 00 9 6 0 0 00 (g) 4 8 0 0 00 32 0 0 0 00 12 2 0 0 00 (h) (j) (j) (k) (k) (i) 5

1 6 8 0 00 3 8 8 00

6 4 0 00 3 1 0 00 7 2 50 3 0 00 2 7 0 00 0 0 0 00

108 6 8 4 00 56 0 0 0 00 653 7 7 8 00 10 0 0 0 00 350 0 0 0 00 9 2 0 0 00 (a) 86 0 0 0 00 (b) 78 0 0 0 00 36 0 0 0 00 2 2 0 0 00 160 0 0 0 00 13 0 0 0 00

(i) 5 0 0 0 00 (j) 3 8 2 50 (k) 3 0 0 00 (d) 9 2 2 0 00 (e) 3 6 0 0 00 830 6 0 0 00 830 6 0 0 00 182 5 0 2 50

192 0 6 7 50

PROBLEM 12.5A (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 30 1 0 0 00 35 2 0 0 00 3 2 2 0 00 78 0 0 0 00 1 1 8 0 00 1 8 0 0 00 8 3 0 0 00 3 9 7 5 00 28 0 0 0 00 14 4 0 0 00

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT 30 1 0 0 00 35 2 0 0 00 3 2 2 0 00 78 0 0 0 00 1 1 8 0 00 1 8 0 0 00 8 3 0 0 00 3 9 7 5 00 28 0 0 0 00 14 4 0 0 00

32 0 0 0 00 12 2 0 0 00 6 4 0 00 1 9 9 0 00 4 6 0 50 3 0 00 2 7 0 00 5 0 0 0 00 108 6 8 4 00

56 0 0 0 00

56 0 0 0 00 653 7 7 8 00

10 0 0 0 00 350 0 0 0 00 86 0 0 0 00 36 0 0 0 00 2 2 0 0 00 165 0 0 0 00 13 6 8 2 50 9 2 2 0 00 3 6 0 0 00 914 2 8 2 50

653 7 7 8 00 10 0 0 0 00 350 0 0 0 00

9 2 0 0 00 78 0 0 0 00

923 8 4 7 50

86 0 0 0 00 36 0 0 0 00 2 2 0 0 00 165 0 0 0 00 13 6 8 2 50 9 2 2 0 00 3 6 0 0 00 675 7 0 2 50

9 2 0 0 00 78 0 0 0 00

740 9 7 8 00

238 5 8 0 00

1 2 3 4 5 6 7 8 9 10

11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 182 8 6 9 50 33 34

PROBLEM 12.5A (continued)

ACCOUNT NAME 1 Totals Brought Forward 2 Depr. Expense—Office Equipment 3 Depr. Expense—Warehouse Equipment 4 Uncollectible Accounts Expense 5 Interest Expense 6 Totals 7 Net Income 8 9

TRIAL BALANCE DEBIT CREDIT 830 6 0 0 00 830 6 0 0 00

830 6 0 0 00

ADJUSTMENTS DEBIT CREDIT 182 5 0 2 50 192 0 6 7 50 (f) 1 3 2 5 00 (g) 4 8 0 0 00

192 0 6 7 50

PROBLEM 12.5A (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 914 2 8 2 50 923 8 4 7 50 1 3 2 5 00 4 8 0 0 00 2 8 0 0 00 6 4 0 00 923 8 4 7 50 923 8 4 7 50

INCOME STATEMENT DEBIT CREDIT 675 7 0 2 50 740 9 7 8 00 1 3 2 5 00 4 8 0 0 00 2 8 0 0 00 6 4 0 00 685 2 6 7 50 740 9 7 8 00 55 7 1 0 50 740 9 7 8 00 740 9 7 8 00

BALANCE SHEET DEBIT CREDIT 238 5 8 0 00 182 8 6 9 50 1 2 3 4 5 238 5 8 0 00 182 8 6 9 50 6 55 7 1 0 50 7 238 5 8 0 00 238 5 8 0 00 8 9

Analyze: The net income will be $55,710.50.

PROBLEM 12.6A Artisan Wines Worksheet Year Ended December 31, 2019 ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Prepaid Advertising 4 Supplies 5 Merchandise Inventory 6 Store Equipment 7 Accum. Depr., Store Equip. 8 Office Equipment 9 Accum. Depr., Office Equip. 10 Notes Payable, due 2017 11 Accounts Payable 12 Wages Payable 13 Social Security Tax Payable 14 Medicare Tax Payable 15 Unearned Seminar Fees 16 Interest Payable 17 Vincent Arroyo, Capital 18 Vincent Arroyo, Drawing 19 Income Summary 20 Sales 21 Sales Discounts 22 Seminar Fee Income 23 Purchases 24 Purchases Returns & Allow. 25 Freight In 26 Rent Expense 27 Wages Expense 28 Payroll Taxes Expense 29 Depreciation Exp., Store Equip. 30 Depreciation Exp., Office Equip. 31 Advertising Expense 32 Supplies Expense 33 Interest Expense 34 35 Net income 36

TRIAL BALANCE ADJUSTMENTS DEBIT CREDIT DEBIT CREDIT 28 3 8 6 00 5 0 0 00 4 8 0 00 (c) 1 6 0 00 3 0 0 00 (d) 1 4 0 00 15 0 0 0 00 (a) 13 0 0 0 00 (b) 15 0 0 0 00 25 0 0 0 00 3 0 0 0 00 (e) 3 0 0 0 00 5 0 0 0 00 1 5 0 0 00 (f) 1 2 5 0 00 20 0 0 0 00 2 7 0 5 00 (h) 5 0 0 00 (i) 3 1 00 7 25 6 0 0 0 00 (g) 4 0 0 0 00 (j) 1 0 0 00 32 7 0 0 00 14 1 1 0 00 (b) 15 0 0 0 00 (a) 13 0 0 0 00 153 9 7 0 00 2 0 0 00 (g) 4 0 0 0 00 91 0 0 0 00 1 0 0 0 00 2 2 5 00 13 2 0 0 00 24 0 0 0 00 (h) 5 0 0 00 3 3 2 4 00 (i) 3 8 25 (e) 3 0 0 0 00 (f) 1 2 5 0 00 (c) 1 6 0 00 (d) 1 4 0 00 1 5 0 00 (j) 1 0 0 00 220 8 7 5 00 220 8 7 5 00 37 1 8 8 25 37 1 8 8 25

PROBLEM 12.6A (continued)

ADJUSTED TRIAL BALANCE INCOME STATEMENT DEBIT CREDIT DEBIT CREDIT 28 3 8 6 00 5 0 0 00 3 2 0 00 1 6 0 00 13 0 0 0 00 25 0 0 0 00 6 0 0 0 00 5 0 0 0 00 2 7 5 0 00 20 0 0 0 00 2 7 0 5 00 5 0 0 00 3 1 00 7 25 2 0 0 0 00 1 0 0 00 32 7 0 0 00 14 1 1 0 00 15 0 0 0 00 13 0 0 0 00 15 0 0 0 00 13 0 0 0 00 153 9 7 0 00 153 9 7 0 00 2 0 0 00 2 0 0 00 4 0 0 0 00 4 0 0 0 00 91 0 0 0 00 91 0 0 0 00 1 0 0 0 00 1 0 0 0 00 2 2 5 00 2 2 5 00 13 2 0 0 00 13 2 0 0 00 24 5 0 0 00 24 5 0 0 00 3 3 6 2 25 3 3 6 2 25 3 0 0 0 00 3 0 0 0 00 1 2 5 0 00 1 2 5 0 00 1 6 0 00 1 6 0 00 1 4 0 00 1 4 0 00 2 5 0 00 2 5 0 00 238 7 6 3 25 238 7 6 3 25 152 2 8 7 25 171 9 7 0 00 19 6 8 2 75 171 9 7 0 00 171 9 7 0 00

BALANCE SHEET DEBIT CREDIT 28 3 8 6 00 5 0 0 00 3 2 0 00 1 6 0 00 13 0 0 0 00 25 0 0 0 00 6 0 0 0 00 5 0 0 0 00 2 7 5 0 00 20 0 0 0 00 2 7 0 5 00 5 0 0 00 3 1 00 7 25 2 0 0 0 00 1 0 0 00 32 7 0 0 00 14 1 1 0 00

86 4 7

6 00

86 4 7

6 00

66 7 9 3 25 19 6 8 2 75 86 4 7 6 00

Analyze: The The amount amount of of revenue revenue earned earned by by conducting conducting seinars seminars during during thethe year year ended ended December 31, 2019 was $4,000.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

PROBLEM 12.1B PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2019 2 Dec 31 (Adjustment a) 3 Income Summary 4 Merchandise Inventory 5 6 31 (Adjustment b) 7 Merchandise Inventory 8 Income Summary 9 10 31 (Adjustment c) 11 Unearned Seminar Fees 12 Seminar Fees Income 13 14 31 (Adjustment d) 15 Insurance Expense 16 Prepaid Insurance 17 18 31 (Adjustment e) 19 Depreciation Expense - Store Equipment 20 Accumulated Depreciation - Store Equipment 21 22 31 (Adjustment f) 23 Wages Expense 24 Wages Payable 25 26 31 (Adjustment g) 27 Payroll Taxes Expense 28 State Unemployment Taxes Payable 29 Federal Unemployment Taxes Payable 30 Medicare Taxes Payable 31 Social Security Taxes Payable 32 33 31 (Adjustment h) 34 Uncollectible Accounts Expense 35 Allowance for Doubtful Accounts 36

POST. REF.

DEBIT

CREDIT

9 7 0 0 00 9 7 0 0 00

10 8 0 0 00 10 8 0 0 00

13 5 0 0 00 13 5 0 0 00

6 0 0 0 00 6 0 0 0 00

7 6 0 00 7 6 0 00

1 0 0 0 00 1 0 0 0 00

1 1 2 50 3 0 00 6 00 1 4 50 6 2 00

45 0 0 0 00 45 0 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

PROBLEM 12.1B (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 37 31 (Adjustment i) 38 Rent Expense 39 Prepaid Rent 40 41 31 (Adjustment j) 42 Supplies Expense 43 Supplies 44 45 31 (Adjustment k) 46 Interest Expense 47 Interest Payable

POST. REF.

DEBIT 4 5 0 0 00

4 5 0 00

1 0 0 00

CREDIT 37 38 4 5 0 0 00 39 40 41 42 4 5 0 00 43 44 45 46 1 0 0 00 47

Notes on calculations: a.-b. Amounts given. c. $18,000 cash received /4 seminars = $4,500/seminar. $4,500/seminar × 3 seminars conducted = $13,500 earned. d. $12,000/6 months in policy = $2,000/month. $2,000/month × 3 months expired (October, November and December) = $6,000 insurance expense. e. f. g. h. i. j. k.

($12,000 cost - $600 salvage value) /60 months = $190/month depreciation. $190/month × 4 months of use (September, October, November and December) = $760. Amounts given. Amounts given. $3,000,000 × 1.5% = $45,000 $13,500/9 months prepaid = $1,500/month; $1,500 × 3 months expired = $4,500. $600 balance - $150 supplies on hand = $450 of supplies used. $15,000 principal ×8% interest rate × 1/12 time factor = $100.

Analyze: The balance of the Unearned Seminar Fees account will be $4,500 ($18,000 - $13,500 earned).

PROBLEM 12.2B PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2019 2 June 1 Prepaid Rent 3 Cash 4 5 1 Cash 6 Prepaid Interest 7 Notes Payable 8 9 1 Cash 10 Unearned Advertising Fees 11 12 1 Office Equipment 13 Notes Payable 14 15 1 Prepaid Insurance 16 Cash 17 18 3 Office Furniture 19 Cash 20 Accounts Payable 21 22 5 Office Supplies 23 Cash 24

POST. REF.

DEBIT

CREDIT

15 0 0 0 00 15 0 0 0 00 17 5 5 0 00 4 5 0 00 18 0 0 0 00 78 0 0 0 00 78 0 0 0 00 17 2 0 0 00 17 2 0 0 00 1 6 8 0 00 1 6 8 0 00 17 4 0 0 00 10 0 0 0 00 7 4 0 0 00 1 9 1 0 00 1 9 1 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

PROBLEM 12.2B (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 Adjusting Entries 2 2019 3 June 30 Rent Expense 4 Prepaid Rent 5 6 30 Interest Expense 7 Prepaid Interest 8 9 30 Unearned Advertising Fees 10 Advertising Fees 11 12 30 Interest Expense 13 Interest Payable 14 15 30 Depreciation Expense—Office Equipment 16 Accumulated Depreciation—Office Equipment 17 18 30 Insurance Expense 19 Prepaid Insurance 20 21 30 Depreciation Expense—Office Furniture 22 Accumulated Depreciation—Office Furniture 23 24 30 Office Supplies Expense 25 Office Supplies 26

POST. REF.

DEBIT

CREDIT

1 2 5 0 00 1 2 5 0 00 1 5 0 00 1 5 0 00 6 5 0 0 00 6 5 0 0 00 8 6 00 8 6 00 2 7 0 00 2 7 0 00 1 4 0 00 1 4 0 00 2 7 0 00 2 7 0 00 1 0 6 0 00 1 0 6 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

Analyze: Of the amount paid on June 1, $8,750 will have been charged to rent expense ($1,250 per month * 7 months).

PROBLEM 12.3B Cross Timbers Company Partial Worksheet Month Ended September 30, 2019 ACCOUNT NAME 1 Cash 2 Supplies 3 Prepaid Rent 4 Prepaid Advertising 5 Prepaid Interest 6 Furniture 7 Accumulated Depreciation—Office Furniture 8 Equipment 9 Accumulated Depreciation—Equipment 10 Notes Payable 11 Accounts Payable 12 Interest Payable 13 Unearned Course Fees 14 Scott Nelson, Capital 15 Scott Nelson, Drawing 16 Course Fees 17 Salaries Expense 18 Telephone Expense 19 Entertainment Expense 20 Supplies Expense 21 Rent Expense 22 Advertising Expense 23 Depreciation Expense—Furniture 24 Depreciation Expense—Equipment 25 Interest Expense 26 27 Totals 28

TRIAL BALANCE DEBIT CREDIT 26 4 6 0 00 7 4 0 00 4 2 0 0 00 3 7 5 0 00 4 5 0 00 4 8 4 0 00

ADJUSTMENTS DEBIT CREDIT (a) (b) (c ) (d)

3 5 00 7 0 0 00 6 2 5 00 1 5 0 00

(e)

7 5 00

(f)

1 3 0 00

(g)

3 5 00

9 0 0 0 00

20 2 5 0 00 4 4 0 0 00 22 0 0 0 00 (h) 7 0 0 0 00 6 7 3 0 00 2 0 0 0 00 (h) 7 0 0 0 00 1 6 0 0 00 1 2 0 00 2 2 0 00

53 3 8 0 00

(a) (b) (c) (e)

3 5 00 7 0 0 00 6 2 5 00 7 5 00

(f)

1 3 0 00

(d) (g)

1 5 0 00 3 5 00 8 7 5 0 00

8 7 5 0 00

PROBLEM 12.3B (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 26 4 6 0 00 7 0 5 00 3 5 0 0 00 3 1 2 5 00 3 0 0 00 4 8 4 0 00 7 5 00

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT

9 0 0 0 00 1 3 0 00 20 2 5 0 00 4 4 0 0 00 3 5 00 15 0 0 0 00 6 7 3 0 00

1 2 3 4 5 6 7 8 9

1 6 0 0 00 1 2 0 00 2 2 0 00 3 5 00 7 0 0 00 6 2 5 00 7 5 00

10 11 12 13 14 15 16 17 18 19 20 21 22 23

1 3 0 00

1 8 5 00

25 26 27 28

2 0 0 0 00 7 0 0 0 00

53 6 2 0 00

Analyze:

53 6 2 0 00

The net dollar effect of the adjustments is an increase of $5,250.00 in income.

PROBLEM 12.4B Fun Depot Worksheet Year Ended December 31, 2019 TRIAL BALANCE ACCOUNT NAME 1 Cash

DEBIT 26 4 0 0 00

2 Accounts Receivable

22 7 0 0 00

3 Allowance for Doubtful Accounts

ADJUSTMENTS

CREDIT

DEBIT

3 2 0 00

CREDIT

(c ) 3

4 Merchandise Inventory

138 0 0 0 00

5 Supplies

11 6 0 0 00

(d) 8

6 4 0 00

6 Prepaid Advertising

5 2 8 0 00

(e) 3

5 2 0 00

7 Store Equipment

32 5 0 0 00 5 7 6 0 00

(f)

7 6 0 00

10 Accumulated Depr.—Office Equip.

1 4 4 0 00

(g) 1

4 4 0 00

11 Accounts Payable

8 6 0 0 00

12 Social Security Tax Payable

5 9 2 0 00

(i)

4 9 6 00

13 Medicare Tax Payable

1 3 6 8 00

(i)

1 1 6 00

8 Accumulated Depr.—Store Equip. 9 Office Equipment

(b)148

0 8 0 00

0 0 0 00 (a)138 0 0 0 00

8 4 0 0 00

14 Federal Unemployment Tax Payable

(j)

4 8 00

15 State Unemployment Tax Payable

(j)

4 3 2 00

(h) 8

0 0 0 00

16 Salaries Payable 17 Janie Fielder, Capital 18 Janie Fielder, Drawing

112 2 5 0 00 100 0 0 0 00

19 Sales

1,043 6 6 2 00

20 Sales Returns and Allowances

17 2 0 0 00

21 Purchases

507 6 0 0 00

22 Purchases Returns and Allowances 23 Rent Expense

5 0 4 0 00 125 0 0 0 00

24 Telephone Expense

4 2 8 0 00

25 Salaries Expense

164 2 0 0 00

(h) 8

0 0 0 00

26 Payroll Taxes Expense

15 2 0 0 00

(i)

6 1 2 00

(j)

4 8 0 00

28 Income Summary

(a)138

0 0 0 00 (b)148 0 0 0 00

(d) 8

6 4 0 00

(e) 3

5 2 0 00

31 Depreciation Expense—Store Equip.

(f)

7 6 0 00

32 Depreciation Expense—Office 33 Equipment Uncollectible Accounts Expense

(g) 1

4 4 0 00

0 8 0 00

29 Supplies Expense 30 Advertising Expense

34 Totals Carried Forward

6 0 0 0 00

1,184 3 6 0 00

317 5 3 2 00

PROBLEM 12.4B (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 26 4 0 0 00 22 7 0 0 00 3 4 0 0 00

INCOME STATEMENT DEBIT CREDIT

148 0 0 0 00 2 9 6 0 00 1 7 6 0 00 32 5 0 0 00

BALANCE SHEET DEBIT CREDIT 26 4 0 0 00 22 7 0 0 00 3 4 0 0 00 148 0 0 0 00 2 9 6 0 00 1 7 6 0 00 32 5 0 0 00

11 5 2 0 00

8 4 0 0 00

8 4 0 0 00 2 8 8 0 00 8 6 0 0 00 6 4 1 6 00 1 4 8 4 00 4 8 00 4 3 2 00 8 0 0 0 00 112 2 5 0 00

2 8 8 0 00 8 6 0 0 00 6 4 1 6 00 1 4 8 4 00 4 8 00 4 3 2 00 8 0 0 0 00 112 2 5 0 00

100 0 0 0 00

100 0 0 0 00 1043 6 6 2 00

17 2 0 0 00 507 6 0 0 00

1043 6 6 2 00 17 2 0 0 00 507 6 0 0 00

5 0 4 0 00 125 0 0 0 00 4 2 8 0 00 172 2 0 0 00 16 2 9 2 00 138 0 0 0 00 8 6 4 0 00 9 5 2 0 00 5 7 6 0 00 1 4 4 0 00 3 0 8 0 00 1,351 7 3 2 00

5 0 4 0 00 125 0 0 0 00 4 2 8 0 00 172 2 0 0 00 16 2 9 2 00

148 0 0 0 00

1,351 7 3 2 00

138 0 0 0 00 8 6 4 0 00 9 5 2 0 00 5 7 6 0 00 1 4 4 0 00 3 0 8 0 00 1,009 0 1 2 00

148 0 0 0 00

1,196 7 0 2 00

342 7 2 0 00 155 0 3 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34

PROBLEM 12.4B (continued) Fun Depot Worksheet (Continued) Year Ended December 31, 2019 ACCOUNT NAME 1 Totals Brought Forward 2 Totals 3 Net Income 4 5

TRIAL BALANCE ADJUSTMENTS DEBIT CREDIT DEBIT CREDIT 1,184 3 6 0 00 1,184 3 6 0 00 317 5 3 2 00 317 5 3 2 00 1,184 3 6 0 00 1,184 3 6 0 00 317 5 3 2 00 317 5 3 2 00

PROBLEM 12.4B (continued)

ADJUSTED TRIAL BALANCE INCOME STATEMENT BALANCE SHEET DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT 1,351 7 3 2 00 1,351 7 3 2 00 1,009 0 1 2 00 1,196 7 0 2 00 342 7 2 0 00 155 0 3 0 00 1 187 6 9 0 00 187 6 9 0 00 2 1,196 7 0 2 00 1,196 7 0 2 00 342 7 2 0 00 342 7 2 0 00 3 4 5

Analyze: The resulting net income without the advertising adjustment would have been $191,210.

PROBLEM 12.5B Whatnots Worksheet Year Ended December 31, 2019

ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Allowance for Doubtful Accounts 4 Merchandise Inventory 5 Supplies 6 Prepaid Insurance 7 Store Equipment 8 Accumulated Depr.—Store Equipment 9 Store Fixtures 10 Accumulated Depr.—Store Fixtures 11 Notes Payable 12 Accounts Payable 13 Interest Payable 14 Social Security Tax Payable 15 Medicare Tax Payable 16 Federal Unemployment Tax Payable 17 State Unemployment Tax Payable 18 Salaries Payable 19 Preston Allen, Capital 20 Preston Allen, Drawing 21 Sales 22 Sales Returns and Allowances 23 Purchases 24 Purchases Returns and Allowance 25 Rent Expenses 26 Telephone Expense 27 Salaries Expense 28 Payroll Taxes Expense 29 30 Income Summary 31 Supplies Expense 32 Insurance Expense 33 Totals Carried Forward

TRIAL BALANCE ADJUSTMENTS DEBIT CREDIT DEBIT CREDIT 3 2 3 5 00 6 9 1 0 00 6 0 0 00 (c) 1 2 8 0 00 16 9 8 5 00 (b) 15 8 4 0 00 (a) 16 9 8 5 00 7 5 0 00 (d) 5 0 5 00 2 4 0 0 00 (e) 1 2 0 0 00 6 0 0 0 00 2 0 0 0 00 (f) 1 0 0 0 00 15 7 6 0 00 4 1 0 0 00 (g) 2 0 5 0 00 4 0 0 0 00 6 0 0 00 (h) 9 0 00 (j) 8 9 90 (j) 2 1 03 (k) 8 70 (k) 7 2 50 (i) 1 4 5 0 00 39 7 8 0 00 8 0 0 0 00 236 5 6 0 00 6 0 0 0 00 160 0 0 0 00 2 0 0 0 00 18 0 0 0 00 2 4 0 0 00 40 0 0 0 00 (i) 1 4 5 0 00 3 2 0 0 00 (j) 1 1 0 93 (k) 8 1 20 (a) 16 9 8 5 00 (b) 15 8 4 0 00 (d) 5 0 5 00 (e) 1 2 0 0 00 289 6 4 0 00 289 6 4 0 00 36 1 7 2 13 40 5 9 2 13

PROBLEM 12.5B (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 3 2 3 5 00 6 9 1 0 00 1 8 8 0 00 15 8 4 0 00 2 4 5 00 1 2 0 0 00 6 0 0 0 00 3 0 0 0 00 15 7 6 0 00 6 1 5 0 00 4 0 0 0 00 6 0 0 00 9 0 00 8 9 90 2 1 03 8 70 7 2 50 1 4 5 0 00 39 7 8 0 00 8 0 0 0 00 236 5 6 0 00 6 0 0 0 00 160 0 0 0 00 2 0 0 0 00 18 0 0 0 00 2 4 0 0 00 41 4 5 0 00 3 3 9 2 13 16 9 8 5 00 5 0 5 00 1 2 0 0 00 307 1 2 2 13

15 8 4 0 00

311 5 4 2 13

INCOME STATEMENT DEBIT CREDIT

BALANCE SHEET DEBIT CREDIT 3 2 3 5 00 6 9 1 0 00 1 8 8 0 00 15 8 4 0 00 2 4 5 00 1 2 0 0 00 6 0 0 0 00 3 0 0 0 00 15 7 6 0 00 6 1 5 0 00 4 0 0 0 00 6 0 0 00 9 0 00 8 9 90 2 1 03 8 70 7 2 50 1 4 5 0 00 39 7 8 0 00 8 0 0 0 00

236 5 6 0 00 6 0 0 0 00 160 0 0 0 00 2 0 0 0 00 18 0 0 0 00 2 4 0 0 00 41 4 5 0 00 3 3 9 2 13 16 9 8 5 00 5 0 5 00 1 2 0 0 00 249 9 3 2 13

15 8 4 0 00

254 4 0 0 00

57 1 9 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 57 1 4 2 13 33

PROBLEM 12.5B (continued)

ACCOUNT NAME 1 Totals Brought Forward 2 Depr. Expense—Store Equipment 3 Depr. Expense—Store Fixtures 4 Interest Expense 5 Uncollectible Accounts Expense 6 Totals 7 Net Income 8 9

TRIAL BALANCE DEBIT CREDIT 289 6 4 0 00 289 6 4 0 00

ADJUSTMENTS DEBIT CREDIT 36 1 7 2 13 40 5 9 2 13 (f) 1 0 0 0 00 (g) 2 0 5 0 00 (h) 9 0 00 (c) 1 2 8 0 00 289 6 4 0 00 289 6 4 0 00 40 5 9 2 13 40 5 9 2 13

PROBLEM 12.5B (continued)

1 2 3 4 5 6 7 8 9

ADJUSTED TRIAL BALANCE DEBIT CREDIT 307 1 2 2 13 311 5 4 2 13 1 0 0 0 00 2 0 5 0 00 9 0 00 1 2 8 0 00 311 5 4 2 13 311 5 4 2 13

INCOME STATEMENT DEBIT CREDIT 249 9 3 2 13 254 4 0 0 00 1 0 0 0 00 2 0 5 0 00 9 0 00 1 2 8 0 00 254 3 5 2 13 254 4 0 0 00 4 7 87 254 4 0 0 00 254 4 0 0 00

BALANCE SHEET DEBIT CREDIT 57 1 9 0 00 57 1 4 2 13 1 2 3 4 5 57 1 9 0 00 57 1 4 2 13 6 4 7 87 7 57 1 9 0 00 57 1 9 0 00 8 9

Analyze: The net book value of the company’s assets is $38,160. Add all the asset accounts in the "Balance Sheet" column of the worksheet, then deduct the accumulated depreciation and allowance for doubtful account amounts in the "Balance Sheet" column of the worksheet.

PROBLEM 12.6B The Game Place Worksheet Year Ended December 31, 2019 ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Prepaid Advertising 4 Supplies 5 Merchandise Inventory 6 Store Equipment 7 Accum. Depr., Store Equip. 8 Office Equipment 9 Accum. Depr., Office Equip. 10 Notes Payable, due 2017 11 Accounts Payable 12 Wages Payable 13 Social Security Tax Payable 14 Medicare Tax Payable 15 Unearned Seminar Fees 16 Interest Payable 17 Matt Huffman, Capital 18 Matt Huffman, Drawing 19 Income Summary 20 Sales 21 Sales Discounts 22 Seminar Fee Income 23 Purchases 24 Purchases Returns & Allow. 25 Freight In 26 Rent Expense 27 Wages Expense 28 Payroll Taxes Expense 29 Depreciation Exp., Store Equip. 30 Depreciation Exp., Office Equip. 31 Advertising Expense 32 Supplies Expense 33 Interest Expense 34 35 Net income 36

TRIAL BALANCE ADJUSTMENTS DEBIT CREDIT DEBIT CREDIT 34 4 6 5 00 1 6 6 9 00 4 8 0 00 (c) 3 2 0 00 4 2 5 00 (d) 3 0 0 00 18 5 0 0 00 (a) 21 2 0 0 00 (b) 18 5 0 0 00 30 0 0 0 00 3 0 0 0 00 (e) 4 5 0 0 00 4 8 0 0 00 1 5 0 0 00 (f) 1 5 0 0 00 22 5 0 0 00 5 7 2 5 00 (h) 8 0 0 00 (i) 4 9 60 (i) 1 1 60 7 5 0 0 00 (g) 4 5 0 0 00 (j) 1 5 0 00 43 0 0 0 00 18 0 0 0 00 (b) 18 5 0 0 00 (a) 21 2 0 0 00 163 6 6 0 00 1 8 0 00 (g) 4 5 0 0 00 92 5 0 0 00 7 7 0 00 2 7 5 00 26 4 0 0 00 18 0 0 0 00 (h) 8 0 0 00 1 8 1 1 00 (i) 6 1 20 (e) 4 5 0 0 00 (f) 1 5 0 0 00 (c) 3 2 0 00 (d) 3 0 0 00 1 5 0 00 (j) 1 5 0 00 247 6 5 5 00 247 6 5 5 00 51 8 3 1 20 51 8 3 1 20

PROBLEM 12.6B (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 34 4 6 5 00 1 6 6 9 00 1 6 0 00 1 2 5 00 21 2 0 0 00 30 0 0 0 00 7 5 0 0 00 4 8 0 0 00 3 0 0 0 00 22 5 0 0 00 5 7 2 5 00 8 0 0 00 4 9 60 1 1 60 3 0 0 0 00 1 5 0 00 43 0 0 0 00 18 0 0 0 00 18 5 0 0 00 21 2 0 0 00 163 6 6 0 00 1 8 0 00 4 5 0 0 00 92 5 0 0 00 7 7 0 00 2 7 5 00 26 4 0 0 00 18 8 0 0 00 1 8 7 2 20 4 5 0 0 00 1 5 0 0 00 3 2 0 00 3 0 0 00 3 0 0 00 275 8 6 6 20 275 8 6 6 20

Analyze:

INCOME STATEMENT DEBIT CREDIT

18 5 0 0 00

BALANCE SHEET DEBIT CREDIT 34 4 6 5 00 1 6 6 9 00 1 6 0 00 1 2 5 00 21 2 0 0 00 30 0 0 0 00 7 5 0 0 00 4 8 0 0 00 3 0 0 0 00 22 5 0 0 00 5 7 2 5 00 8 0 0 00 4 9 60 1 1 60 3 0 0 0 00 1 5 0 00 43 0 0 0 00 18 0 0 0 00

21 2 0 0 00 163 6 6 0 00

1 8 0 00 4 5 0 0 00 92 5 0 0 00 7 7 0 00 2 7 5 00 26 4 0 0 00 18 8 0 0 00 1 8 7 2 20 4 5 0 0 00 1 5 0 0 00 3 2 0 00 3 0 0 00 3 0 0 00 165 4 4 7 20 24 6 8 2 80 190 1 3 0 00

190 1 3 0 00

110 4 1 9 00

190 1 3 0 00

110 4 1 9 00

85 7 3 6 20 24 6 8 2 80 110 4 1 9 00

The balance of merchandise inventory increased by $2,700 during 2016 ($21,200 $18,500).

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

CRITICAL THINKING PROBLEM 12.1 Ben’s Jewelers Worksheet Year Ended December 31, 2019 TRIAL BALANCE ADJUSTMENTS DEBIT CREDIT DEBIT CREDIT 1 Cash 13 0 5 0 00 2 Accounts Receivable 49 9 0 0 00 3 Allowance for Doubtful Accounts 2 0 0 0 00 (c) 1 0 0 0 00 4 Merchandise Inventory 105 9 0 0 00 (b) 98 7 0 0 00 (a)105 9 0 0 00 5 Store Supplies 4 2 3 0 00 (d) 3 6 0 5 00 6 Office Supplies 2 9 5 0 00 (e) 2 6 4 5 00 7 Store Equipment 113 5 9 0 00 8 Accumulated Depr.—Store Equip. 13 0 1 0 00 (f) 11 3 6 0 00 9 Office Equipment 27 6 4 0 00 10 Accumulated Depr.—Office Equip. 4 9 3 0 00 (g) 3 3 0 0 00 11 Accounts Payable 4 3 9 0 00 12 Salaries Payable (h) 5 0 0 0 00 13 Social Security Tax Payable (i) 3 2 6 00 14 Medicare Tax Payable (i) 7 6 00 15 Federal Unemployment Tax Payable (j) 5 6 00 16 State Unemployment Tax Payable (j) 2 7 0 00 17 Ben Waites, Capital 166 3 1 0 00 18 Ben Waites, Drawing 30 0 0 0 00 19 Income Summary (a)105 9 0 0 00 (b) 98 7 0 0 00 20 Sales 862 2 3 0 00 21 Sales Returns and Allowances 7 5 8 0 00 22 Purchases 504 8 1 0 00 23 Purchases Returns and Allowances 4 2 4 0 00 24 Purchases Discounts 10 7 7 0 00 25 Freight In 7 0 0 0 00 26 Salaries Expense—Sales 75 9 5 0 00 (h) 4 0 0 0 00 27 Rent Expense 35 5 0 0 00 28 Advertising Expense 12 3 0 0 00 29 Store Supplies Expense (d) 3 6 0 5 00 30 Depreciation Expense—Store Equip. (f) 11 3 6 0 00 31 Salaries Expense—Office 77 4 8 0 00 (h) 1 0 0 0 00 32 Total Carried Forward 1,067 8 8 0 00 1,067 8 8 0 00 224 5 6 5 00 232 2 3 8 00 33 ACCOUNT NAME

CRITICAL THINKING PROBLEM 12.1 (continued)

ADJUSTED TRIAL BALANCE INCOME STATEMENT BALANCE SHEET DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT 13 0 5 0 00 13 0 5 0 00 49 9 0 0 00 49 9 0 0 00 3 0 0 0 00 3 0 0 0 00 98 7 0 0 00 98 7 0 0 00 6 2 5 00 6 2 5 00 3 0 5 00 3 0 5 00 113 5 9 0 00 113 5 9 0 00 24 3 7 0 00 24 3 7 0 00 27 6 4 0 00 27 6 4 0 00 8 2 3 0 00 8 2 3 0 00 4 3 9 0 00 4 3 9 0 00 5 0 0 0 00 5 0 0 0 00 3 2 6 00 3 2 6 00 7 6 00 7 6 00 5 6 00 5 6 00 2 7 0 00 2 7 0 00 166 3 1 0 00 166 3 1 0 00 30 0 0 0 00 30 0 0 0 00 105 9 0 0 00 98 7 0 0 00 105 9 0 0 00 98 7 0 0 00 862 2 3 0 00 862 2 3 0 00 7 5 8 0 00 7 5 8 0 00 504 8 1 0 00 504 8 1 0 00 4 2 4 0 00 4 2 4 0 00 10 7 7 0 00 10 7 7 0 00 7 0 0 0 00 7 0 0 0 00 79 9 5 0 00 79 9 5 0 00 35 5 0 0 00 35 5 0 0 00 12 3 0 0 00 12 3 0 0 00 3 6 0 5 00 3 6 0 5 00 11 3 6 0 00 11 3 6 0 00 78 4 8 0 00 78 4 8 0 00 1,180 2 9 5 00 1,187 9 6 8 00 846 4 8 5 00 975 9 4 0 00 333 8 1 0 00 212 0 2 8 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33

CRITICAL THINKING PROBLEM 12.1 (continued) Ben’s Jewelers Worksheet (Continued) Year Ended December 31, 2019

ACCOUNT NAME 1 Totals Brought Forward 2 Office Supplies Expense 3 Depreciation Expense—Office Equipment 4 Uncollectible Accounts Expense 5 Payroll Taxes Expense 6 7 Totals 8 Net Income 9

TRIAL BALANCE DEBIT CREDIT 1,067 8 8 0 00 1,067 8 8 0 00

1,067 8 8 0 00

ADJUSTMENTS DEBIT CREDIT 224 5 6 5 00 232 2 3 8 00 (e) 2 6 4 5 00 (g) 3 3 0 0 00 (c) 1 0 0 0 00 (i) 4 0 2 00 (j) 3 2 6 00 1,067 8 8 0 00 232 2 3 8 00 232 2 3 8 00

CRITICAL THINKING PROBLEM 12.1 (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 1,180 2 9 5 00 1,187 9 6 8 00 2 6 4 5 00 3 3 0 0 00 1 0 0 0 00 7 2 8 00

INCOME STATEMENT DEBIT CREDIT 846 4 8 5 00 975 9 4 0 00 2 6 4 5 00 3 3 0 0 00 1 0 0 0 00 7 2 8 00

1,187 9 6 8 00

854 1 5 8 00 121 7 8 2 00 975 9 4 0 00

1,187 9 6 8 00

975 9 4 0 00 975 9 4 0 00

BALANCE SHEET DEBIT CREDIT 333 8 1 0 00 212 0 2 8 00 1 2 3 4 5 6 333 8 1 0 00 212 0 2 8 00 7 121 7 8 2 00 8 333 8 1 0 00 333 8 1 0 00 9

CRITICAL THINKING PROBLEM 12.1 (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 Adjusting Entries 2 2019 Instruction 2 3 Dec. 31 Income Summary 4 Merchandise Inventory 5 6 31 Merchandise Inventory 7 Income Summary 8 9 31 Uncollectible Accounts Expense 10 Allowance for Doubtful Accounts 11 12 31 Store Supplies Expense 13 Store Supplies 14 15 31 Office Supplies Expense 16 Office Supplies 17 18 31 Depreciation Expense—Store Equipment 19 Accumulated Depreciation—Store Equipment 20 21 31 Depreciation Expense—Office Equipment 22 Accumulated Depreciation—Office Equipment 23 24 31 Salaries Expense—Sales 25 Salaries Expense—Office 26 Salaries Payable 27 28 31 Payroll Taxes Expense 29 Social Security Tax Payable 30 Medicare Tax Payable 31 32 31 Payroll Taxes Expenses 33 Federal Unemployment Tax Payable 34 State Unemployment Tax Payable 35

POST. REF.

DEBIT

CREDIT

105 9 0 0 00 105 9 0 0 98 7 0 0 00 98 7 0 0 1 0 0 0 00 1 0 0 0 3 6 0 5 00 3 6 0 5 2 6 4 5 00 2 6 4 5 11 3 6 0 00 11 3 6 0 3 3 0 0 00 3 3 0 0 4 0 0 0 00 1 0 0 0 00 5 0 0 0 4 0 2 00 3 2 6 7 6 3 2 6 00 5 6 2 7 0

1 2 3 00 4 5 6 00 7 8 9 00 10 11 12 00 13 14 15 00 16 17 18 00 19 20 21 00 22 23 24 25 00 26 27 28 00 29 00 30 31 32 00 33 00 34 35

CRITICAL THINKING PROBLEM 12.1 (continued) PAGE

GENERAL JOURNAL

DATE

DESCRIPTION

1 2 2019 Instruction 3 3 Dec. 31 Sales 4 Purchases Returns and Allowances 5 Purchases Discounts 6 Income Summary 7 8 31 Income Summary 9 Sales Returns and Allowances 10 Purchases 11 Freight In 12 Salaries Expense—Sales 13 Rent Expense 14 Advertising Expense 15 Store Supplies Expense 16 Depreciation Expense—Store Equipment 17 Office Salaries Expense 18 Uncollectible Accounts Expense 19 Depreciation Expense—Office Equipment 20 Office Supplies Expense 21 Payroll Taxes Expense 22 23 31 Income Summary 24 Ben Waites, Capital 25 26 31 Ben Waites, Capital 27 Ben Waites, Drawing 28

POST. REF.

DEBIT

CREDIT

1 2 862 2 3 0 00 3 4 2 4 0 00 4 10 7 7 0 00 5 877 2 4 0 00 6 7 748 2 5 8 00 8 7 5 8 0 00 9 504 8 1 0 00 10 7 0 0 0 00 11 79 9 5 0 00 12 35 5 0 0 00 13 12 3 0 0 00 14 3 6 0 5 00 15 11 3 6 0 00 16 78 4 8 0 00 17 1 0 0 0 00 18 3 3 0 0 00 19 2 6 4 5 00 20 7 2 8 00 21 22 121 7 8 2 00 23 121 7 8 2 00 24 25 30 0 0 0 00 26 30 0 0 0 00 27 28

CRITICAL THINKING PROBLEM 12.1 (continued) a. Net Sales

Sales Less Sales Returns and Allowances Net Sales

$862,230 7,580 $854,650

b. Net Delivered Cost of Purchases

Purchases Freight In Delivered Cost of Purchases Less Purchases Returns and Allowances Purchases Discounts Net Delivered Cost of Purchases

$504,810 7,000 $511,810

c. Cost of Goods Sold

$4,240 10,770

Merchandise Inventory, January 1, 2019 Net Delivered Cost of Purchases Total Merchandise Available for Sale Less Merchandise Inventory, December 31, 2019 Cost of Goods Sold

$105,900 496,800 602,700 98,700 $504,000

d. Net Income (from worksheet) e. Capital, December 31

Analyze:

15,010 496,800

$121,782

Ben Waites, Capital, January 1, 2019 Net Income for Year Less Withdrawals for Year Ben Waites, Capital, December 31, 2019

$166,310 $121,782 30,000

91,782 $258,092

The changes shown in Ben Waites, Capital in the statement of owner’s equity will be the net income, $121,782, and the withdrawal of $30,000.

CRITICAL THINKING PROBLEM 12.2 1. Under the accrual basis of accounting, expenses are recorded when incurred and not necessarily when paid. Thus, when a business reports expenses on the income statement that did not require the use of cash during the accounting period, the increase in the cash account will be greater than the net income.

Increase in cash account Net Income from income statement Difference Expense not requiring the use of cash: Increase in Salaries Payable Decrease in Prepaid Insurance Decrease in Supplies Depreciation Expense Difference

$38,228 21,100 $17,128 $1,560 300 2,268 13,000 $17,128

SOLUTIONS TO BUSINESS CONNECTIONS Ethical Dilemma: You should count the row only once. Counting a row twice will misrepresent the amount of inventory and create false financial statements.

Financial Statement Analysis: 1. The Allowance for doubtful accounts, prepaid expenses and accumulated depreciation. 2. The Allowance for Doubtful Accounts: debit Uncollectible Accounts Expense and credit Allowance for Doubtful Accounts. Prepaid expenses: debit the appropriate expense account and credit Prepaid Expenses. Accumulated depreciation: debit Depreciation Expense and credit Accumulated Depreciation. 3. Cash and cash equivalents increased by 22.7 percent (($77.3 - $63.0) ÷ $63.0). Teamwork: Since service companies will not have inventory, the inventory adjustment would not be needed. Both types of companies would require an insurance and depreciation adjustment. Service companies that deal only with cash customers would not require an uncollectible account adjustment. A service company would need the accrued wages since the employee will be directly producing the service income but paid weekly instead of daily.

Internet Connection: The student’s answer will depend on the search engine used. In general, several Excel spreadsheets should be available to download.

Problem EX EX EX EX EX EX EX EX EX EX

13.1 13.2 13.3 13.4 13.5 13.6 13.7 13.8 13.9 13.1

Times 10 10 20 10 20 15 10 15 20 10

PR PR PR PR PR

13.1A 13.2A 13.3A 13.4A 13.5A

50 50 50 35 25

CT CT

13.1 13.2

120 30

5 10 15 20 25 30 35 40 45 50 55 60 70 80 90 100 110 120

= = = = = = = = = = = = = = = = = =

1-5 min. 6-10 min. 11-15 min. 16-20 min. 21-25 min. 26-30 min. 31-35 min. 36-40 min. 41-45 min. 46-50 min. 51-55 min. 56-60 min. 61-70 min. 71-80 min. 81-90 min. 91-100 min. 101-110 min. 111-120 min.

CHAPTER 13 FINANCIAL STATEMENTS AND CLOSING PROCEDURES Chapter Opener: Thinking Critically A grocery store chain will have many of the same revenue and expense items that you would see on income statements of companies in other industries. For example, the Sales account is a common revenue account but Sprouts will report detailed revenue from Bakery Sales, Meat Sales, Non-Perishable Food Sales, etc. The company also has very similar expense accounts, including Wages Expense, Rent Expense, Depreciation Expense, Advertising Expense, and Insurance Expense. However, they may also report some unique expenses like Perishable-Food Waste and Grocery Cart Repairs.

Discussion Questions Note to instructor : These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter. 1. Interest expense. 2.

The Cost of Goods Sold section contains this information.

Operating expenses arise from the normal operating activities of the business. Financing expenses are generally excluded from operating expenses and included in Other Revenues and Expenses.

It shows the firm’s financial position on a specific date through a presentation of the assets, liabilities and owner’s equity.

Cash, items that will be converted into cash within one year, and items that will be used up within one year are considered to be current assets. These include cash, accounts receivable, merchandise inventory, and prepaid expenses.

Current liabilities are debts that must be paid within one year; long-term liabilities are debts that are due more than a year in the future.

Discussion Questions (continued) 7. 8.

a. b.

9. 10. 11. 12. 13. 14. 15. 16. a. b. c. d. e. f. g. h. i. j. 17. Kagan Company's inventory turnover decreased from 9 times in 2018 to 8 times in 2019. This indicates Kagan Company sold their inventory more slowly in 2019 than in 2018.

Discussion Questions (continued) It reports the beginning and ending owner’s equity and the changes that occurred in owner’s equity during the year. Ending merchandise inventory is shown in both the income statement and the balance sheet. The owner’s ending capital is shown in both the balance sheet and the statement of owner’s equity. It assures that the general ledger is in balance after the adjusting and closing entries have been posted. The permanent accounts—assets, liabilities, and owner’s equity—appear on the post-closing trial balance. The likely problem is that the posting of either a debit amount or a credit amount of a closing entry was The types of adjusting entries that are reversed are: (a) all accruals, (b) prepaid items such as prepaid insurance initially charged to the Insurance Expense account, and (c) unearned income items initially credited to income accounts. A reversing entry with a debit to Interest Income and a credit to Interest Receivable would be recorded. Entries for (a) accrued payroll taxes and (e) accrued interest income would be reversed. The additional investment would be shown in the Statement of Owner’s Equity as an addition to Beginning The steps inCapital. the accounting cycle are: Analyze transactions Journalize the data about transactions Post the data about transactions to the accounts Prepare a worksheet Prepare financial statements Journalize and post adjusting entries Journalize and post closing entries Prepare a post closing trial balance Interpret the financial information A final step for some companies is to journalize and post reversing entries. Kagan Company's inventory turnover decreased from 9 times in 2018 to 8 times in 2019. This indicates Kagan Company sold their inventory more slowly in 2019 than in 2018.

EXERCISE 13.1

1. 2. 3. 4. 5. 6. 7. 8. 9.

Purchase returns and allowances Telephone Expense Sales Returns and Allowances Purchases Interest income Merchandise Inventory Interest Expense Sales Depreciation expense – Store Equipment 10. Rent Expense

b c a b d b e a

11. 12. 13. 14. 15.

Sales Discounts Supplies Expense Freight In Purchases Discounts Uncollectible Accounts Expense

11. 12. 13. 14. 15.

Notes Receivable, due 2020 Accum. Depr., Delivery Van Notes Payable, due 2020 David Stafford, Drawing Interest Payable

c c

EXERCISE 13.2 1. Accounts Receivable 2. Delivery Van 3. Prepaid Insurance 4. Notes Payable, due 2025 5. Store Supplies 6. Accounts Payable 7. Merchandise Inventory 8. David Stafford, Capital 9. Cash 10. Unearned Subscription Income

a b a d a c a e a c

a c b b c

a b c e c

EXERCISE 13.3 Bridget's Office Supplies Income Statement Year Ended December 31, 2019 Operating Revenue Sales Less Sales Returns and Allowance Net Sales Cost of Goods Sold Merchandise Inventory, January 1, 2019 Purchases Freight In Delivered Cost of Purchases Less Purchases Returns and Allowance Purchases Discounts Net Delivered Cost of Purchases Total Merchandise Available for Sale Less Merchandise Inventory, Dec. 31, 2019 Cost of Goods Sold Gross Profit on Sales Operating Expenses Selling Expenses Salaries Expense—Sales Store Supplies Expense Depreciation Expense—Store Equip. Total Selling Expense General and Administrative Expenses Rent Expense Utilities Expense Salaries Expense—Office Payroll Taxes Expense Depreciation Expense—Office Equip. Uncollectible Accounts Expense Total General and Admin. Expenses Total Operating Expenses Income from Operations Other Income Miscellaneous Income Other Expense Interest Expense Net Nonoperating Expenses Net Income for Year

248 9 0 0 00 4 3 5 0 00 244 5 5 0 00 59 7 7 5 00 103 6 0 0 00 1 9 7 5 00 105 5 7 5 00 3 6 0 0 00 1 8 0 0 00

5 4 0 0 00 100 1 7 5 00 159 9 5 0 00 52 7 2 5 00 107 2 2 5 00 137 3 2 5 00

45 3 0 0 00 2 3 1 0 00 1 5 1 0 00 49 1 2 0 00 13 5 0 0 00 3 0 0 0 00 21 1 0 0 00 6 0 0 0 00 5 7 0 00 7 2 0 00 44 8 9 0 00 94 0 1 0 00 43 3 1 5 00 4 0 0 00 7 4 0 00 3 4 0 00 42 9 7 5 00

EXERCISE 13.4 Bridget's Office Supplies Statement of Owner's Equity Year Ended December 31, 2019 Bridget Swanson, Capital, January 1, 2019 Net Income for Year Less Withdrawals for Year Increase in Capital Bridget Swanson, Capital, December 31, 2019

63 7 6 0 00 42 9 7 5 00 40 7 0 0 00 2 2 7 5 00 66 0 3 5 00

EXERCISE 13.5 Bridget's Office Supplies Balance Sheet December 31, 2019 Assets Current Assets Cash Change Fund Accounts Receivable Less Allowance for Doubtful Accounts Merchandise Inventory Prepaid Expenses Store Supplies Prepaid Interest Total Current Assets Plant and Equipment Store Equipment Less Accumulated Depreciation Office Equipment Less Accumulated Depreciation Total Plant and Equipment Total Assets Liabilities and Owner’s Equity Current Liabilities Notes Payable Accounts Payable Interest Payable Sales Tax Payable Total Current Liabilities Owner’s Equity Bridget Swanson, Capital Total Liabilities and Owner’s Equity

5 6 0 5 00 5 0 0 00 5 1 4 0 00 8 6 0 00

1 1 0 0 00 1 3 0 00

11 2 0 0 00 1 1 8 0 00 3 4 0 0 00 5 0 0 00

4 2 8 0 00 52 7 2 5 00

1 2 3 0 00 64 3 4 0 00

10 0 2 0 00 2 9 0 0 00 12 9 2 0 00 77 2 6 0 00

5 5 0 0 00 3 7 2 5 00 1 1 0 00 1 8 9 0 00 11 2 2 5 00 66 0 3 5 00 77 2 6 0 00

EXERCISE 13.6 GENERAL JOURNAL

DATE

DESCRIPTION Closing Entries

1 2 2019 3 Dec. 31 Sales 4 Interest Income 5 Purchases Returns and Allowances 6 Purchases Discounts 7 Income Summary 8 9 31 Income Summary 10 Sales Returns and Allowances 11 Sales Discounts 12 Purchases 13 Freight In 14 Rent Expense 15 Utilities Expense 16 Telephone Expense 17 Salaries Expense 18 Payroll Taxes Expense 19 Supplies Expense 20 Depreciation Expense 21 Interest Expense 22 23 31 Income Summary 24 John Capeletti, Capital 25 26 31 John Capaletti, Capital 27 John Capeletti, Drawing 28 29 30 31 32 33 34 35 36 37

PAGE POST. REF.

DEBIT

261 5 0 0 00 2 2 0 00 1 5 0 0 00 1 6 3 0 00

239 8 4 0 00

28 3 1 0 00

30 7 0 0 00

CREDIT 1 2 3 4 5 6 264 8 5 0 00 7 8 9 4 4 0 0 00 10 1 6 0 0 00 11 137 2 0 0 00 12 2 7 0 0 00 13 12 0 0 0 00 14 3 0 3 0 00 15 1 7 4 0 00 16 67 1 0 0 00 17 5 3 7 0 00 18 1 2 8 0 00 19 3 0 0 0 00 20 4 2 0 00 21 22 23 28 3 1 0 00 24 25 26 30 7 0 0 00 27 28 29 30 31 32 33 34 35 36 37

EXERCISE 13.7 PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Reversing Entries

1 2 2020 3 Jan. 1 Salaries Payable 4 Salaries Expense—Office 5 To reverse adjustment (e) made on Dec. 31, 2019 6 7 1 Social Security Tax Payable 8 Medicare Tax Payable 9 Payroll Taxes Expense 10 To reverse adjustment (f) made on Dec. 31, 2019 11 12 1 Interest Payable 13 Interest Expense 14 To reverse adjustment (g) made on Dec. 31, 2019 15 16 1 Interest Income 17 Interest Receivable 18 To reverse adjustment (h) made on Dec. 31, 2019 19 20 21 22 23 24 25 26 27 28 29 30

POST. REF.

DEBIT

3 8 0 0 00

2 3 5 60 5 5 10

3 0 0 00

1 8 8 00

CREDIT 1 2 3 3 8 0 0 00 4 5 6 7 8 2 9 0 70 9 10 11 12 3 0 0 00 13 14 15 16 1 8 8 00 17 18 19 20 21 22 23 24 25 26 27 28 29 30

EXERCISE 13.8 Van Zant Janitorial Supplies Post-closing Trial Balance December 31, 2019 ACCOUNT NAME Cash Accounts Receivable Allowance for Doubtful Accounts Merchandise Inventory Supplies Prepaid Insurance Equipment Accumulated Depreciation—Equipment Accounts Payable Social Security Tax Payable Medicare Tax Payable Steven Van Zant, Capital Totals

DEBIT 21 6 0 0 00 62 8 0 0 00

CREDIT

2 2 0 00 187 2 0 0 00 6 2 4 0 00 3 1 6 0 00 52 0 0 0 00

333 0 0 0 00

22 8 0 0 00 8 7 0 0 00 1 4 9 0 00 4 1 0 00 299 3 8 0 00 330 0 0 0 00

EXERCISE 13.9 a. Net Sales

Sales Less Sales Discounts Net Sales

Gross profit

Net sales Less cost of goods sold Gross profit

The gross profit percentage

Gross profit Net sales

b. Current assets

Cash Accounts receivable Note receivable, due 2020 Merchandise inventory Prepaid insurance Supplies

Current liabilities

Note payable to bank, due 2020 Accounts payable Interest payable

Working capital

$130,000 - $48,400 =

c. Current ratio

$130,000 $48,400

d. Inventory turnover

Cost of goods sold Average inventory

$35,700 + $58,500

Average inventory:

$183,260 $531,800

$348,540 $47,100

$531,800 $50,125

2 e. Accounts receivable turnover

Net credit sales Average accounts

receivable

$535,000 3,200 $531,800 $531,800 348,540 $183,260 34.5%

$33,340 47,700 9,500 35,700 2,350 1,410 $130,000

$35,000 13,050 350 $48,400 $81,600

2.69

7.40 times

$47,100

10.61 times

EXERCISE 13.10 a.

The accounts receivable turnover is 8.00 times, calculated as follows: Net sales Average accounts receivable

$1,000,000 ($110,000 + $140,000)

$1,000,000 $125,000

8.00

The inventory turnover is 8.52 times, calculated as follows: Cost of goods sold Average inventory

$490,000 ($55,000 + $60,000)

$490,000 $57,500

8.52

PROBLEM 13.1A Superior Hardwood Company Income Statement Year Ended December 31, 2019 Operating Revenue Sales Less Sales Returns and Allowances Net Sales Cost of Goods Sold Merchandise Inventory, January 1, 2019 Purchases Freight In Delivered Cost of Purchases Less Purchases Returns and Allowances Purchases Discounts Net Delivered Cost of Purchases Total Merchandise Available for Sale Less Merchandise Inventory, December 31, 2019 Cost of Goods Sold Gross Profit on Sales Operating Expenses Warehouse Expenses Warehouse Wages Expense Warehouse Supplies Expense Depreciation Expense—Warehouse Equipment Total Warehouse Expenses Selling Expenses Salaries Expense—Sales Travel and Entertainment Expense Delivery Wages Expense Depreciation Expense—Delivery Equipment

1,685 0 0 0 00 18 2 0 0 00 1,666 8 0 0 00 244 0 0 0 00 767 0 0 0 00 13 8 0 0 00 780 8 0 0 00 8 4 4 0 00 11 1 6 0 00

19 6 0 0 00 761 2 0 0 00 1,005 2 0 0 00 234 0 0 0 00 771 2 0 0 00 895 6 0 0 00

199 6 0 0 00 7 1 0 0 00 5 8 0 0 00 212 5 0 0 00 269 2 0 0 00 21 5 0 0 00 60 3 3 0 00 9 8 0 0 00

Total Selling Expenses

360 8 3 0 00

PROBLEM 13.1A (continued) Superior Hardwood Company Income Statement (continued) Year Ended December 31, 2019 General and Administrative Expenses Salaries Expense—Office Office Supplies Expense Insurance Expense Utilities Expense Telephone Expense Payroll Taxes Expense Property Taxes Expense Uncollectible Accounts Expense Depreciation Expense—Building Depreciation Expense—Office Equipment Total General and Administrative Exp. Total Operating Expenses Income from Operations Other Income Interest Income Other Expenses Interest Expense Net Nonoperating Expenses Net Income for Year

70 6 0 0 00 4 0 0 0 00 6 2 0 0 00 9 2 9 0 00 6 5 2 0 00 59 0 0 0 00 5 6 0 0 00 5 8 0 0 00 9 0 0 0 00 4 0 0 0 00 180 0 1 0 00 753 3 4 0 00 142 2 6 0 00 1 5 8 0 00 8 2 0 0 00 6 6 2 0 00 135 6 4 0 00

PROBLEM 13.1A (continued) Superior Hardwood Company Statement of Owner's Equity Year Ended December 31, 2019 Charles Ronie, Capital, January 1, 2019 Net Income for Year Less Withdrawals for Year Increase in Capital Charles Ronie, Capital, December 31, 2019

452 4 6 0 00 135 6 4 0 00 127 0 0 0 00 8 6 4 0 00 461 1 0 0 00

PROBLEM 13.1A (continued) Superior Hardwood Company Balance Sheet December 31, 2019 Assets Current Assets Cash Petty Cash Fund Notes Receivable Accounts Receivable Less Allowance for Doubtful Accounts Merchandise Inventory Prepaid Expenses Warehouse Supplies Office Supplies Prepaid Insurance Total Current Assets Plant and Equipment Land Building Less Accumulated Depreciation Warehouse Equipment Less Accumulated Depreciation Delivery Equipment Less Accumulated Depreciation Office Equipment Less Accumulated Depreciation Total Plant and Equipment Total Assets Liability and Owner’s Equity Current Liabilities Notes Payable Accounts Payable Interest Payable Total Current Liabilities

34 1 0 0 00 5 0 0 00 11 8 0 0 00 86 0 0 0 00 6 0 0 0 00

2 8 6 0 00 1 4 2 0 00 10 2 0 0 00

80 0 0 0 00 234 0 0 0 00

14 4 8 0 00 374 8 8 0 00

46 0 0 0 00 178 0 0 0 00 54 0 0 0 00 37 0 0 0 00 17 4 0 0 00 51 0 0 0 00 19 6 0 0 00 25 0 0 0 00 12 0 0 0 00

124 0 0 0 00 19 6 0 0 00 31 4 0 0 00 13 0 0 0 00 234 0 0 0 00 608 8 8 0 00

20 2 0 0 00 49 0 0 0 00 5 8 0 00 69 7 8 0 00

PROBLEM 13.1A (continued) Superior Hardwood Company Balance Sheet (continued) December 31, 2019 Long-Term Liabilities Mortgage Payable Loans Payable Total Long-Term Liabilities Total Liabilities Owner’s Equity Charles Ronie, Capital Total Liabilities and Owner’s Equity

61 0 0 0 00 17 0 0 0 00 78 0 0 0 00 147 7 8 0 00 461 1 0 0 00 608 8 8 0 00

Analyze: The company’s current ratio is 5.37 to 1 ($374,880 ÷ $69,780).

PROBLEM 13.2A Good to Go Auto Products Income Statement Year Ended December 31, 2019 Operating Revenue Sales Less Sales Returns and Allowances Net Sales Cost of Goods Sold Merchandise Inventory, January 1, 2019 Purchases Freight In Delivered Cost of Purchases Less Purchases Returns and Allowances Purchases Discounts Net Delivered Cost of Purchases Total Merchandise Available for Sale Less Merchandise Inventory, Dec. 31, 2019 Cost of Goods Sold Gross Profit on Sales Operating Expenses Warehouse Expenses Warehouse Wages Expense Warehouse Supplies Expense Depreciation Exp.—Warehouse Equip. Total Warehouse Expenses Selling Expenses Salaries Expense—Sales Travel Expense Delivery Expense Total Selling Expenses

1,110 3 0 0 00 8 4 0 0 00 1,101 9 0 0 00 131 4 0 0 00 463 0 0 0 00 9 8 0 0 00 472 8 0 0 00 13 6 5 0 00 9 2 4 0 00

22 8 9 0 00 449 9 1 0 00 581 3 1 0 00 128 5 0 0 00 452 8 1 0 00 649 0 9 0 00

108 6 0 0 00 5 8 0 0 00 3 4 0 0 00 117 8 0 0 00 151 7 0 0 00 24 0 0 0 00 37 4 2 5 00 213 1 2 5 00

PROBLEM 13.2A (continued) Good to Go Auto Products Income Statement (continued) Year Ended December 31, 2019 General and Administrative Expenses Salaries Expense—Office Office Supplies Expense Insurance Expense Utilities Expense Telephone Expense Payroll Taxes Expense Building Repair Expense Property Taxes Expense Uncollectible Accounts Expense Depreciation Expense—Building Depreciation Expense—Office Equip. Total General and Administrative Exp. Total Operating Expenses Income from Operations Other Income Interest Income Other Expenses Interest Expense Net Nonoperating Expenses Net Income for Year

85 0 0 0 00 1 2 2 0 00 9 8 7 5 00 8 0 0 0 00 3 2 8 0 00 31 6 0 0 00 3 7 0 0 00 16 4 0 0 00 3 5 8 0 00 5 6 0 0 00 1 6 2 0 00 169 8 7 5 00 500 8 0 0 00 148 2 9 0 00 5 8 0 00 4 0 0 0 00 3 4 2 0 00 144 8 7 0 00

PROBLEM 13.2A (continued) Good to Go Auto Products Statement of Owner's Equity Year Ended December 31, 2019 Colin O’Brien, Capital, January 1, 2019 Net Income for Year Less Withdrawals for Year Increase in Capital Colin O’Brien, Capital, December 31, 2019

326 8 7 0 00 144 8 7 0 00 70 6 5 0 00 74 2 2 0 00 401 0 9 0 00

PROBLEM 13.2A (continued) Good to Go Auto Products Balance Sheet December 31, 2019 Assets Current Assets Cash Petty Cash Fund Notes Receivable Accounts Receivable Less Allowance for Doubtful Accounts Merchandise Inventory Interest Receivable Prepaid Expenses Warehouse Supplies Office Supplies Prepaid Insurance Total Current Assets Plant and Equipment Land Building Less Accumulated Depreciation Warehouse Equipment Less Accumulated Depreciation Office Equipment Less Accumulated Depreciation Total Plant and Equipment Total Assets Liability and Owner’s Equity Current Liabilities Notes Payable Accounts Payable Interest Payable Total Current Liabilities

99 0 0 0 00 6 0 0 00 15 0 0 0 00 140 2 0 0 00 3 8 0 0 00 136 4 0 0 00 128 5 0 0 00 1 5 0 00 3 3 0 0 00 7 0 0 00 4 6 4 0 00

8 6 4 0 00 388 2 9 0 00

16 0 0 0 00 107 0 0 0 00 16 7 0 0 00 19 8 0 0 00 9 5 0 0 00 9 4 0 0 00 3 9 0 0 00

90 3 0 0 00 10 3 0 0 00 5 5 0 0 00 122 1 0 0 00 510 3 9 0 00

15 0 0 0 00 56 9 0 0 00 4 0 0 00 72 3 0 0 00

PROBLEM 13.2A (continued) Good to Go Auto Products Balance Sheet (continued) December 31, 2019 Long-Term Liabilities Mortgage Payable Loans Payable Total Long-Term Liabilities Total Liabilities Owner’s Equity Colin O'Brien, Capital Total Liabilities and Owner’s Equity

20 0 0 0 00 17 0 0 0 00 37 0 0 0 00 109 3 0 0 00

401 0 9 0 00 510 3 9 0 00

Analyze: The percentage of total operating expenses attributable to warehouse expense is 23.52% ($117,800 ÷ $500,800).

PROBLEM 13.3A Artisan Wines Income Statement Year Ended December 31, 2019 Operating Revenue Sales Less Sales Discount Net Sales Cost of Goods Sold Merchandise Inventory, January 1, 2019 Purchases Freight In Delivered Cost of Purchases Less Purchases Returns and Allowances Net Delivered Cost of Purchases Goods Available for Sale Less Merchandise Inventory, December 31, 2019 Cost of Goods Sold Gross Profit on Sales Operating Expenses Rent Expense Wages Expense Payroll Taxes Expense Depreciation Expense, Store Equipment Depreciation Expense, Office Equipment Advertising Expense Supplies Expense Total Operating Expenses Income From Operations Other Income Seminar Fee Income Other Expenses Interest Expense Net Nonoperating Income Net Income for Year

153,970.00 200.00 153,770.00 15,000.00 91,000.00 225.00 91,225.00 1,000.00 90,225.00 105,225.00 13,000.00 92,225.00 61,545.00 13,200.00 24,500.00 3,362.25 3,000.00 1,250.00 160.00 140.00 45,612.25 15,932.75 4,000.00 250.00 3,750.00 19,682.75

PROBLEM 13.3A (continued) Artisan Wines Statement of Owner's Equity Year Ended December 31, 2019 Vincent Arroyo, Capital, January 1, 2019 Net Income for the Year Less Withdrawals for the Year Increase in Capital Vincent Arroyo, Capital, December 31, 2019

32,700.00 19,682.75 14,110.00 5,572.75 38,272.75

Artisan Wines Balance Sheet December 31, 2019 Assets Current Assets Cash Accounts Receivable Prepaid Advertising Supplies Merchandise Inventory Total Current Assets Plant and Equipment: Store Equipment 25,000.00 Less Accumulated Depreciation 6,000.00 Office Equipment 5,000.00 Less Accumulated Depreciation 2,750.00 Total Plant and Equipment Total Assets Liabilities and Owner's Equity Current Liabilities: Notes Payable, due 2020 Accounts Payable Wages Payable Social Security Tax Payable Medicare Tax Payable Unearned Seminar Fees Interest Payable Total Current Liabilities Owner's Equity Vincent Arroyo, Capital Total Liabilities and Owner's Equity

28,386.00 500.00 320.00 160.00 13,000.00 42,366.00

19,000.00 2,250.00 21,250.00 63,616.00

20,000.00 2,705.00 500.00 31.00 7.25 2,000.00 100.00 25,343.25 38,272.75 63,616.00

PROBLEM 13.3A (continued) Analyze:

The inventory turnover for Artisan Wines is 6.59 times, calculated as follows: Cost of Goods Sold = 92,225 = 6.59 Average Inventory 14,000 Average Inventory

13,000 + 15,000 2

14,000

PROBLEM 13.4A PAGE

GENERAL JOURNAL

DATE

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31

DESCRIPTION Adjusting Entries 2019 (Adjustment a) Dec. 31 Income Summary Merchandise Inventory To transfer beginning inventory (Adjustment b) 31 Merchandise Inventory Income Summary To record ending inventory (Adjustment c) 31 Uncollectible Accounts Expense Allowance for Doubtful Accounts To record estimated loss for 2019, based on 0.5% of net credit sales $560,000 (Adjustment d) 31 Supplies Expense Supplies To record supplies used during 2019 (Adjustment e) 31 Insurance Expense Prepaid Insurance To record expired insurance (Adjustment f) 31 Depreciation Expense—Office Equipment Accumulated Depreciation—Office Equipment To record depreciation for 2019 (schedule on file)

POST. REF.

DEBIT

CREDIT

86 0 0 0 00 86 0 0 0 00

78 0 0 0 00 78 0 0 0 00

2 8 0 0 00 2 8 0 0 00

9 2 2 0 00 9 2 2 0 00

3 6 0 0 00 3 6 0 0 00

1 3 2 5 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31

PROBLEM 13.4A (continued) PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Adjusting Entries

1 2 2019 (Adjustment g) 3 Dec. 31 Depreciation Expense—Warehouse Equipment 4 Accumulated Depreciation—Warehouse Equipment 5 To record depreciation for 2019 (schedule on file) 6 7 (Adjustment h) 8 31 Interest Expense 9 Interest Payable 10 To record accrued interest on 4-month, 12% trade 11 note payable dated November 1, 2019 12 $32,000 × 0.12 × 2/12 = $640 13 14 (Adjustment i) 15 31 Salaries Expense 16 Salaries Payable 17 To record accrued salaries 18 19 (Adjustment j) 20 31 Payroll Taxes Expense 21 Social Security Tax Payable 22 Medicare Tax Payable 23 To record accrued payroll taxes on accrued 24 salaries for December: social security tax = 25 6.2% × $5000; Medicare tax = 1.45% × $5,000 26 27 (Adjustment k) 28 31 Payroll Taxes Expense 29 Federal Unemployment Tax Payable 30 State Unemployment Tax Payable 31 To record payroll taxes (state = 0.054 × $5,000, 32 federal = 0.006 × $5,000) 33 34 35

POST. REF.

DEBIT

CREDIT

1 2 4 8 0 0 00 3 4 8 0 0 00 4 5 6 7 6 4 0 00 8 6 4 0 00 9 10 11 12 13 14 5 0 0 0 00 15 5 0 0 0 00 16 17 18 19 3 8 2 50 20 3 1 0 00 21 7 2 50 22 23 24 25 26 27 3 0 0 00 28 3 0 00 29 2 7 0 00 30 31 32 33 34 35

PROBLEM 13.4A (continued) PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Closing Entries

1 2 2019 3 Dec. 31 Sales 4 Purchases Returns and Allowances 5 Income Summary 6 7 31 Income Summary 8 Sales Returns and Allowances 9 Purchases 10 Rent Expenses 11 Telephone Expense 12 Salaries Expense 13 Payroll Taxes Expense 14 Supplies Expense 15 Insurance Expense 16 Depreciation Expense—Office Equipment 17 Depreciation Expense—Warehouse Equipment 18 Uncollectible Accounts Expense 19 Interest Expense 20 21 31 Income Summary 22 Phillip Tucker, Capital 23 24 31 Phillip Tucker, Capital 25 Phillip Tucker, Drawing 26 27 28 29 30 31 32 33 34 35 36 37

POST. REF.

DEBIT

CREDIT

653 7 7 8 00 9 2 0 0 00 662 9 7 8 00 599 2 6 7 50 10 0 0 0 00 350 0 0 0 00 36 0 0 0 00 2 2 0 0 00 165 0 0 0 00 13 6 8 2 50 9 2 2 0 00 3 6 0 0 00 1 3 2 5 00 4 8 0 0 00 2 8 0 0 00 6 4 0 00 55 7 1 0 50 55 7 1 0 50 56 0 0 0 00

56 0 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37

PROBLEM 13.4A (continued) PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Reversing Entries

POST. REF.

1 2 2020 3 Jan. 1 Interest Payable 4 Interest Expense 5 To reverse adjusting entry (h) made Dec. 31, 2019 6 7 1 Salaries Payable 8 Salaries Expense 9 To reverse adjusting entry (i) made Dec. 31, 2019 10 11 1 Social Security Tax Payable 12 Medicare Tax Payable 13 Payroll Taxes Expense 14 To reverse adjusting entry (j) made Dec. 31, 2019 15 16 1 Federal Unemployment Tax Payable 17 State Unemployment Tax Payable 18 Payroll Taxes Expense 19 To reverse adjusting entry (k) made Dec. 31, 2019 20 21 22 23

DEBIT

CREDIT

6 4 0 00 6 4 0 00

5 0 0 0 00 5 0 0 0 00

3 1 0 00 7 2 500 3 8 2 50

3 0 00 2 7 0 00 3 0 0 00

Analyze: The following entry would be required: PAGE

GENERAL JOURNAL

1 2 3 4 5 6

DATE DESCRIPTION 2020 Jan. 3 Salaries Payable Salaries Expense Cash To record the payment of salaries

POST. REF.

DEBIT

CREDIT

5 0 0 0 00 1 0 0 0 00 6 0 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

1 2 3 4 5 6

PROBLEM 13.5A GENERAL JOURNAL

DATE

DESCRIPTION Adjusting Entries

1 2 2019 (Adjustment a) 3 Dec. 31 Rent Expense 4 Prepaid Rent 5 To record expired rent on 6-month lease of 6 $21,000 paid November 1, 2019 7 8 (Adjustment b) 9 31 Supplies Expense 10 Supplies 11 To record supplies used in 2019 12 13 (Adjustment c) 14 31 Depreciation Expense—Equipment 15 Accumulated Depreciation—Equipment 16 To record depreciation for 2019 17 18 (Adjustment d) 19 31 Salaries Expense 20 Salaries Payable 21 To record accrued salaries 22 23 31 (Adjustment e) 24 Payroll Taxes Expense 25 Social Security Tax Payable 26 Medicare Tax Payable 27 To record accrued payroll taxes on accrued 28 salaries 29 30 (Adjustment f) 31 31 Interest Receivable 32 Interest Income 33 To record accrued interest on 5-month, 34 8%, $6,500 note receivable dated 35 October 1, 2019 36

PAGE POST. REF.

DEBIT

7 0 0 0 00

9 9 4 0 00

10 7 5 0 00

6 1 0 0 00

4 6 6 65

1 3 0 00

CREDIT 1 2 3 7 0 0 0 00 4 5 6 7 8 9 9 9 4 0 00 10 11 12 13 14 10 7 5 0 00 15 16 17 18 19 6 1 0 0 00 20 21 22 23 24 3 7 8 20 25 8 8 45 26 27 28 29 30 31 1 3 0 00 32 33 34 35 36

PROBLEM 13.5A (continued) PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Reversing Entries

1 2 2020 3 Jan. 1 Salaries Payable 4 Salaries Expense 5 To reverse adjusting entry (d) made Dec. 31, 2019 6 7 1 Social Security Tax Payable 8 Medicare Tax Payable 9 Payroll Taxes Expense 10 To reverse adjusting entry (e) made Dec. 31, 2019 11 12 1 Interest Income 13 Interest Receivable 14 To reverse adjusting entry (f) made Dec. 31, 2019 15 16

POST. REF.

DEBIT

CREDIT

1 2 6 1 0 0 00 3 6 1 0 0 00 4 5 6 3 7 8 20 7 8 8 45 8 4 6 6 65 9 10 11 1 3 0 00 12 1 3 0 00 13 14 15 16

Analyze: The balance of the Prepaid Rent Account on January 1, 2020, is $14,000 ($21,000 - $7,000).

PROBLEM 13.1B ComputerGeeks.com Income Statement Year Ended December 31, 2019 Operating Revenue Sales Less Sales Returns and Allowances Net Sales Cost of Goods Sold Merchandise Inventory, January 1, 2019 Purchases Freight In Delivered Cost of Purchases Less Purchases Returns and Allowances Purchases Discounts Net Delivered Cost of Purchases Total Merchandise Available for Sale Less Merchandise Inventory, Dec. 31, 2019 Cost of Goods Sold Gross Profit on Sales Operating Expenses Warehouse Expenses Warehouse Wages Expense Warehouse Supplies Expense Depreciation Expense—Warehouse Equipment Total Warehouse Expenses Selling Expenses Salaries Expense—Sales Travel and Entertainment Expense Delivery Wages Expense Depreciation Expense—Delivery Equipment

429 8 0 0 00 3 1 5 0 00 426 6 5 0 00 33 1 2 5 00 179 6 0 0 00 2 2 0 0 00 181 8 0 0 00 2 5 2 0 00 2 3 5 0 00

4 8 7 0 00 176 9 3 0 00 210 0 5 5 00 35 4 0 0 00 174 6 5 5 00 251 9 9 5 00

38 9 0 0 00 1 7 9 0 00 1 4 0 0 00 42 0 9 0 00 67 2 0 0 00 6 3 0 0 00 26 9 0 0 00 2 4 4 0 00

Total Selling Expenses

102 8 4 0 00

PROBLEM 13.1B (continued) ComputerGeeks.com Income Statement (continued) Year Ended December 31, 2019 General and Administrative Expenses Salaries Expense—Office Office Supplies Expense Insurance Expense Utilities Expense Telephone Expense Payroll Taxes Expense Property Taxes Expense Uncollectible Accounts Expense Depreciation Expense—Building Depreciation Expense—Office Equipment Total General and Administrative Expenses Total Operating Expenses Income from Operations Other Income Interest Income Other Expenses Interest Expense Net Nonoperating Expenses Net Income for Year

15 9 1 1 1 5 2 4 1 3 15 2 1 7 1 0 3 0 1 0

0 5 0 0 8 5 5 5 0 2

0 00 0 00 0 00 0 00 0 00 0 00 0 00 0 00 0 00 0 00 44 4 0 0 00 189 3 3 0 00 62 6 6 5 00 4 6 2 00 1 6 0 0 00 1 1 3 8 00 61 5 2 7 00

PROBLEM 13.1B (continued) ComputerGeeks.com Statement of Owner's Equity Year Ended December 31, 2019 Bruce Zaro, Capital, January 1, 2019 Net Income for Year Less Withdrawals for Year Increase in Capital Bruce Zaro, Capital, December 31, 2019

60 9 4 0 00 61 5 2 7 00 24 0 0 0 00 37 5 2 7 00 98 4 6 7 00

PROBLEM 13.1B (continued) ComputerGeeks.com Balance Sheet December 31, 2019 Assets Current Assets Cash Petty Cash Fund Notes Receivable Accounts Receivable Less Allowance for Doubtful Accounts Merchandise Inventory Prepaid Expenses Warehouse Supplies Office Supplies Prepaid Insurance Total Current Assets Plant and Equipment Land Building Less Accumulated Depreciation Warehouse Equipment Less Accumulated Depreciation Delivery Equipment Less Accumulated Depreciation Office Equipment Less Accumulated Depreciation Total Plant and Equipment Total Assets Liability and Owner’s Equity Current Liabilities Notes Payable Accounts Payable Interest Payable Total Current Liabilities

12 2 0 0 00 1 0 0 00 3 2 0 0 00 19 2 5 0 00 2 2 5 0 00

7 7 5 00 7 8 0 00 2 2 0 0 00

17 0 0 0 00 35 4 0 0 00

3 7 5 5 00 71 6 5 5 00

7 6 4 2 00 48 5 0 0 00 13 0 0 0 00 8 0 0 0 00 2 3 0 0 00 16 4 0 0 00 3 6 0 0 00 6 0 0 0 00 2 5 0 0 00

35 5 0 0 00 5 7 0 0 00 12 8 0 0 00 3 5 0 0 00 65 1 4 2 00 136 7 9 7 00

4 0 0 0 00 14 1 4 0 00 2 4 0 00 18 3 8 0 00

PROBLEM 13.1B (continued) ComputerGeeks.com Balance Sheet (continued) December 31, 2019 Long-Term Liabilities Mortgage Payable Loans Payable Total Long-Term Liabilities Total Liabilities

15 9 5 0 00 4 0 0 0 00

Owner’s Equity Bruce Zaro, Capital Total Liabilities and Owner’s Equity

Analyze:

19 9 5 0 00 38 3 3 0 00

98 4 6 7 00 136 7 9 7 00

The gross profit percentage for the period is 59.06% ($251,995 ÷ $426,650).

PROBLEM 13.2B Hog Wild Income Statement Year Ended December 31, 2019 Operating Revenue Sales Less Sales Returns and Allowances Net Sales Cost of Goods Sold Merchandise Inventory, January 1, 2019 Purchases Freight In Delivered Cost of Purchases Less Purchases Returns and Allowances Purchases Discounts Net Delivered Cost of Purchases Total Merchandise Available for Sale Less Merchandise Inventory, Dec. 31, 2019 Cost of Goods Sold Gross Profit on Sales Operating Expenses Warehouse Expenses Warehouse Wages Expense Warehouse Supplies Expense Depreciation Expense—Warehouse Equipment Total Warehouse Expenses Selling Expenses Salaries Expense—Sales Travel Expense Delivery Expense Total Selling Expenses

608 4 1 7 00 9 4 0 0 00 599 0 1 7 00 88 9 8 0 00 230 0 5 0 00 9 6 0 0 00 239 6 5 0 00 6 4 2 0 00 5 7 6 0 00

12 1 8 0 00 227 4 7 0 00 316 4 5 0 00 87 9 1 5 00 228 5 3 5 00 370 4 8 2 00

64 3 0 0 00 4 3 0 0 00 2 4 0 0 00 71 0 0 0 00 78 9 0 0 00 21 0 0 0 00 35 4 0 0 00 135 3 0 0 00

PROBLEM 13.2B (continued) Hog Wild Income Statement (continued) Year Ended December 31, 2019 General and Administrative Expenses Salaries Expense—Office Office Supplies Expense Insurance Expense Utilities Expense Telephone Expense Payroll Taxes Expense Property Taxes Expense Building Repair Expense Uncollectible Accounts Expense Depreciation Expense—Building Depreciation Expense—Office Equipment Total General and Administrative Expenses Total Operating Expenses Income from Operations Other Income Interest Income Other Expenses Interest Expense Net Nonoperating Expenses Net Income for Year

57 5 0 0 00 1 3 6 0 00 9 5 0 0 00 6 9 1 2 00 4 3 7 0 00 19 2 0 0 00 11 7 0 0 00 3 1 0 0 00 2 9 0 0 00 3 2 0 0 00 1 6 8 0 00 121 4 2 2 00 327 7 2 2 00 42 7 6 0 00 7 2 0 00 3 6 0 0 00 2 8 8 0 00 39 8 8 0 00

PROBLEM 13.2B (continued) Hog Wild Statement of Owner's Equity Year Ended December 31, 2019 Nick Henry, Capital, January 1, 2019 Net Income for Year Less Withdrawals for Year Decrease in Capital Nick Henry, Capital, December 31, 2019

198 7 1 0 00 39 8 8 0 00 56 0 0 0 00 16 1 2 0 00 182 5 9 0 00

PROBLEM 13.2B (continued) Hog Wild Balance Sheet December 31, 2019 Assets Current Assets Cash Petty Cash Fund Notes Receivable Accounts Receivable Less Allowance for Doubtful Accounts Merchandise Inventory Interest Receivable Prepaid Expenses Warehouse Supplies Office Supplies Prepaid Insurance Total Current Assets Plant and Equipment Land Building Less Accumulated Depreciation Warehouse Equipment Less Accumulated Depreciation Office Equipment Less Accumulated Depreciation Total Plant and Equipment Total Assets Liability and Owner’s Equity Current Liabilities Notes Payable Accounts Payable Interest Payable Total Current Liabilities

14 3 5 0 00 2 0 0 00 6 0 0 0 00 54 6 0 0 00 5 0 0 0 00

3 7 0 0 00 1 8 0 0 00 6 9 0 0 00

49 6 0 0 00 87 9 1 5 00 2 0 0 00

12 4 0 0 00 170 6 6 5 00

20 4 0 0 00 53 1 0 0 00 8 4 0 0 00 24 0 0 0 00 4 0 0 0 00 12 8 0 0 00 1 8 0 0 00

44 7 0 0 00 20 0 0 0 00 11 0 0 0 00 96 1 0 0 00 266 7 6 5 00

8 0 0 0 00 32 5 0 0 00 1 8 0 0 00 42 3 0 0 00

If this link does not work with a click, then copy the complete Download link and paste link in internet explorer/ﬁrefox/google chrome and get all ﬁles download successfully.

PROBLEM 13.2B (continued) Hog Wild Balance Sheet (continued) December 31, 2019 Long-Term Liabilities Mortgage Payable Notes Payable-Long Term Total Long-Term Liabilities Total Liabilities Owner’s Equity Nick Henry, Capital Total Liabilities and Owner’s Equity

35 8 7 5 00 6 0 0 0 00 41 8 7 5 00 84 1 7 5 00

182 5 9 0 00 266 7 6 5 00

Analyze: The inventory turnover is 2.58 times ($228,535 COGS ÷ $88,448 Avg. Inventory). Average inventory is ($88,980 + $87,915) ÷ 2 = $88,448.

PROBLEM 13.3B The Game Place Income Statement Year Ended December 31, 2019 Operating Revenue Sales Less Sales Discount Net Sales Cost of Goods Sold Merchandise Inventory, January 1, 2019 Purchases Freight In Delivered Cost of Purchases Less Purchases Returns and Allowances Net Delivered Cost of Purchases Total Merchandise Available for Sale Less Merchandise Inventory, December 31, 2019 Cost of Goods Sold Gross Profit on Sales Operating Expenses Rent Expense Wages Expense Payroll Taxes Expense Depreciation Expense, Store Equipment Depreciation Expense, Office Equipment Advertising Expense Supplies Expense Total Operating Expenses Net Income From Operations Other Income Seminar Fee Income Other Expenses Interest Expense Net Nonoperating Income Net Income for Year

163,660.00 180.00 163,480.00 18,500.00 92,500.00 275.00 92,775.00 770.00 92,005.00 110,505.00 21,200.00 89,305.00 74,175.00 26,400.00 18,800.00 1,872.20 4,500.00 1,500.00 320.00 300.00 53,692.20 20,482.80 4,500.00 300.00

4,200.00 24,682.80

PROBLEM 13.3B (continued) The Game Place Statement of Owner's Equity Year Ended December 31, 2019 Matt Huffman, Capital, January 1, 2019 Net Income for the Year Less Withdrawals for the Year Increase in Capital Matt Huffman, Capital, December 31, 2019

43,000.00 24,682.80 18,000.00 6,682.80 49,682.80

The Game Place Balance Sheet December 31, 2019 Assets Current Assets Cash Accounts Receivable Prepaid Advertising Supplies Merchandise Inventory Total Current Assets Plant and Equipment Store Equipment 30,000.00 Less Accumulated Depreciation 7,500.00 Office Equipment 4,800.00 Less Accumulated Depreciation 3,000.00 Total Plant and Equipment Total Assets Liabilities and Owner's Equity Current Liabilities Notes Payable, due 2020 Accounts Payable Wages Payable Social Security Tax Payable Medicare Tax Payable Unearned Seminar Fees Interest Payable Total Current Liabilities Owner's Equity Matt Huffman, Capital Total Liabilities and Owner's Equity

34,465.00 1,669.00 160.00 125.00 21,200.00 57,619.00

22,500.00 1,800.00 24,300.00 81,919.00

22,500.00 5,725.00 800.00 49.60 11.60 3,000.00 150.00 32,236.20 49,682.80 81,919.00

PROBLEM 13.3B (continued) Analyze: The amount of working capital is $25,382.80, calculated as follows: Current assets 57,619.00 Less current liabilities 32,236.20 Working capital 25,382.80 PROBLEM 13.4B PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Adjusting Entries

1 2 2019 (Adjustment a) 3 Dec. 31 Income Summary 4 Merchandise Inventory 5 To transfer beginning inventory 6 7 (Adjustment b) 8 31 Merchandise Inventory 9 Income Summary 10 To record ending inventory 11 12 (Adjustment c) 13 31 Uncollectible Accounts Expense 14 Allowance for Doubtful Accounts 15 To record estimated loss for 2019, based 16 on 0.8% of net credit sales $160,000 17 18 (Adjustment d) 19 31 Supplies Expense 20 Supplies 21 To record supplies used during 2019 22 23 (Adjustment e) 24 31 Insurance Expense 25 Prepaid Insurance 26 To record expired insurance on one-year policy 27 28 (Adjustment f) 29 31 Depreciation Expense—Store Equipment 30 Accumulated Depreciation—Store Equipment 31 To record depreciation for 2019 (schedule on file) 32

POST. REF.

DEBIT

CREDIT

1 2 16 9 8 5 00 3 16 9 8 5 00 4 5 6 7 15 8 4 0 00 8 15 8 4 0 00 9 10 11 12 1 2 8 0 00 13 1 2 8 0 00 14 15 16 17 18 5 0 5 00 19 5 0 5 00 20 21 22 23 1 2 0 0 00 24 1 2 0 0 00 25 26 27 28 1 0 0 0 00 29 1 0 0 0 00 30 31 32

PROBLEM 13.4B (continued) GENERAL JOURNAL

DATE

DESCRIPTION Adjusting Entries

1 2 2019 (Adjustment g) 3 Dec. 31 Depreciation Expense—Store Fixtures 4 Accumulated Depreciation—Store Fixtures 5 To record depreciation for 2019 (schedule on file) 6 7 (Adjustment h) 8 31 Interest Expense 9 Interest Payable 10 To record accrued interest on six-month, $4,000, 11 9% trade note payable, dated October 1, 2019 12 $4,000 × 0.09 × 3/12 = $90 13 14 (Adjustment i) 15 31 Salaries Expense 16 Salaries Payable 17 To record accrued salaries 18 19 (Adjustment j) 20 31 Payroll Taxes Expense 21 Social Security Tax Payable 22 Medicare Tax Payable 23 To record accrued payroll taxes on accrued 24 salaries (Social Security = 0.062 × $1,450; 25 Medicare = 0.0145 × $1450) 26 27 (Adjustment k) 28 31 Payroll Taxes Expense 29 Federal Unemployment Tax Payable 30 State Unemployment Tax Payable 31 To record unemployment taxes on accrued 32 salaries (federal = .006 × $1,450; 33 state = .05 × $1,450) 34 35 36 37

PAGE POST. REF.

DEBIT

CREDIT

1 2 2 0 5 0 00 3 2 0 5 0 00 4 5 6 7 9 0 00 8 9 0 00 9 10 11 12 13 14 1 4 5 0 00 15 1 4 5 0 00 16 17 18 19 1 1 0 93 20 8 9 90 21 2 1 03 22 23 24 25 26 27 8 1 20 28 8 70 29 7 2 50 30 31 32 33 34 35 36 37

PROBLEM 13.4B (continued) PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Closing Entries

1 2 2019 3 Dec. 31 Sales 4 Purchases Returns and Allowances 5 Income Summary 6 7 31 Income Summary 8 Sales Returns and Allowances 9 Purchases 10 Rent Expenses 11 Telephone Expense 12 Salaries Expense 13 Payroll Taxes Expense 14 Supplies Expense 15 Insurance Expense 16 Depreciation Expense—Office Equipment 17 Depreciation Expense—Store Equipment 18 Uncollectible Accounts Expense 19 Interest Expense 20 21 31 Income Summary 22 Preston Allen, Capital 23 24 31 Preston Allen, Capital 25 Preston Allen, Drawing 26 27 28 29

POST. REF.

DEBIT

CREDIT

236 5 6 0 00 2 0 0 0 00 238 5 6 0 00 237 3 6 7 13 6 0 0 0 00 160 0 0 0 00 18 0 0 0 00 2 4 0 0 00 41 4 5 0 00 3 3 9 2 13 5 0 5 00 1 2 0 0 00 1 0 0 0 00 2 0 5 0 00 1 2 8 0 00 9 0 00 4 7 87 4 7 87 8 0 0 0 00 8 0 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

PROBLEM 13.4B (continued) PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Reversing Entries

POST. REF.

DEBIT

CREDIT

1 2 3 9 0 00 9 0 00 4 5 6 7 1 4 5 0 00 1 4 5 0 00 8 9 10 11 8 9 90 12 2 1 030 1 1 0 93 13 14 15 16 8 70 17 7 2 50 8 1 20 18 19 20 21 22 23

Analyze: The following entry would be required: PAGE

GENERAL JOURNAL

1 2 3 4 5 6

DATE DESCRIPTION 2020 Jan. 4 Salaries Payable Salaries Expense Cash To record the payment of salaries (ignoring payroll taxes)

POST. REF.

DEBIT

CREDIT

1 4 5 0 00 1 1 5 0 00 2 6 0 0 00

1 2 3 4 5 6

PROBLEM 13.5B PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Adjusting Entries

1 2 2019 (Adjustment a) 3 Dec. 31 Advertising Expense 4 Prepaid Advertising 5 To record expired advertising on $18,600, 6 6 month contract paid August 1, 2019 7 8 (Adjustment b) 9 31 Supplies Expense 10 Supplies 11 To record supplies used in 2019 12 13 (Adjustment c) 14 31 Depreciation Expense—Store Equipment 15 Accumulated Depreciation—Equipment 16 To record depreciation for 2019 17 18 (Adjustment d) 19 31 Salaries Expense 20 Salaries Payable 21 To record accrued salaries 22 23 31 (Adjustment e) 24 Payroll Taxes Expense 25 Social Security Tax Payable 26 Medicare Tax Payable 27 To record accrued payroll taxes on accrued 28 salaries 29 30 (Adjustment f) 31 31 Interest Receivable 32 Interest Income 33 To record accrued interest on 5-month, 34 6%, $6,000 note receivable dated 35 December 1, 2019 36

POST. REF.

DEBIT

CREDIT

1 2 15 5 0 0 00 3 15 5 0 0 00 4 5 6 7 8 8 6 4 0 00 9 8 6 4 0 00 10 11 12 13 12 2 5 0 00 14 12 2 5 0 00 15 16 17 18 8 8 0 0 00 19 8 8 0 0 00 20 21 22 23 6 7 3 20 24 5 4 5 60 25 1 2 7 60 26 27 28 29 30 3 0 00 31 3 0 00 32 33 34 35 36

PROBLEM 13.5B (continued) PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Reversing Entries

POST. REF.

DEBIT

8 8 0 0 00

5 4 5 60 1 2 7 60

3 0 00

CREDIT 1 2 3 8 8 0 0 00 4 5 6 7 8 6 7 3 20 9 10 11 12 3 0 00 13 14 15 16

Analyze: The balance of the Prepaid Advertising Account on December 31 is $3,100 ($18,600 - $15,500).

CRITICAL THINKING PROBLEM 13.1 Programs Plus Worksheet Year Ending December 31, 2019 ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Allowance for Doubtful Accounts 4 Merchandise Inventory 5 Supplies 6 Prepaid Insurance 7 Equipment 8 Accumulated Depreciation—Equip. 9 Notes Payable 10 Accounts Payable 11 Social Security Tax Payable 12 Medicare Tax Payable 13 Salaries Payable 14 Interest Payable 15 Yasser Tousson, Capital 16 Yasser Tousson, Drawing 17 Income Summary 18 Sales 19 Sales Returns and Allowances 20 Purchases 21 Freight In 22 Purchases Returns and Allowances 23 Purchases Discounts 24 Rent Expense 25 Telephone Expense 26 Salaries Expense 27 Payroll Taxes Expense 28 Interest Expense 29 Supplies Expense 30 Insurance Expense 31 Depreciation Expense—Equipment 32 Uncollectible Accounts Expense 33 Totals 34 Net Income 35 36

TRIAL BALANCE ADJUSTMENTS DEBIT CREDIT DEBIT CREDIT 15 2 8 0 00 26 6 0 0 00 9 5 00 (c) 1 2 2 5 00 62 3 7 5 00 (b) 67 8 5 0 00 (a) 62 3 7 5 00 6 7 4 0 00 (d) 5 7 2 0 00 2 3 8 0 00 (e) 1 1 9 0 00 34 0 0 0 00 10 1 0 0 00 (f) 5 6 0 0 00 7 2 6 4 00 6 5 0 0 00 5 6 0 00 (i) 1 3 0 20 1 3 0 00 (i) 3 0 45 (h) 2 1 0 0 00 (g) 3 2 5 00 93 6 2 0 00 50 0 0 0 00 (a) 62 3 7 5 00 (b) 67 8 5 0 00 514 9 8 0 00 9 6 0 0 00 319 4 3 0 00 3 6 0 0 00 7 1 4 5 00 5 7 6 0 00 14 5 0 0 00 2 1 6 4 00 92 0 0 0 00 (h) 2 1 0 0 00 7 3 0 0 00 (i) 1 6 0 65 1 8 5 00 (g) 3 2 5 00 (d) 5 7 2 0 00 (e) 1 1 9 0 00 (f) 5 6 0 0 00 (c) 1 2 2 5 00 646 1 5 4 00 646 1 5 4 00 146 5 4 5 65 146 5 4 5 65

CRITICAL THINKING PROBLEM 13.1 (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 15 2 8 0 00 26 6 0 0 00 1 3 2 0 00 67 8 5 0 00 1 0 2 0 00 1 1 9 0 00 34 0 0 0 00 15 7 0 0 00 7 2 6 4 00 6 5 0 0 00 6 9 0 20 1 6 0 45 2 1 0 0 00 3 2 5 00 93 6 2 0 00 50 0 0 0 00 62 3 7 5 00 67 8 5 0 00 514 9 8 0 00 9 6 0 0 00 319 4 3 0 00 3 6 0 0 00 7 1 4 5 00 5 7 6 0 00 14 5 0 0 00 2 1 6 4 00 94 1 0 0 00 7 4 6 0 65 5 1 0 00 5 7 2 0 00 1 1 9 0 00 5 6 0 0 00 1 2 2 5 00 723 4 1 4 65 723 4 1 4 65

INCOME STATEMENT DEBIT CREDIT

62 3 7 5 00

67 8 5 0 00 514 9 8 0 00

9 6 0 0 00 319 4 3 0 00 3 6 0 0 00 7 1 4 5 00 5 7 6 0 00 14 5 0 0 00 2 1 6 4 00 94 1 0 0 00 7 4 6 0 65 5 1 0 00 5 7 2 0 00 1 1 9 0 00 5 6 0 0 00 1 2 2 5 00 527 4 7 4 65 68 2 6 0 35 595 7 3 5 00

595 7 3 5 00 595 7 3 5 00

BALANCE SHEET DEBIT CREDIT 15 2 8 0 00 1 26 6 0 0 00 2 1 3 2 0 00 3 67 8 5 0 00 4 1 0 2 0 00 5 1 1 9 0 00 6 34 0 0 0 00 7 15 7 0 0 00 8 7 2 6 4 00 9 6 5 0 0 00 10 6 9 0 20 11 1 6 0 45 12 2 1 0 0 00 13 3 2 5 00 14 93 6 2 0 00 15 50 0 0 0 00 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 195 9 4 0 00 127 6 7 9 65 33 68 2 6 0 35 34 195 9 4 0 00 195 9 4 0 00 35

CRITICAL THINKING PROBLEM 13.1 (continued) Programs Plus Income Statement Year Ended December 31, 2019 Operating Revenue Sales Less Sales Returns and Allowances Net Sales Cost of Goods Sold Merchandise Inventory, January 1, 2019 Purchases Freight In Delivered Cost of Purchases Less Purchases Returns and Allowances Purchases Discounts Net Delivered Cost of Purchases Total Merchandise Available for Sale Less Merchandise Inventory, Dec. 31, 2019 Cost of Goods Sold Gross Profit on Sales Operating Expenses Rent Expense Telephone Expense Salaries Expense Payroll Taxes Expense Supplies Expense Insurance Expense Depreciation Expense—Equipment Uncollectible Accounts Expense Total Operating Expenses Income from Operations Other Expenses Interest Expense

514 9 8 0 00 9 6 0 0 00 505 3 8 0 00 62 3 7 5 00 319 4 3 0 00 3 6 0 0 00 323 0 3 0 00 7 1 4 5 00 5 7 6 0 00

12 9 0 5 00 310 1 2 5 00 372 5 0 0 00 67 8 5 0 00 304 6 5 0 00 200 7 3 0 00 14 5 0 0 00 2 1 6 4 00 94 1 0 0 00 7 4 6 0 65 5 7 2 0 00 1 1 9 0 00 5 6 0 0 00 1 2 2 5 00 131 9 5 9 65 68 7 7 0 35 5 1 0 00

Net Income for Year

68 2 6 0 35

CRITICAL THINKING PROBLEM 13.1 (continued) Programs Plus Statement of Owner's Equity Year Ended December 31, 2019 Yasser Tousson, January 1, 2019 Net Income for Year Less Withdrawals for Year Increase in Capital Yasser Tousson, Capital, December 31, 2019

93 6 2 0 00 68 2 6 0 35 50 0 0 0 00 18 2 6 0 35 111 8 8 0 35

Programs Plus Balance Sheet December 31, 2019 Assets Current Assets Cash Accounts Receivable Less Allowance for Doubtful Accounts Merchandise Inventory Prepaid Expenses Supplies Prepaid Insurance Total Current Assets Plant and Equipment Equipment Less Accumulated Depreciation Total Plant and Equipment Total Assets Liability and Owner’s Equity Current Liabilities Notes Payable Accounts Payable Interest Payable Social Security Tax Payable Medicare Tax Payable Salaries Payable Total Current Liabilities Owner’s Equity Yasser Tousson, Capital Total Liabilities and Owner’s Equity

15 2 8 0 00 26 6 0 0 00 1 3 2 0 00

1 0 2 0 00 1 1 9 0 00

34 0 0 0 00 15 7 0 0 00

25 2 8 0 00 67 8 5 0 00

2 2 1 0 00 110 6 2 0 00

18 3 0 0 00 18 3 0 0 00 128 9 2 0 00

7 2 6 4 00 6 5 0 0 00 3 2 5 00 6 9 0 20 1 6 0 45 2 1 0 0 00 17 0 3 9 65 111 8 8 0 35 128 9 2 0 00

CRITICAL THINKING PROBLEM 13.1 (continued) GENERAL JOURNAL

DATE

DESCRIPTION Adjusting Entries

1 2 2019 (Adjustment a) 3 Dec. 31 Income Summary 4 Merchandise Inventory 5 To transfer beginning inventory 6 7 (Adjustment b) 8 31 Merchandise Inventory 9 Income Summary 10 To record ending inventory 11 12 (Adjustment c) 13 31 Uncollectible Accounts Expense 14 Allowance for Doubtful Accounts 15 To record estimated loss for 2019, based on 0.5% 16 of net credit sales of $245,000 17 18 (Adjustment d) 19 31 Supplies Expense 20 Supplies 21 To record supplies used during 2019 22 23 (Adjustment e) 24 31 Insurance Expense 25 Prepaid Insurance 26 To record expired insurance 27 28 (Adjustment f) 29 31 Depreciation Expense—Equipment 30 Accumulated Depreciation—Equipment 31 To record depreciation for 2019 (schedule on file) 32

PAGE POST. REF.

DEBIT

CREDIT

1 2 62 3 7 5 00 3 62 3 7 5 00 4 5 6 7 67 8 5 0 00 8 67 8 5 0 00 9 10 11 12 1 2 2 5 00 13 1 2 2 5 00 14 15 16 17 18 5 7 2 0 00 19 5 7 2 0 00 20 21 22 23 1 1 9 0 00 24 1 1 9 0 00 25 26 27 28 5 6 0 0 00 29 5 6 0 0 00 30 31 32

CRITICAL THINKING PROBLEM 13.1 (continued) PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Adjusting Entries

1 2 2019 (Adjustment g) 3 Dec. 31 Interest Expense 4 Interest Payable 5 To record accrued interest on notes payable 6 7 (Adjustment h) 8 31 Salaries Expense 9 Salaries Payable 10 To record accrued salaries 11 12 (Adjustment i) 13 31 Payroll Taxes Expense 14 Social Security Tax Payable 15 Medicare Tax Payable 16 To record accrued payroll taxes on accrued 17 salaries for December: 18 Social Security tax = 6.2% × $2,100; 19 Medicare = 1.45% × $2,100 20 21 22 23

POST. REF.

DEBIT

CREDIT

3 2 5 00 3 2 5 00

2 1 0 0 00 2 1 0 0 00

1 6 0 65 1 3 0 20 3 0 45

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

CRITICAL THINKING PROBLEM 13.1 (continued) PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Closing Entries

1 2 2019 3 Dec. 31 Sales 4 Purchase Returns and Allowances 5 Purchase Discounts 6 Income Summary 7 8 31 Income Summary 9 Sales Returns and Allowances 10 Purchases 11 Freight In 12 Rent Expenses 13 Telephone Expense 14 Salaries Expense 15 Payroll Taxes Expense 16 Supplies Expense 17 Insurance Expense 18 Depreciation Expense—Equipment 19 Uncollectible Accounts Expense 20 Interest Expense 21 22 31 Income Summary 23 Yasser Tousson, Capital 24 25 31 Yasser Tousson, Capital 26 Yasser Tousson, Drawing 27 28 29

POST. REF.

DEBIT

CREDIT

514 9 8 0 00 7 1 4 5 00 5 7 6 0 00 527 8 8 5 00 465 0 9 9 65 9 6 0 0 00 319 4 3 0 00 3 6 0 0 00 14 5 0 0 00 2 1 6 4 00 94 1 0 0 00 7 4 6 0 65 5 7 2 0 00 1 1 9 0 00 5 6 0 0 00 1 2 2 5 00 5 1 0 00 68 2 6 0 35 68 2 6 0 35 50 0 0 0 00 50 0 0 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

CRITICAL THINKING PROBLEM 13.1 (continued) GENERAL JOURNAL

DATE

DESCRIPTION Reversing Entries

1 2 2020 3 Jan. 1 Interest Payable 4 Interest Expense 5 To reverse adjusting entry (g) made Dec. 31, 2019 6 7 1 Salaries Payable 8 Salaries Expense 9 To reverse adjusting entry (h) made Dec. 31, 2019 10 11 1 Social Security Tax Payable 12 Medicare Tax Payable 13 Payroll Taxes Expense 14 To reverse adjusting entry (i) made Dec. 31, 2019 15 16 17 18 19 20 21 22 23 24 25

PAGE POST. REF.

DEBIT

CREDIT

1 2 3 2 5 00 3 3 2 5 00 4 5 6 2 1 0 0 00 7 2 1 0 0 00 8 9 10 1 3 0 20 11 3 0 450 12 1 6 0 65 13 14 15 16 17 18 19 20 21 22 23 24 25

Analyze: The owner’s capital account increased by 19.5% ($111,880.35 - $93,620.00) ÷ $93,620 = 19.5%.

CRITICAL THINKING PROBLEM 13.2 Newport Jewelry Balance Sheet December 31, 2018 Assets Current Assets Cash Accounts Receivable Inventory Prepaid Expenses Total Current Assets Plant and Equipment Store Fixtures and Equipment Total Assets Liability and Owner’s Equity Current Liabilities Accounts Payable Salaries Payable Total Current Liabilities Long-Term Liabilities Notes Payable Total Liabilities Owner’s Equity Teagan Fitzgerald, Capital Total Liabilities and Owner’s Equity

150 0 0 0 00 45 0 0 0 00 105 0 0 0 00 6 0 0 0 00 306 0 0 0 00 180 0 0 0 00 486 0 0 0 00

132 0 0 0 00 18 0 0 0 00 150 0 0 0 00 90 0 0 0 00 240 0 0 0 00

246 0 0 0 00 486 0 0 0 00

CRITICAL THINKING PROBLEM 13.2 (continued) Newport Jewelry Balance Sheet December 31, 2019 Assets Current Assets Cash Accounts Receivable Inventory Prepaid Expenses Total Current Assets Plant and Equipment Store Fixtures and Equipment Total Assets Liability and Owner’s Equity Current Liabilities Accounts Payable Salaries Payable Total Current Liabilities Long-Term Liabilities Notes Payable Total Liabilities Owner’s Equity Teagan Fitzgerald, Capital Total Liabilities and Owner’s Equity

30 0 0 0 00 91 5 0 0 00 234 0 0 0 00 9 0 0 0 00 364 5 0 0 00 390 0 0 0 00 754 5 0 0 00

171 0 0 0 00 19 5 0 0 00 190 5 0 0 00 240 0 0 0 00 430 5 0 0 00

324 0 0 0 00 754 5 0 0 00

NOTE TO INSTRUCTOR: While detailed financial statement analysis is not presented in this chapter, we have included this problem to show students how classified statements provide more useful financial information than non-classified statements. 2. From 2018 to 2019, Newport Jewelry’s cash decreased by $120,000. At the same time, current liabilities increased from $150,000 to $190,500, or by $40,500. In spite of these changes, the ratio of current assets to current liabilities is still close to 2:1, a widely-used rule of thumb for this ratio as satisfactory. One strong factor is the growth in owner’s equity, resulting from profits. Newport Jewelry should be able to meet its obligations. However one development to be examined further is the large growth in inventory. 3. A classified balance sheet permits the reader to make more meaningful comparisons of balance sheet accounts. This allows the reader to make better decisions regarding the company's financial strength and financial future.

SOLUTIONS TO BUSINESS CONNECTIONS Managerial Focus: 1. Timely receipt of financial data facilitates effective management and planning. 2. Increase in accounts receivable resulting from slow collections from customers or an unwarranted growth in inventories; payment of long-term debt or purchase of property. 3. May reflect that excess inventory has become obsolete or soiled. Growth in inventory ties up funds. 4. Reveal trends or changes in specific items that need to be investigated. 5. Yes. This indicates a strong possibility that there will be inadequate funds to cover the liabilities as they come due. 6. Yes, compare increase in selling expenses to the increase in sales. Investigate levels of sales returns and allowances. Review each selling expense account for accuracy. 7. Reveals variances out-of-line with industry averages; areas where costs should be controlled. Ethical Dilemma: You should follow the generally accepted accounting principles (GAAP) and do the proper adjusting entry. You might suggest the owner seek different forms of financing that would not require maintenance of a 1.5 current ratio. Additionally, you can offer to meet with the banker and try to obtain a waiver of the current ratio current ratio requirement for the current period. Financial Statement Analysis: 1. 2014: 1.26 ($1,416.2 ÷ $1,122.0) 2013: 1.29 ($1,370.2 ÷ $1,063.1) 2. The current ratio declined from 1.29 in 2013 to 1.26 in 2014. 3. 40.8% gross profit percentage ($1,730.2 ÷ $4,243.2) Teamwork: Answers will vary depending on the year. Internet Connection: Answers will vary depending on the corporation.

MINI-PRACTICE SET 2 MERCHANDISING BUSINESS ACCOUNTING CYCLE PAGE

SALES JOURNAL

DATE

1 2019 2 Oct. 3 3 9 4 15 5 24 6 29 7 31 8 9 10 11 12 13 14

SALES POST. SLIP NO. CUSTOMER’S NAME REF.

241 242 243 244 245

Dimitri Sayegh Emma Maldonado James Helmer Megan Greening Emily Tran Totals

✔ ✔ ✔ ✔ ✔

ACCOUNTS RECEIVABLE DEBIT

SALES TAX PAYABLE CREDIT

SALES CREDIT

2 6 0 4 00 2 1 5 2 50 2 0 3 7 00 8 6 1 00 3 2 7 6 00 10 9 3 0 50 ( 1 11)

1 2 4 00 1 0 2 50 9 7 00 4 1 00 1 5 6 00 5 2 0 50 ( 2 3 1)

2 4 2 0 1 9 8 3 1 10 4 ( 4

PURCHASED FROM

2019 Oct. 11 A Fashion Statement 25 Classy Threads 30 Today’s Woman 31

INVOICE INVOICE NUMBER DATE

9422 3418 5821

8 0 00 5 0 00 4 0 00 2 0 00 2 0 00 1 0 00 0 1)

PURCHASES JOURNAL

DATE

TERMS

10/8/16 2/10,n/30 10/23/16 2/10,n/30 10/26/16 1/10,n/30

POST. REF.

✔ ✔ ✔

PURCHASES DR./ACCOUNTS PAYABLE CREDIT

4 8 2 0 00 3 3 8 0 00 4 0 2 0 00 12 2 2 0 00 (5 0 1/ 2 03)

1 2 3 4 5 6 7 8 9 10 11 12 13 14

MINI-PRACTICE SET 2 (continued) CASH RECEIPTS JOURNAL

DATE DESCRIPTION 2019 Oct. 2 Megan Greening 5 Emily Tran 6 Cash sales 8 James Helmer 13 Cash sales 16 Dimitri Sayegh 20 Cash sales 27 Cash sales 31 Cash sales 31 Totals

POST. REF. ✔ ✔ ✔ ✔

ACCOUNTS SALES TAX RECEIVABLE PAYABLE CREDIT CREDIT

SALES CREDIT

5 2 0 00 1 7 0 0 00 9 3 0 00

18 6 0 0 00

6 1 5 00

12 3 0 0 00

6 7 5 00 7 1 2 00 8 5 00 3 0 1 7 00 (231)

13 5 0 0 00 14 2 4 0 00 1 7 0 0 00 60 3 4 0 00 (401)

8 3 2 00 5 1 0 00

3 5 6 2 00 ( 1 11)

PAGE

L OTHER ACCOUNTS CREDIT POST. REF. ACCOUNT NAME

CASH DEBIT 5 2 0 00 1 7 0 0 00 19 5 3 0 00 8 3 2 00 12 9 1 5 00 5 1 0 00 14 1 7 5 00 14 9 5 2 00 1 7 8 5 00 66 9 1 9 00 (101)

MINI-PRACTICE SET 2 (continued) CASH PAYMENTS JOURNAL OTHER ACCOUNTS DEBIT

DATE

CK. NO.

DESCRIPTION

2019 Oct. 1 1 2 2 4 4 5 8

601 602 603 604 605 606 607 608

City Properties Cable Station KOTU State Tax Com. A Fashion Statement BMX Supply Co. Today’s Woman Classy Threads U.S. Treasury

10 609 The City Daily 12 610 Ace Freight Co. 16 611 Acme Jobbers 16 612 A Fashion Statement 18 613 Teresa Lojay 22 614 City Utilities 26 615 Regional Telephone 31 616-619 (Employees) 31 620 Handy Janitors 31

ACCOUNTS POST. PAYABLE REF. DEBIT

✔ ✔ ✔

✔

POST. REF.

AMOUNT

Rent Expense Prepaid Advertising Sales Tax Payable

629 135 231

420 480 17 8 2

Supplies

131

105

Social Security Tax Payable Medicare Tax Payable Employee Income Tax Payable Advertising Expense Freight In Purchases

221 222 223 611 502 501

70 16 102 144 37 642

Teresa Lojay, Drawing Utilities Expense Telephone Expense Salaries Payable Janitorial Services Expense

302 644 638 229 623

720 111 78 891 47 56 4 7 (✕

ACCOUNT NAME

7 8 3 0 00 8 7 7 0 00 1 7 0 0 00

4 8 2 0 00

23 1 2 0 00 (203)

PAGE

BIT

AMOUNT

PURCHASES DISCOUNT CREDIT

0 00 0 00 0 00 1 5 6 60 0 00 1 7 5 40 3 4 00 2 00 2 00 0 00 5 00 5 00 0 00 9 6 40 0 00 2 00 0 00 6 00 5 00 7 00 4 6 2 40 ) (50 4)

CASH CREDIT

4 2 0 0 00 4 8 0 0 00 17 8 2 0 00 7 6 7 3 40 1 0 5 0 00 8 5 9 4 60 1 6 6 6 00 7 0 2 00 1 6 2 00 1 0 2 0 00 1 4 4 5 00 3 7 5 00 6 4 2 0 00 4 7 2 3 60 7 2 0 0 00 1 1 1 2 00 7 8 0 00 8 9 1 6 00 4 7 5 00 79 1 3 4 60 (101)

MINI-PRACTICE SET 2 (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 2019 2 Oct. 5 Sales Returns and Allowances 3 Sales Tax Payable 4 Accounts Receivable—Dimitri Sayegh 5 Issued Credit Memo 18 for damaged 6 merchandise originally sold on Sales 7 Slip 241, October 3 8 9 29 Accounts Payable—Classy Threads 10 Purchases Returns and Allowances 11 Received Credit Memo 175 for defective 12 goods returned; original purchase made 13 on Invoice 3418, October 25 14 15 29 Salaries Expense 16 Salaries Payable 17 Social Security Tax Payable 18 Medicare Tax Payable 19 Employee Income Tax Payable 20 To record October payroll 21 22 29 Payroll Taxes Expense 23 Social Security Tax Payable 24 Medicare Tax Payable 25 Federal Unemployment Tax Payable 26 State Unemployment Tax Payable 27 To record October payroll taxes 28 29 30 31 32 33 34 35 36 37 38

POST. REF.

DEBIT

402 231 111

6 0 0 00 3 0 00

203 503

4 3 0 00

632 229 221 222 223

10 8 0 0 00

626 221 222 225 227

1 5 6 6 00

CREDIT

6 3 0 00

4 3 0 00

8 9 1 6 00 7 0 2 00 1 6 2 00 1 0 2 0 00

7 0 2 00 1 6 2 00 1 1 8 00 5 8 4 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38

MINI-PRACTICE SET 2 (continued) PAGE

GENERAL JOURNAL

DATE

DESCRIPTION Adjusting Entries

1 2 2019 (Adjustment a) 3 Oct. 31 Uncollectible Accounts Expense 4 Allowance for Doubtful Accounts 5 To record estimated loss from uncollectible 6 accounts, based on 1% of net credit sales 7 8 (Adjustment b) 9 31 Supplies Expense 10 Supplies 11 To record supplies used 12 13 (Adjustment c) 14 31 Insurance Expense 15 Prepaid Insurance 16 To record expired insurance 17 18 (Adjustment d) 19 31 Advertising Expense 20 Prepaid Advertising 21 To record expired advertising 22 23 (Adjustment e) 24 31 Depreciation Expense—Equipment 25 Accumulated Depreciation—Equipment 26 To record depreciation for month 27 28 (Adjustment f) 29 31 Income Summary 30 Merchandise Inventory 31 To transfer beginning inventory 32 33 (Adjustment g) 34 31 Merchandise Inventory 35 Income Summary 36 To record ending inventory 37

POST. REF.

DEBIT

620 112

9 8 10

635 131

1 9 1 0 00

617 133

1 4 0 0 00

611 135

1 6 0 0 00

614 142

1 1 7 5 00

399 121

88 9 9 6 00

121 399

81 2 6 0 00

CREDIT

9 8 10

1 9 1 0 00

1 4 0 0 00

1 6 0 0 00

1 1 7 5 00

88 9 9 6 00

81 2 6 0 00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37

MINI-PRACTICE SET 2 (continued) PAGE

GENERAL JOURNAL

DATE DESCRIPTION 1 Closing Entries 2 2019 3 Oct. 31 Sales 4 Purchases Returns and Allowances 5 Purchases Discounts 6 Income Summary 7 8 31 Income Summary 9 Sales Returns and Allowances 10 Purchases 11 Freight In 12 Advertising Expense 13 Depreciation Expense—Equipment 14 Insurance Expense 15 Uncollectible Accounts Expense 16 Janitorial Services Expense 17 Payroll Taxes Expense 18 Rent Expense 19 Salaries Expense 20 Supplies Expense 21 Telephone Expense 22 Utilities Expense 23 24 31 Income Summary 25 Teresa Lojay, Capital 26 27 31 Teresa Lojay, Capital 28 Teresa Lojay, Drawing 29 30 31 32 33 34 35 36 37

POST. REF.

401 503 504 399 399 402 501 502 611 614 617 620 623 626 629 632 635 638 644 399 301 301 302

DEBIT

CREDIT

1 2 70 7 5 0 00 3 4 3 0 00 4 4 6 2 40 5 71 6 4 2 40 6 7 46 1 7 6 10 8 6 0 0 00 9 18 6 4 0 00 10 3 7 5 00 11 3 0 4 5 00 12 1 1 7 5 00 13 1 4 0 0 00 14 9 8 10 15 4 7 5 00 16 1 5 6 6 00 17 4 2 0 0 00 18 10 8 0 0 00 19 1 9 1 0 00 20 7 8 0 00 21 1 1 1 2 00 22 23 17 7 3 0 30 24 17 7 3 0 30 25 26 7 2 0 0 00 27 7 2 0 0 00 28 29 30 31 32 33 34 35 36 37

MINI-PRACTICE SET 2 (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2019 Oct. 1 Balance 31 31

ACCOUNT

✔ CR10 CP10

DEBIT

CREDIT

66 9 1 9 00 79 1 3 4 60

POST. REF. ✔ J16 S10 CR10

DEBIT

CREDIT

6 3 0 00 10 9 3 0 50 3 5 6 2 00

POST. REF.

DEBIT

✔ J17

POST. REF. ✔ J17 J17

6 2 1 0 00 5 5 8 0 00 16 5 1 0 50 12 9 4 8 50

CREDIT

88 9 9 6 00 81 2 6 0 00

112

BALANCE DEBIT CREDIT 4 2 0 00 5 1 8 10

ACCOUNT NO.

DEBIT

111

BALANCE DEBIT CREDIT

9 8 10

Merchandise Inventory

DATE DESCRIPTION 2019 Oct. 1 Balance 31 Adjusting 31 Adjusting

59 8 0 0 00 126 7 1 9 00 47 5 8 4 40

ACCOUNT NO.

CREDIT

101

BALANCE DEBIT CREDIT

ACCOUNT NO.

Allowance for Doubtful Accounts

DATE DESCRIPTION 2019 Oct. 1 Balance 31 Adjusting

ACCOUNT

POST. REF.

Accounts Receivable

DATE DESCRIPTION 2019 Oct. 1 Balance 5 Credit Memo 18 31 31

ACCOUNT

ACCOUNT NO.

Cash

121

BALANCE DEBIT CREDIT 88 9 9 6 00 ─ 0─ 81 2 6 0 00

MINI-PRACTICE SET 2 (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2019 Oct. 1 Balance 4 31 Adjusting

ACCOUNT

✔ CP10 J17

DEBIT

CREDIT

1 9 1 0 00

4 1 0 0 00 5 1 5 0 00 3 2 4 0 00

1 0 5 0 00

ACCOUNT NO. POST. REF.

DEBIT

✔ J17

CP10 J17

DEBIT

CREDIT

1 4 0 0 00

8 4 0 0 00 7 0 0 0 00

BALANCE DEBIT CREDIT

1 6 0 0 00

4 8 0 0 00 3 2 0 0 00

4 8 0 0 00

ACCOUNT NO. POST. REF. ✔

DEBIT

135

CREDIT

Equipment

DATE DESCRIPTION 2019 Oct. 1 Balance

133

BALANCE DEBIT CREDIT

ACCOUNT NO. POST. REF.

131

BALANCE DEBIT CREDIT

Prepaid Advertising

DATE DESCRIPTION 2019 Oct. 1 31 Adjusting

ACCOUNT

POST. REF.

Prepaid Insurance

DATE DESCRIPTION 2019 Oct. 1 Balance 31 Adjusting

ACCOUNT

ACCOUNT NO.

Supplies

CREDIT

141

BALANCE DEBIT CREDIT 83 0 0 0 00

MINI-PRACTICE SET 2 (continued) GENERAL LEDGER ACCOUNT

Accumulated Depreciation—Equipment

DATE DESCRIPTION 2019 Oct. 1 Balance 31 Adjusting

ACCOUNT

✔ J17

CREDIT

1 1 7 5 00

POST. REF.

DEBIT

✔ J16 4 3 0 00 P10 CP10 23 1 2 0 00

CREDIT

12 2 2 0 00

POST. REF. ✔ CP10 J16 J16

CREDIT

7 0 2 00 7 0 2 00 7 0 2 00

POST. REF. ✔ CP10 J16 J16

DEBIT

CREDIT

1 6 2 00 1 6 2 00 1 6 2 00

203

BALANCE DEBIT CREDIT 18 3 0 0 00 17 8 7 0 00 30 0 9 0 00 6 9 7 0 00

221

BALANCE DEBIT CREDIT 7 0 2 00 ─ 0─ 7 0 2 00 1 4 0 4 00

ACCOUNT NO.

Medicare Tax Payable

DATE DESCRIPTION 2019 Oct. 1 Balance 8 29 29

7 0 5 0 00 8 2 2 5 00

ACCOUNT NO.

DEBIT

142

BALANCE DEBIT CREDIT

ACCOUNT NO.

Social Security Tax Payable

DATE DESCRIPTION 2019 Oct. 1 Balance 8 29 29

ACCOUNT

DEBIT

Accounts Payable

DATE DESCRIPTION 2019 Oct. 1 Balance 29 31 31

ACCOUNT

POST. REF.

ACCOUNT NO.

222

BALANCE DEBIT CREDIT 1 6 2 00 ─ 0─ 1 6 2 00 3 2 4 00

MINI-PRACTICE SET 2 (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2019 Oct. 1 Balance 8 29

ACCOUNT DATE 2019 Oct.

DESCRIPTION

DATE 2019 Oct. 29 31

✔ CP10 J16

DEBIT

CREDIT

1 0 2 0 00 1 0 2 0 00

POST. REF.

DEBIT

✔ J16

CREDIT

1 1 8 00

POST. REF.

DEBIT

✔ J16

5 8 4 00

POST. REF.

DEBIT

J16 CP10

8 9 1 6 00

CREDIT 8 9 1 6 00

225

BALANCE DEBIT CREDIT 5 1 2 00 6 3 0 00

227

BALANCE DEBIT CREDIT 1 2 6 8 00 1 8 5 2 00

ACCOUNT NO.

Salaries Payable

DESCRIPTION

1 0 2 0 00 ─0─ 1 0 2 0 00

ACCOUNT NO.

CREDIT

223

BALANCE DEBIT CREDIT

ACCOUNT NO.

State Unemployment Tax Payable

DATE DESCRIPTION 2019 Oct. 1 Balance 29

ACCOUNT

POST. REF.

Federal Unemployment Tax Payable

1 Balance 29

ACCOUNT

ACCOUNT NO.

Employee Income Tax Payable

229

BALANCE DEBIT CREDIT 8 9 1 6 00 ─0─

MINI-PRACTICE SET 2 (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2019 Oct. 1 Balance 2 5 31 31 ACCOUNT

DEBIT

✔ CP10 17 8 2 0 00 J16 3 0 00 S10 CR10

CREDIT

POST. REF. ✔ J18 J18

POST. REF. CP10 J18

3 0 00 5 2 0 50 3 0 1 7 00

CREDIT

4 9 0 50 3 5 0 7 50

203 2 5 2 00 220 9 8 2 30 213 7 8 2 30

17 7 3 0 30

ACCOUNT NO.

DEBIT

BALANCE DEBIT CREDIT

7 2 0 0 00

7 2 0 0 00 ─ 0─

7 2 0 0 00

J17 J17 J18 J18 J18

DEBIT

CREDIT

88 9 9 6 00 81 2 6 0 00 71 6 4 2 40 46 1 7 6 10 17 7 3 0 30

302

CREDIT

ACCOUNT NO. POST. REF.

301

BALANCE DEBIT CREDIT

7 2 0 0 00

Income Summary

DATE DESCRIPTION 2019 Oct. 31 Adjusting 31 Adjusting 31 Closing 31 Closing 31 Closing

BALANCE DEBIT CREDIT

ACCOUNT NO.

DEBIT

231

17 8 2 0 00 ─ 0─

Teresa Lojay, Drawing

DATE DESCRIPTION 2019 Oct. 18 31 Closing ACCOUNT

POST. REF.

Teresa Lojay, Capital

DATE DESCRIPTION 2019 Oct. 1 Balance 31 Closing 31 Closing ACCOUNT

ACCOUNT NO.

Sales Tax Payable

399

BALANCE DEBIT CREDIT 88 9 9 6 00 7 7 3 6 00 63 9 0 6 40 17 7 3 0 30 ─ 0─

MINI-PRACTICE SET 2 (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2019 Oct. 31 31 31 Closing

ACCOUNT

DEBIT

S10 CR10 J18 70 7 5 0 00

CREDIT

POST. REF. J16 J18

CREDIT

6 0 0 00 6 0 0 00

POST. REF.

DEBIT

CP10 6 4 2 0 00 P10 12 2 2 0 00 J18

CREDIT

6 0 0 00 ─ 0─

CP10 J18

DEBIT

501

BALANCE DEBIT CREDIT 6 4 2 0 00 18 6 4 0 00 ─ 0─

18 6 4 0 00

ACCOUNT NO. POST. REF.

402

BALANCE DEBIT CREDIT

ACCOUNT NO.

Freight In

DATE DESCRIPTION 2019 Oct. 12 31 Closing

10 4 1 0 00 70 7 5 0 00 ─ 0─

ACCOUNT NO.

DEBIT

401

BALANCE DEBIT CREDIT

10 4 1 0 00 60 3 4 0 00

Purchases

DATE DESCRIPTION 2019 Oct. 16 31 31 Closing

ACCOUNT

POST. REF.

Sales Returns and Allowances

DATE DESCRIPTION 2019 Oct. 5 31 Closing

ACCOUNT

ACCOUNT NO.

Sales

CREDIT

3 7 5 00

BALANCE DEBIT CREDIT 3 7 5 00

3 7 5 00

502

─ 0─

MINI-PRACTICE SET 2 (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2019 Oct. 29 31 Closing

ACCOUNT

DEBIT

J16 J18

4 3 0 00

CREDIT

DEBIT

CP10 J18

4 6 2 40

CREDIT

4 6 2 40 ─ 0─

ACCOUNT NO.

POST. REF. CP10 J17 J18

DEBIT

POST. REF. J17 J18

611

CREDIT

BALANCE DEBIT CREDIT

3 0 4 5 00

1 4 4 5 00 3 0 4 5 00 ─ 0─

1 4 4 5 00 1 6 0 0 00

DEBIT

504

BALANCE DEBIT CREDIT

4 6 2 40

Depreciation Expense—Equipment

DATE DESCRIPTION 2019 Oct. 31 Adjusting 31 Closing

4 3 0 00 ─ 0─

ACCOUNT NO.

POST. REF.

503

BALANCE DEBIT CREDIT

4 3 0 00

Advertising Expense

DATE DESCRIPTION 2019 Oct. 10 31 Adjusting 31 Closing

ACCOUNT

POST. REF.

Purchases Discounts

DATE DESCRIPTION 2019 Oct. 31 31 Closing

ACCOUNT

ACCOUNT NO.

Purchases Returns and Allowances

ACCOUNT NO.

CREDIT

1 1 7 5 00

BALANCE DEBIT CREDIT 1 1 7 5 00

1 1 7 5 00

614

─ 0─

MINI-PRACTICE SET 2 (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2019 Oct. 31 Adjusting 31 Closing

ACCOUNT

J17 J18

DEBIT

CREDIT

1 4 0 0 00

POST. REF.

1 4 0 0 00

J17 J18

POST. REF. CP10 J18

CREDIT

9 8 10 9 8 10

DEBIT

CREDIT

4 7 5 00 4 7 5 00

DATE DESCRIPTION 2019 Oct. 29 31 Closing

J16 J18

9 8 10 ─ 0─

623

BALANCE DEBIT CREDIT 4 7 5 00 ─ 0─

ACCOUNT NO.

DEBIT

620

BALANCE DEBIT CREDIT

ACCOUNT NO.

Payroll Taxes Expense POST. REF.

─ 0─

ACCOUNT NO.

DEBIT

617

BALANCE DEBIT CREDIT

1 4 0 0 00

Janitorial Services Expense

DATE DESCRIPTION 2019 Oct. 31 31 Closing

ACCOUNT

POST. REF.

Uncollectible Accounts Expense

DATE DESCRIPTION 2019 Oct. 31 Adjusting 31 Closing

ACCOUNT

ACCOUNT NO.

Insurance Expense

626

CREDIT

BALANCE DEBIT CREDIT

1 5 6 6 00

1 5 6 6 00 ─ 0─

1 5 6 6 00

MINI-PRACTICE SET 2 (continued) GENERAL LEDGER ACCOUNT

DATE DESCRIPTION 2019 Oct. 1 31 Closing ACCOUNT

BALANCE DEBIT CREDIT

4 2 0 0 00

4 2 0 0 00 ─ 0─

4 2 0 0 00

ACCOUNT NO. POST. REF. J16 J18

DEBIT

CREDIT

10 8 0 0 00 10 8 0 0 00

J17 J18

DEBIT

CREDIT

1 9 1 0 00

1 9 1 0 00 ─ 0─

1 9 1 0 00

CP10 J18

DEBIT

CREDIT

7 8 0 00 7 8 0 00

CP10 J18

DEBIT

638

BALANCE DEBIT CREDIT 7 8 0 00 ─ 0─ ACCOUNT NO.

POST. REF.

635

BALANCE DEBIT CREDIT

Utilities Expense

DATE DESCRIPTION 2019 Oct. 22 31 Closing

10 8 0 0 00 ─ 0─

ACCOUNT NO. POST. REF.

632

BALANCE DEBIT CREDIT

ACCOUNT NO. POST. REF.

629

CREDIT

Telephone Expense

DATE DESCRIPTION 2019 Oct. 26 31 Closing ACCOUNT

CP10 J18

DEBIT

Supplies Expense

DATE DESCRIPTION 2019 Oct. 31 Adjusting 31 Closing ACCOUNT

POST. REF.

Salaries Expense

DATE DESCRIPTION 2019 Oct. 29 31 Closing

ACCOUNT

ACCOUNT NO.

Rent Expense

644

CREDIT

BALANCE DEBIT CREDIT

1 1 1 2 00

1 1 1 2 00 ─ 0─

1 1 1 2 00

MINI-PRACTICE SET 2 (continued) ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME

DATE DESCRIPTION 2019 Oct. 1 Balance

NAME

DEBIT

BALANCE

TERMS POST. REF. ✔ CR10 S10

DEBIT

BALANCE

5 2 0 00

5 2 0 00 ─ 0─ 8 6 1 00

8 6 1 00

✔ CR10 S10

DEBIT

BALANCE

8 3 2 00

8 3 2 00 ─ 0─ 2 0 3 7 00

2 0 3 7 00

✔ S10

DEBIT

2 1 5 2 50

n/30

CREDIT

TERMS POST. REF.

n/30

CREDIT

TERMS POST. REF.

n/30

7 9 5 00

Emma Maldonado

DATE DESCRIPTION 2019 Oct. 1 Balance 9 Sales Slip 242

CREDIT

✔

James Helmer

DATE DESCRIPTION 2019 Oct. 1 Balance 8 15 Sales Slip 243

NAME

POST. REF.

Megan Greening

DATE DESCRIPTION 2019 Oct. 1 Balance 2 24 Sales Slip 244

NAME

TERMS

Jennifer Brown

CREDIT

n/30

BALANCE 2 3 2 00 2 3 8 4 50

MINI-PRACTICE SET 2 (continued) ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER NAME

DATE DESCRIPTION 2019 Oct. 1 Balance

NAME

POST. REF.

DEBIT

BALANCE

TERMS POST. REF. ✔ S10 J16 CR10

DEBIT

BALANCE

6 3 0 00 5 1 0 00

5 1 0 00 3 1 1 4 00 2 4 8 4 00 1 9 7 4 00

2 6 0 4 00

✔ CR10 S10

DEBIT

3 2 7 6 00

n/30

CREDIT

TERMS POST. REF.

n/30

1 6 2 1 00

Emily Tran

DATE DESCRIPTION 2019 Oct. 1 Balance 5 29 Sales Slip 245

CREDIT

✔

Dimitri Sayegh

DATE DESCRIPTION 2019 Oct. 1 Balance 3 Sales Slip 241 5 Credit Memo 18 16

NAME

TERMS

Jim Price

n/30

CREDIT

BALANCE

1 7 0 0 00

1 7 0 0 00 ─ 0─ 3 2 7 6 00

MINI-PRACTICE SET 2 (continued) ACCOUNTS PAYABLE SUBSIDIARY LEDGER NAME

DATE DESCRIPTION 2019 Oct. 1 Balance 2 11 Invoice 9422 16

NAME

POST. REF. ✔ CP10 P10 CP10

DEBIT

4 8 2 0 00 4 8 2 0 00

POST. REF. ✔ CP10 P10 J16

DEBIT

CREDIT

1 7 0 0 00 3 3 8 0 00 4 3 0 00

7 8 3 0 00 ─ 0─ 4 8 2 0 00 ─ 0─

✔ CP10 P10

DEBIT

2/10,n/30

BALANCE 1 7 0 0 00 ─ 0─ 3 3 8 0 00 2 9 5 0 00

TERMS POST. REF.

2/10,n/30

BALANCE

TERMS

Today’s Woman

DATE DESCRIPTION 2019 Oct. 1 Balance 4 30 Invoice 5821

CREDIT

7 8 3 0 00

Classy Threads

DATE DESCRIPTION 2019 Oct. 1 Balance 5 25 Invoice 3418 29 Credit Memo 175

NAME

TERMS

A Fashion Statement

1/10,n/30

CREDIT

BALANCE

4 0 2 0 00

8 7 7 0 00 ─ 0─ 4 0 2 0 00

8 7 7 0 00

MINI-PRACTICE SET 2 (continued) The Fashion Rack Schedule of Accounts Payable October 31, 2019 A Fashion Statement Classy Threads Today’s Woman Total

0 00 2 9 5 0 00 4 0 2 0 00 6 9 7 0 00

The Fashion Rack Schedule of Accounts Receivable October 31, 2019 Jennifer Brown Megan Greening James Helmer Emma Maldonado Jim Price Dimitri Sayegh Emily Tran Total

7 9 5 00 8 6 1 00 2 0 3 7 00 2 3 8 4 50 1 6 2 1 00 1 9 7 4 00 3 2 7 6 00 12 9 4 8 50

MINI-PRACTICE SET 2 (continued) The Fashion Rack Worksheet For Month Ended October 31, 2019 ACCOUNT NAME 1 Cash 2 Accounts Receivable 3 Allowance for Doubtful Accounts 4 Merchandise Inventory 5 Supplies 6 Prepaid Insurance 7 Prepaid Advertising 8 Equipment 9 Accumulated Depreciation—Equipment 10 Accounts Payable 11 Social Security Tax Payable 12 Medicare Tax Payable 13 Employee Income Tax Payable 14 Federal Unemployment Tax Payable 15 State Unemployment Tax Payable 16 Salaries Payable 17 Sales Tax Payable 18 Teresa Lojay, Capital 19 Teresa Lojay, Drawing 20 Income Summary 21 Sales 22 Sales Returns and Allowances 23 Purchases 24 Freight In 25 Purchases Returns and Allowances 26 Purchases Discounts 27 Advertising Expense 28 Depreciation Expense—Equipment 29 Insurance Expense 30 Uncollectible Accounts Expense 31 Janitorial Services Expense 32 Payroll Taxes Expense 33 Rent Expense 34 Salaries Expense 35 Supplies Expense 36 Telephone Expense 37 Utilities Expense 38 Totals 39 Net Income 40

TRIAL BALANCE DEBIT CREDIT 47 5 8 4 40 12 9 4 8 50 4 2 0 00 88 9 9 6 00 5 1 5 0 00 8 4 0 0 00 4 8 0 0 00 83 0 0 0 00 7 0 5 0 00 6 9 7 0 00 1 4 0 4 00 3 2 4 00 1 0 2 0 00 6 3 0 00 1 8 5 2 00 0 00 3 5 0 7 50 203 2 5 2 00 7 2 0 0 00

ADJUSTMENTS DEBIT CREDIT

81 2 6 0 00

9 8 10 88 9 9 6 00 1 9 1 0 00 1 4 0 0 00 1 6 0 0 00 1 1 7 5 00

88 9 9 6 00

81 2 6 0 00

70 7 5 0 00 6 0 0 00 18 6 4 0 00 3 7 5 00 4 3 0 00 4 6 2 40 1 4 4 5 00 1 6 0 0 00 0 00 1 1 7 5 00 0 00 1 4 0 0 00 0 00 9 8 10 4 7 5 00 1 5 6 6 00 4 2 0 0 00 10 8 0 0 00 0 00 1 9 1 0 00 7 8 0 00 1 1 1 2 00 298 0 7 1 90 298 0 7 1 90 176 4 3 9 10 176 4 3 9 10

MINI-PRACTICE SET 2 (continued)

ADJUSTED TRIAL BALANCE DEBIT CREDIT 47 5 8 4 40 12 9 4 8 50 5 1 8 10 81 2 6 0 00 3 2 4 0 00 7 0 0 0 00 3 2 0 0 00 83 0 0 0 00 8 2 2 5 00 6 9 7 0 00 1 4 0 4 00 3 2 4 00 1 0 2 0 00 6 3 0 00 1 8 5 2 00 0 00 3 5 0 7 50 203 2 5 2 00 7 2 0 0 00 88 9 9 6 00 81 2 6 0 00 70 7 5 0 00 6 0 0 00 18 6 4 0 00 3 7 5 00 4 3 0 00 4 6 2 40 3 0 4 5 00 1 1 7 5 00 1 4 0 0 00 9 8 10 4 7 5 00 1 5 6 6 00 4 2 0 0 00 10 8 0 0 00 1 9 1 0 00 7 8 0 00 1 1 1 2 00 380 6 0 5 00 380 6 0 5 00

INCOME STATEMENT DEBIT CREDIT

88 9 9 6 00

81 2 6 0 00 70 7 5 0 00

6 0 0 00 18 6 4 0 00 3 7 5 00 4 3 0 00 4 6 2 40 3 0 4 5 00 1 1 7 5 00 1 4 0 0 00 9 8 10 4 7 5 00 1 5 6 6 00 4 2 0 0 00 10 8 0 0 00 1 9 1 0 00 7 8 0 00 1 1 1 2 00 135 1 7 2 10 17 7 3 0 30 152 9 0 2 40

152 9 0 2 40 0 00 152 9 0 2 40

BALANCE SHEET DEBIT CREDIT 47 5 8 4 40 1 12 9 4 8 50 2 5 1 8 10 3 81 2 6 0 00 4 3 2 4 0 00 5 7 0 0 0 00 6 3 2 0 0 00 7 83 0 0 0 00 8 8 2 2 5 00 9 6 9 7 0 00 10 1 4 0 4 00 11 3 2 4 00 12 1 0 2 0 00 13 6 3 0 00 14 1 8 5 2 00 15 0 00 16 3 5 0 7 50 17 203 2 5 2 00 18 7 2 0 0 00 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 245 4 3 2 90 227 7 0 2 60 38 0 00 17 7 3 0 30 39 245 4 3 2 90 245 4 3 2 90 40

MINI-PRACTICE SET 2 (continued) The Fashion Rack Income Statement For Month Ended October 31, 2019 Operating Revenue Sales Less Sales Returns and Allowances Net Sales Cost of Goods Sold Merchandise Inventory, October 1, 2019 Purchases Freight In Delivered Cost of Purchases Less Purchases Returns and Allowances Purchases Discounts Net Delivered Cost of Purchases Total Merchandise Available for Sale Less Merchandise Inventory, October 31, 2019 Cost of Goods Sold Gross Profit on Sales Operating Expenses Advertising Expense Depreciation Expense—Equipment Insurance Expense Uncollectible Accounts Expense Janitorial Services Expense Payroll Tax Expense Rent Expense Salaries Expense Supplies Expense Telephone Expense Utilities Expense Total Operating Expenses Net Income

88 9 9 6 18 6 4 0 00 3 7 5 00 19 0 1 5 00 4 3 0 00 4 6 2 40

8 9 2 40 18 1 2 2 107 1 1 8 81 2 6 0

3 0 4 5 1 1 7 5 1 4 0 0 9 8 4 7 5 1 5 6 6 4 2 0 0 10 8 0 0 1 9 1 0 7 8 0 1 1 1 2

70 7 5 0 00 6 0 0 00 70 1 5 0 00 00

60 60 00 25 8 5 8 60 44 2 9 1 40 00 00 00 10 00 00 00 00 00 00 00 26 5 6 1 10 17 7 3 0 30

MINI-PRACTICE SET 2 (continued) The Fashion Rack Statement of Owner's Equity For Month Ended October 31, 2016 Teresa Lojay, Capital, October 1, 2016 Net Income for Month Less Withdrawals for Month Increase in Capital Teresa Lojay, Capital, October 31, 2016

203 2 5 2 00 17 7 3 0 30 7 2 0 0 00 10 5 3 0 30 213 7 8 2 30

The Fashion Rack Balance Sheet October 31, 2019 Assets Current Assets Cash Accounts Receivable Less Allowance for Doubtful Accounts Merchandise Inventory Supplies Prepaid Expenses Prepaid Insurance Prepaid Advertising Total Current Assets Plant and Equipment Equipment Less Accumulated Depreciation Total Plant and Equipment Total Assets Liability and Owner’s Equity Current Liabilities Accounts Payable Social Security Tax Payable Medicare Tax Payable Employee Income Tax Payable Federal Unemployment Tax Payable State Unemployment Tax Payable Sales Tax Payable Total Liabilities Owner’s Equity Teresa Lojay, Capital Total Liabilities and Owner’s Equity

47 5 8 4 40 12 9 4 8 50 5 1 8 10

7 0 0 0 00 3 2 0 0 00

12 4 3 0 40 81 2 6 0 00 3 2 4 0 00

10 2 0 0 00 154 7 1 4 80

83 0 0 0 00 8 2 2 5 00 74 7 7 5 00 229 4 8 9 80

6 9 7 0 00 1 4 0 4 00 3 2 4 00 1 0 2 0 00 6 3 0 00 1 8 5 2 00 3 5 0 7 50 15 7 0 7 50 213 7 8 2 30 229 4 8 9 80

MINI-PRACTICE SET 2 (continued) The Fashion Rack Post-closing Trial Balance October 31, 2019 ACCOUNT NAME Cash Accounts Receivable Allowance for Doubtful Accounts Merchandise Inventory Supplies Prepaid Insurance Prepaid Advertising Equipment Accumulated Depreciation—Equipment Accounts Payable Social Security Tax Payable Medicare Tax Payable Employee Income Tax Payable Federal Unemployment Tax Payable State Unemployment Tax Payable Sales Tax Payable Teresa Lojay, Capital Totals

DEBIT 47 5 8 4 40 12 9 4 8 50

CREDIT

5 1 8 10 81 2 6 0 00 3 2 4 0 00 7 0 0 0 00 3 2 0 0 00 83 0 0 0 00

238 2 3 2 90

8 2 2 5 00 6 9 7 0 00 1 4 0 4 00 3 2 4 00 1 0 2 0 00 6 3 0 00 1 8 5 2 00 3 5 0 7 50 213 7 8 2 30 238 2 3 2 90

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