Financial Accounting Transactions

1
Chapter 2
and
Financial Statements
Accounting Transactions
QUESTIONS
EXERCISES
Exercise 2-1 (10 minutes)
a) $80,000 $65,000 = $15,000 net income
b) $92,000 $149,000 = $57,000 net loss
c) $10,000 + 0 0 + x = $86,000
x = $86,000 $10,000
x = $76,000 net income
d) $25,000 + $40,000 0 + x = $52,000

x = 52,000 25,000 40,000
x = $13,000 or a $13,000 Net loss

(a)
Answers
(b)
(c)
(d)
(e)
$ (24,750) $36,000 $12,000 $21,500 $92,000
Proofs:
Owners equity, January 1.................
$
0 $
0 $92,000
Owners investments
during the year ..................................60,000
Copyright 2007 by McGraw-Hill Ryerson Limited. All rights reserved.

Solutions Manual for Chapter 3
36,000
31,500
37,000 150,000
Net income (loss) for the

15,750
year .................................................................
40,500
(4,500) 21,500
(8,000)
Owners withdrawals
during the year .................................
(24,750) (27,000) (15,000) (15,750) (63,000)
Owners equity, December
$51,000 $49,500 $12,000 $42,750 $171,00
31 .....................................................................
0


THE DOBBS GROUP
Income Statement
For Month Ended November 30, 2011
Revenues:
Consulting fees earned ..................................
Operating expenses:
Salaries expense ............................................
Rent expense ..................................................
Telephone expense ........................................
Utilities expenses ...........................................
Total operating expenses ...........................
Net income .............................................................
$18,000
$6,000
2,550
1,680
660
10,890
$ 7,110

THE DOBBS GROUP
Statement of Owners Equity
Jean Dobbs, capital, November 1 ....................
Add: Investments by owner ..........................
Net income .............................................
Total ............................................................
Less: Withdrawals by owner ............................
Jean Dobbs, capital, November 30 ..................
$
84,000
7,110
91,110
$91,110
3,360
$87,750
Analysis component:
The owner, Jean Dobbs, invested $84,000 of assets during the month, which
caused equity to increase. Also, net income earned during the month was
$7,110 also causing equity to increase during November. The total increases
in equity during the month were a total of $91,110 ($84,000 + $7,110).
NOTE: Students might point out that equity decreased by a total of $3,360 in
withdrawals which in combination with the total increase of $91,110 caused a
net increase in equity of $87,750.


THE DOBBS GROUP
Balance Sheet
November 30, 2011
Assets
Cash ..............................................
Accounts receivable ....................
Office supplies .............................
Automobiles .................................
Office equipment ..........................
Total assets ..................................
$12,000
17,000
2,250
36,000
28,000
$95,250
Liabilities
Accounts payable ...................
Owners Equity
Jean Dobbs, capital ................
Total liabilities and
owners equity.....................
$ 7,500
87,750
$95,250
Analysis component:
$87,750 (or 92.13% calculated as $87,750/$95,250 100) of the total $95,250

assets are owned by Jean Dobbs, the owner of The Dobbs Group.
EXCEL LEARNING SERVICES
Income Statement
For Month Ended July 31, 2011
Revenues:
Tutoring fees earned ......................................
Textbook rental revenue ................................
Total revenues ............................................
Operating expenses:
Office rent expense ........................................
Tutors wages expense ...................................
Utilities expense .............................................
Net loss ..................................................................

$4,200
300
$ 4,500
$2,500
1,540
580
4,620
$ 120

George Pelzer, capital, July 1 ..........................
Total ............................................................
Net loss ....................................................
George Pelzer, capital, July 31 ........................
$ 1,000
120
$ 7,400
1,200
$ 8,600
1,120
$ 7,480
Analysis component:
Withdrawals of $1,000 by the owner, George Pelzer, caused equity to
decrease during July, 2011. Also, the net loss of $120 caused equity to
decrease in July. The total decrease in equity during the month of July
was $1,120 (calculated as $1,000 + $120).
NOTE: Students might point out that equity increased by $1,200 of owner
investments which, in combination with the total decrease of $1,120, caused a
net increase in equity of $80.
Balance Sheet
July 31, 2011
Assets
Cash ..............................................
Supplies ........................................
Furniture .......................................
Computer equipment ...................
$ 1,600
2,680
600
1,800
2,200
Total assets ...................................................
$8,880
Liabilities
$ 1,400
Owners Equity
George Pelzer, capital ............
7,480
owners equity................................
$8,880
Analysis component:
$1,400 or 15.77% (calculated as $1,400/$8,880 100) of the total
$8,880 assets held by Excel Learning Services are financed by debt.

Description
B
D
1. Requires every business to be accounted for separately from its owner

or owners.
2. Requires financial statement information to be supported by evidence
other than someones opinion or imagination.
3. Requires financial statement information to be based on costs incurred

in transactions.
4. Requires financial statements to reflect the assumption that the

business will continue operating instead of being closed or sold.
5. Requires revenue to be recorded only when the earnings process is
complete.

a.
Assets Liabilities = Owners Equity

Beginning of the year ...................... $ 150,000
$60,000 =
$90,000
End of the year ................................. $240,000
$92,000 =
148,000
Net increase in owners equity ...............................................................
$58,000
Net income ...............................................................................................
$58,000
(Because there were no additional investments or withdrawals, the net
income for the year equals the net increase in owners equity.)
b. Net increase in owners equity ...................................

Add: Withdrawals (12 months @ $3,500) ...................
Net income ...................................................................
$58,000
42,000
$100,000
An alternative calculation:
$90,000 + x - $42,000 = $148,000; x = $100,000
c.
Net increase in owners equity ...................................

Less: Additional investment .......................................
Net loss.........................................................................
$58,000
65,000
$ 7,000
$90,000 + $65,000 + x = $148,000; x = ($7,000) where the negative
represents a loss.
d. Net increase in owners equity ...................................
Gross increase in owners equity ...............................
Net income ...................................................................
$58,000
42,000
$100,000
50,000
$50,000
7
$90,000 + $50,000 - $42,000 + x = $148,000; x = $50,000
a.
If assets decreased by $5,000 during August, then
$20,000 + $5,000 = $25,000 Assets at August 1, 2011.
Therefore, Owners Equity at August 1, 2011 = $25,000 - $1,000 =
$24,000
b.
If liabilities increased by $3,000 during August, then
$1,000 + $3,000 = $4,000 Liabilities at August 31, 2011.
$16,000
Assets
Cash
a)
Accounts
Payable
Noel Bridges,
+
Capital
+ $2,500
2,500
2,500
b)
Totals
Totals
Accounts
Office
+ Receivable + Supplies =
+ $2,500
Totals
c)
Liabilities + Owners Equity
2,500
+
+ $200
+ $200
200
200
600
3,100
2,500
+
200
200
600
3,100
d)*

Totals
e)
Totals
3,100
200
3,100
1,500
1,500
1,600
f)
Totals
200
200
200
1,600
+ $1,250
$1,600
$1,250
+ 1,250
$200
$3,050
$200
=
$2,850
$3,050
*Note: For (d), since no exchange has occurred, no entry is required.

10

Assets
Cash
Accounts
Parts
Equipmen
Accounts
Janine Commry,
+ Receivable + Supplies +
t
= Payable +
Capital
a)
+ $7,000
+ $ 7,000
b)
- 2,500
- 2,500
Totals
$4,500
$ 4,500
c)
Totals
e)
Totals
+ $1,200
$1,200
$1,200
$4,500
d)
Totals
+ $1,200
+ $3,400
$4,500
$3,400
$ 4,500
+ $ 3,400
$1,200
$ 950
$1,200
$7,900
+ $950
$3,550
$3,400
$1,200
$950
$1,200
$7,900
$3,550
$3,400
$1,200
$950
$1,200
$ 7,900
f)*
Totals
g)
Totals
h)
Totals
i)
Totals
$1,200
$2,350
$1,200
$3,400
$1,200
$950
+ $1,400
$3,750
+ $ 1,400
$3,400
$1,200
$950
$2,700
$1,050
$7,900
$9,300
$ 2,700
$3,400
$1,200
$950
$6,600
$6,600
$6,600
*Note: For (f), since no exchange has occurred, no entry is required.

Exercise 2-14: (15 minutes)
b. Office Supplies were purchased paying cash of $500.
c. Office Furniture was purchased paying cash of $8,000.
10
11
d.
e.
f.
g.
Completed work for a client on credit; $1,000.

Purchased office supplies on credit; $400.
Paid $250 to a creditor.
Collected $750 cash from a credit customer.

11
12

a)
b)
c)
d)
e)
f)
g)
h)
The business purchased land paying $3,000.

$400 of office supplies were purchased on credit (or on account).
Paid $700 for the purchase of office supplies
$1,050 of revenue on account (or on credit) was earned.
Collected $1,000 cash for revenue performed.
Collected $1,050 from a credit customer.
The owner invested $5,000 of land.

Cash
+ Accounts
Receivable
a. $25,000
Investment
Equip- =
ment
Accounts + Ellen Manson, Explanation

Payable
Capital
of Change
$5,000
$30,000
b.
1,300
Rent Expense
$1,300
$23,700
$5,000
c.
$23,700
$28,700
+6,000
+6,000
$11,000
$6,000
d.
+ 500
Revenue
$24,200
e.
Revenue
f.
$11,000
$6,000
+$1,000
$24,200
$1,000
4,000
$20,200
$29,200
$11,000
$6,000
$30,200
$6,000
$30,200
+ 4,000
$1,000
$15,000
1,200
$19,000
$1,000
250
250
500
+ 1,000
g.
1,200
Wages Expense
h.
$28,700
$15,000

$6,000
$29,000
12
13
$19,250
i.
$750
$15,000
$6,000
6,000
$13,250
$29,000
6,000
$750
$15,000
$29,000
j. 250
Withdrawal
$13,000
$750
$15,000
$28,750
Revenue
($500 + $1,000)
=
Expenses
($1,300 + $1,200)

=
=
250
$28,750
$28,750
Net loss
$1,000
13
14
Exercise 2-17 (15 minutes) (Answers may vary.)

Possible examples include:
a.
The business purchases office supplies (or some other asset) for cash.
b. The owner withdraws cash (or some other asset) from the business; also,
the business incurs an expense paid with cash.
c.
The business incurs an expense on credit.
d. The business purchases equipment (or some other asset) on credit.

e.
The owner invests cash (or some other asset); or, the business earns a
revenue and accepts cash or an account receivable.
f.
The business pays an account payable (or some other liability) with cash.

Assets
Cash
Liabilitie +
s
+ Accounts + Supplies + Equipmen = Accounts + Annie Explanation

Receivable
t
Payable
Deweerd,
Capital
a)
b)
Totals
d)
Totals
Owner
+$2,500 Investment
+ $2,500
+ $4,000
$4,000
+$4,000 Revenue
$
c)
Totals
Owners Equity
$ 0
$2,500
+ $150
$4,000
$150
$ 0
$6,500
+ $150
$2,500
$150
$ 450
$6,500
$ 450 Sal. Expense
$3,550
$150
$2,500
$150
$6,050
$3,550
$150
$2,500
$150
$6,050
e)*
Totals
f)
Totals
g)
$ 1,400
$2,150
$ 1,400 Rent
Expense
$
$150
+ $2,000

$2,500
$150
$4,650
+$2,000 Revenue
14
15
Totals
$2,150
$2,000
$150
$6,800
$2,500
$150
=
$6,650
$6,800
*Note: For (e), since no exchange has occurred, no entry is required.

15
16

Annie Deweerd Freelance Writing
Income Statement
For Month Ended March 31, 2011
Revenues:
Freelance writing revenue
$6,000
Operating expenses:
Salaries expense
$ 450
Rent expense
1,400
Total operating expenses
1,850
$4,15
0
Net income

Annie Deweerd, capital, March 1

Add: Investment by owner
Net income

$2,500
4,15
0
6,650
$6,65
0
16
17

Balance Sheet
March 31, 2011
Liabilities
Assets
Cash
$2,15
0
Accounts receivable
2,000
Supplies
Equipment
Accounts payable
$ 15
0
150
2,500
Owners Equity
Annie Deweerd, capital
Total assets
$6,80
0
6,650
Total liabilities and owners $6,80

equity
0

17
18
Exercise 2-19 (concluded)

Analysis component:
a. Supplies of $150 were financed by accounts payable, a liability.
b. Equipment of $2,500 was financed by owner investment, an
equity transaction.
c. Cash of $2,150 and Accounts receivable of $2,000 were financed
by net income of $4,150. Net income includes the equity
transactions of revenues and expenses (revenues of $6,000 less
expenses of $1,850).
Assets
Cash
a)
$500
+$400
$500
Owner
+$15,500 Investment
+$15,000
c)
Totals
Owners Equity
+ Accounts + Supplies + Equipmen = Accounts + Pete Jong, Explanation

Receivable
t
Payable
Capital
b)
Totals
Liabilitie +
s
$400
+$400
$15,000
+$600
$400
$15,500
+$600
$500
$1,000
$15,000
$1,000
$15,500
$500
$1,000
$15,000
$1,000
$15,500
d)*
Totals
e)
Totals
+$550
$500
f)
$550
+$550 Revenue
$1,000
$15,000
$1,000
+$600
Totals
$500
g)
-$200
Totals
$300
h)
-$250
$1,150
$16,050
+$600 Revenue
$1,000
$15,000
$1,000
$16,650
-$200
$1,150
$1,000

$15,000
$800
$16,650
-$250 Adv. Expense
18
19
Totals
$50
$1,150
$1,000
$17,200
$15,000
$800
=
$16,400
$17,200

19
20

Petes Yard Care
Income Statement
Revenues:
Yard care revenue
$1,150
Operating expenses:
Advertising expense
250
Net income
$ 900
Petes Yard Care
Pete Jong, capital, March 1
$15,500
Net income
900
16,400
$16,40
0
Petes Yard Care

Balance Sheet
March 31, 2011
Liabilities
Assets
Cash
$ 50
Accounts receivable
1,150
Accounts payable

$ 800
20
21
Supplies
Equipment
1,000
15,000
Owners Equity
Pete Jong, capital
16,400

Total assets
$17,200
owners equity
$17,20
0
Analysis component:
The $900 of net income does not represent cash because all of the
revenues ($550 + $600 = $1,150) were on account. The $250 of
advertising expense was paid in cash. The net income or net loss on an
income statement represents accrual net income (loss) as opposed to a
cash basis net income (loss). Recall that accrual basis net income
represents revenues and expenses that occurred regardless of when
cash is actually received/paid.

21
22

Assets
Cash
Owners Equity
+ Accounts + Supplies + Equipmen = Accounts + Otto Ingles, Explanatio

Receivable
t
Payable
Capital
n
Bal.
$4,000
$1,200
a)
+$1,000
-$1,000
Totals
$5,000
$200
b)
-$2,000
Totals
$3,000
c)
+$700
Totals
$3,700
d)
-$500
Totals
$3,200
e)
-$1,200
Totals
$2,000
f)
-$600
Totals
$1,400
g)
Totals
Liabilitie +
s
$900
$7,500
$4,000
$9,600
$900
$7,500
$4,000
$9,600
-$2,000
$200
$900
$7,500
$2,000
$9,600
+$700 Revenue
$200
$900
$7,500
$2,000
$10,300
-$500 Wage Exp.
$200
$900
$7,500
$2,000
$9,800
-$1,200 Rent Exp.
$200
$900
$7,500
$2,000
$8,600
-$600 Utilities
Exp.
$200
$900
$7,500
$2,000
+$400
$8,000
+$400 Revenue
$1,400
$600
$900
$7,500
$2,000
$8,400
$1,400
$600
$900
$7,500
$2,000
$8,400
h)*
Totals
$10,400
$10,400
*Note: For (h), since no exchange has occurred, no entry is required.

22
23

Ottos Wrecking Service
Income Statement
Revenues:
Wrecking revenue
$1,100
Operating expenses:
Rent expense
$ 1,200
Wages expense
500
Utilities expense
600
2,300
$1,20
0
Net loss

Otto Ingles, capital, July 1
$ 9,600
Less: Net loss
1,200
$ 8,40
0

Balance Sheet
July 31, 2011

23
24
Liabilities
Assets
Cash
$1,400
Accounts receivable
600
Supplies
900
Equipment
Accounts payable
$ 2,000
7,500
Owners Equity
Otto Ingles, capital
8,400

Total assets
$10,400
owners equity
$10,40
0
Analysis component:
$8,400 or 80.77% (calculated as $8,400/$10,400 100) of the assets are financed
by Otto Ingles, the owner. $2,000 or 19.23% (calculated as $2,000/$10,400 100)
of the assets are financed by debt.
Chapter 2
and
QUESTIONS
EXERCISES
e) $80,000 $65,000 = $15,000 net income
f) $92,000 $149,000 = $57,000 net loss
g) $10,000 + 0 0 + x = $86,000
x = $86,000 $10,000
24
25
h) $25,000 + $40,000 0 + x = $52,000

x = 52,000 25,000 40,000
x = $13,000 or a $13,000 Net loss

(a)
Answers
(b)
(c)
(d)
(e)
$ (24,750) $36,000 $12,000 $21,500 $92,000
Proofs:
$
0 $
0 $92,000
Owners investments
during the year ..................................60,000
36,000
31,500
37,000 150,000

15,750
year .................................................................
40,500
(4,500) 21,500
(8,000)
Owners withdrawals
during the year .................................
(24,750) (27,000) (15,000) (15,750) (63,000)
$51,000 $49,500 $12,000 $42,750 $171,00
31 .....................................................................
0

25
26

THE DOBBS GROUP
Income Statement
Revenues:
Operating expenses:
Rent expense ..................................................
Net income .............................................................
$18,000
$6,000
2,550
1,680
660
10,890
$ 7,110

THE DOBBS GROUP
Net income .............................................
Total ............................................................
$
84,000
7,110
91,110
$91,110
3,360
$87,750
Analysis component:

26
27

THE DOBBS GROUP
Balance Sheet
November 30, 2011
Assets
Cash ..............................................
Office supplies .............................
Automobiles .................................
Total assets ..................................
$12,000
17,000
2,250
36,000
28,000
$95,250
Liabilities
Owners Equity
owners equity.....................
$ 7,500
87,750
$95,250
Analysis component:

Income Statement
Revenues:
Total revenues ............................................
Operating expenses:
Net loss ..................................................................

$4,200
300
$ 4,500
$2,500
1,540
580
4,620
$ 120
27
28

Total ............................................................
Net loss ....................................................
$ 1,000
120
$ 7,400
1,200
$ 8,600
1,120
$ 7,480
Analysis component:
Balance Sheet
July 31, 2011
Assets
Cash ..............................................
Supplies ........................................
Furniture .......................................
$ 1,600
2,680
600
1,800
2,200
Total assets ...................................................
$8,880
Liabilities
$ 1,400
Owners Equity
7,480
owners equity................................
$8,880
Analysis component:
28
29

29
30
Description
B
D

or owners.

in transactions.

complete.

a.

$60,000 =
$90,000
End of the year ................................. $240,000
$92,000 =
148,000
$58,000
Net income ...............................................................................................
$58,000

Net income ...................................................................
$58,000
42,000
$100,000
$90,000 + x - $42,000 = $148,000; x = $100,000
c.

Net loss.........................................................................
$58,000
65,000
$ 7,000
represents a loss.
Net income ...................................................................
$58,000
42,000
$100,000
50,000
$50,000
30
31
$90,000 + $50,000 - $42,000 + x = $148,000; x = $50,000
a.
$20,000 + $5,000 = $25,000 Assets at August 1, 2011.
$24,000
b.
$16,000
Assets
Cash
a)
Accounts
Payable
Noel Bridges,
+
Capital
+ $2,500
2,500
2,500
b)
Totals
Totals
Accounts
Office
+ $2,500
Totals
c)
2,500
+
+ $200
+ $200
200
200
600
3,100
2,500
+
200
200
600
3,100
d)*

31
32
Totals
e)
Totals
3,100
200
3,100
1,500
1,500
1,600
f)
Totals
200
200
200
1,600
+ $1,250
$1,600
$1,250
+ 1,250
$200
$3,050
$200
=
$2,850
$3,050

32
33

Assets
Cash
Accounts
Parts
Equipmen
Accounts
Janine Commry,
t
= Payable +
Capital
a)
+ $7,000
+ $ 7,000
b)
- 2,500
- 2,500
Totals
$4,500
$ 4,500
c)
Totals
e)
Totals
+ $1,200
$1,200
$1,200
$4,500
d)
Totals
+ $1,200
+ $3,400
$4,500
$3,400
$ 4,500
+ $ 3,400
$1,200
$ 950
$1,200
$7,900
+ $950
$3,550
$3,400
$1,200
$950
$1,200
$7,900
$3,550
$3,400
$1,200
$950
$1,200
$ 7,900
f)*
Totals
g)
Totals
h)
Totals
i)
Totals
$1,200
$2,350
$1,200
$3,400
$1,200
$950
+ $1,400
$3,750
+ $ 1,400
$3,400
$1,200
$950
$2,700
$1,050
$7,900
$9,300
$ 2,700
$3,400
$1,200
$950
$6,600
$6,600
$6,600

33
34
d.
e.
f.
g.


34
35

i) The business purchased land paying $3,000.
j) $400 of office supplies were purchased on credit (or on account).
k) Paid $700 for the purchase of office supplies
l) $1,050 of revenue on account (or on credit) was earned.
m) Collected $1,000 cash for revenue performed.
n) Paid $400 to a creditor.
o) Collected $1,050 from a credit customer.
p) The owner invested $5,000 of land.
Cash
+ Accounts
Receivable
a. $25,000
Investment
Equip- =
ment

Payable
Capital
of Change
$5,000
$30,000
b.
1,300
Rent Expense
$1,300
$23,700
$5,000
c.
$23,700
$28,700
+6,000
+6,000
$11,000
$6,000
d.
+ 500
Revenue
$24,200
e.
Revenue
f.
$11,000
$6,000
+$1,000
$24,200
$1,000
4,000
$20,200
$29,200
$11,000
$6,000
$30,200
$6,000
$30,200
+ 4,000
$1,000
$15,000
1,200
$19,000
$1,000
250
250
500
+ 1,000
g.
1,200
Wages Expense
h.
$28,700
$15,000

$6,000
$29,000
35
36
$19,250
i.
$750
$15,000
$6,000
6,000
$13,250
$29,000
6,000
$750
$15,000
$29,000
j. 250
Withdrawal
$13,000
$750
$15,000
$28,750
Revenue
($500 + $1,000)
=
Expenses
($1,300 + $1,200)

=
=
250
$28,750
$28,750
Net loss
$1,000
36
37

a.
c.

e.
f.

Assets
Cash
Liabilitie +
s

Receivable
t
Payable
Deweerd,
Capital
a)
b)
Totals
d)
Totals
Owner
+$2,500 Investment
+ $2,500
+ $4,000
$4,000
+$4,000 Revenue
$
c)
Totals
Owners Equity
$ 0
$2,500
+ $150
$4,000
$150
$ 0
$6,500
+ $150
$2,500
$150
$ 450
$6,500
$ 450 Sal. Expense
$3,550
$150
$2,500
$150
$6,050
$3,550
$150
$2,500
$150
$6,050
e)*
Totals
f)
Totals
g)
$ 1,400
$2,150
$ 1,400 Rent
Expense
$
$150
+ $2,000

$2,500
$150
$4,650
+$2,000 Revenue
37
38
Totals
$2,150
$2,000
$150
$6,800
$2,500
$150
=
$6,650
$6,800

38
39

Income Statement
Revenues:
$6,000
Operating expenses:
Salaries expense
$ 450
Rent expense
1,400
1,850
$4,15
0
Net income


Net income

$2,500
4,15
0
6,650
$6,65
0
39
40

Balance Sheet
March 31, 2011
Liabilities
Assets
Cash
$2,15
0
Accounts receivable
2,000
Supplies
Equipment
Accounts payable
$ 15
0
150
2,500
Owners Equity
Total assets
$6,80
0
6,650

equity
0

40
41

Analysis component:
d. Supplies of $150 were financed by accounts payable, a liability.
e. Equipment of $2,500 was financed by owner investment, an
equity transaction.
f. Cash of $2,150 and Accounts receivable of $2,000 were financed
Assets
Cash
a)
$500
+$400
$500
Owner
+$15,500 Investment
+$15,000
c)
Totals
Owners Equity

Receivable
t
Payable
Capital
b)
Totals
Liabilitie +
s
$400
+$400
$15,000
+$600
$400
$15,500
+$600
$500
$1,000
$15,000
$1,000
$15,500
$500
$1,000
$15,000
$1,000
$15,500
d)*
Totals
e)
Totals
+$550
$500
f)
$550
+$550 Revenue
$1,000
$15,000
$1,000
+$600
Totals
$500
g)
-$200
Totals
$300
h)
-$250
$1,150
$16,050
+$600 Revenue
$1,000
$15,000
$1,000
$16,650
-$200
$1,150
$1,000

$15,000
$800
$16,650
-$250 Adv. Expense
41
42
Totals
$50
$1,150
$1,000
$17,200
$15,000
$800
=
$16,400
$17,200

42
43

Petes Yard Care
Income Statement
Revenues:
Yard care revenue
$1,150
Operating expenses:
Advertising expense
250
Net income
$ 900
Petes Yard Care
$15,500
Net income
900
16,400
$16,40
0
Petes Yard Care

Balance Sheet
March 31, 2011
Liabilities
Assets
Cash
$ 50
Accounts receivable
1,150
Accounts payable

$ 800
43
44
Supplies
Equipment
1,000
15,000
Owners Equity
Pete Jong, capital
16,400

Total assets
$17,200
owners equity
$17,20
0
Analysis component:

44
45

Assets
Cash
Owners Equity

Receivable
t
Payable
Capital
n
Bal.
$4,000
$1,200
a)
+$1,000
-$1,000
Totals
$5,000
$200
b)
-$2,000
Totals
$3,000
c)
+$700
Totals
$3,700
d)
-$500
Totals
$3,200
e)
-$1,200
Totals
$2,000
f)
-$600
Totals
$1,400
g)
Totals
Liabilitie +
s
$900
$7,500
$4,000
$9,600
$900
$7,500
$4,000
$9,600
-$2,000
$200
$900
$7,500
$2,000
$9,600
+$700 Revenue
$200
$900
$7,500
$2,000
$10,300
-$500 Wage Exp.
$200
$900
$7,500
$2,000
$9,800
-$1,200 Rent Exp.
$200
$900
$7,500
$2,000
$8,600
-$600 Utilities
Exp.
$200
$900
$7,500
$2,000
+$400
$8,000
+$400 Revenue
$1,400
$600
$900
$7,500
$2,000
$8,400
$1,400
$600
$900
$7,500
$2,000
$8,400
h)*
Totals
$10,400
$10,400

45
46

Income Statement
Revenues:
Wrecking revenue
$1,100
Operating expenses:
Rent expense
$ 1,200
Wages expense
500
Utilities expense
600
2,300
$1,20
0
Net loss

$ 9,600
Less: Net loss
1,200
$ 8,40
0

Balance Sheet
July 31, 2011

46
47
Liabilities
Assets
Cash
$1,400
Accounts receivable
600
Supplies
900
Equipment
Accounts payable
$ 2,000
7,500
Owners Equity
8,400

Total assets
$10,400
owners equity
$10,40
0
Analysis component:
Chapter 2
and
QUESTIONS
EXERCISES
i) $80,000 $65,000 = $15,000 net income
j) $92,000 $149,000 = $57,000 net loss
k) $10,000 + 0 0 + x = $86,000
x = $86,000 $10,000
47
48
l) $25,000 + $40,000 0 + x = $52,000

x = 52,000 25,000 40,000
x = $13,000 or a $13,000 Net loss

(a)
Answers
(b)
(c)
(d)
(e)
$ (24,750) $36,000 $12,000 $21,500 $92,000
Proofs:
$
0 $
0 $92,000
Owners investments
during the year ..................................60,000
36,000
31,500
37,000 150,000

15,750
year .................................................................
40,500
(4,500) 21,500
(8,000)
Owners withdrawals
during the year .................................
(24,750) (27,000) (15,000) (15,750) (63,000)
$51,000 $49,500 $12,000 $42,750 $171,00
31 .....................................................................
0

48
49

THE DOBBS GROUP
Income Statement
Revenues:
Operating expenses:
Rent expense ..................................................
Net income .............................................................
$18,000
$6,000
2,550
1,680
660
10,890
$ 7,110

THE DOBBS GROUP
Net income .............................................
Total ............................................................
$
84,000
7,110
91,110
$91,110
3,360
$87,750
Analysis component:

49
50

THE DOBBS GROUP
Balance Sheet
November 30, 2011
Assets
Cash ..............................................
Office supplies .............................
Automobiles .................................
Total assets ..................................
$12,000
17,000
2,250
36,000
28,000
$95,250
Liabilities
Owners Equity
owners equity.....................
$ 7,500
87,750
$95,250
Analysis component:

Income Statement
Revenues:
Total revenues ............................................
Operating expenses:
Net loss ..................................................................

$4,200
300
$ 4,500
$2,500
1,540
580
4,620
$ 120
50
51

Total ............................................................
Net loss ....................................................
$ 1,000
120
$ 7,400
1,200
$ 8,600
1,120
$ 7,480
Analysis component:
Balance Sheet
July 31, 2011
Assets
Cash ..............................................
Supplies ........................................
Furniture .......................................
$ 1,600
2,680
600
1,800
2,200
Total assets ...................................................
$8,880
Liabilities
$ 1,400
Owners Equity
7,480
owners equity................................
$8,880
Analysis component:
51
52

52
53
Description
B
D

or owners.

in transactions.

complete.

a.

$60,000 =
$90,000
End of the year ................................. $240,000
$92,000 =
148,000
$58,000
Net income ...............................................................................................
$58,000

Net income ...................................................................
$58,000
42,000
$100,000
$90,000 + x - $42,000 = $148,000; x = $100,000
c.

Net loss.........................................................................
$58,000
65,000
$ 7,000
represents a loss.
Net income ...................................................................
$58,000
42,000
$100,000
50,000
$50,000
53
54
$90,000 + $50,000 - $42,000 + x = $148,000; x = $50,000
a.
$20,000 + $5,000 = $25,000 Assets at August 1, 2011.
$24,000
b.
$16,000
Assets
Cash
a)
Accounts
Payable
Noel Bridges,
+
Capital
+ $2,500
2,500
2,500
b)
Totals
Totals
Accounts
Office
+ $2,500
Totals
c)
2,500
+
+ $200
+ $200
200
200
600
3,100
2,500
+
200
200
600
3,100
d)*

54
55
Totals
e)
Totals
3,100
200
3,100
1,500
1,500
1,600
f)
Totals
200
200
200
1,600
+ $1,250
$1,600
$1,250
+ 1,250
$200
$3,050
$200
=
$2,850
$3,050

55
56

Assets
Cash
Accounts
Parts
Equipmen
Accounts
Janine Commry,
t
= Payable +
Capital
a)
+ $7,000
+ $ 7,000
b)
- 2,500
- 2,500
Totals
$4,500
$ 4,500
c)
Totals
e)
Totals
+ $1,200
$1,200
$1,200
$4,500
d)
Totals
+ $1,200
+ $3,400
$4,500
$3,400
$ 4,500
+ $ 3,400
$1,200
$ 950
$1,200
$7,900
+ $950
$3,550
$3,400
$1,200
$950
$1,200
$7,900
$3,550
$3,400
$1,200
$950
$1,200
$ 7,900
f)*
Totals
g)
Totals
h)
Totals
i)
Totals
$1,200
$2,350
$1,200
$3,400
$1,200
$950
+ $1,400
$3,750
+ $ 1,400
$3,400
$1,200
$950
$2,700
$1,050
$7,900
$9,300
$ 2,700
$3,400
$1,200
$950
$6,600
$6,600
$6,600

56
57
d.
e.
f.
g.


57
58

q) The business purchased land paying $3,000.
r) $400 of office supplies were purchased on credit (or on account).
s) Paid $700 for the purchase of office supplies
t) $1,050 of revenue on account (or on credit) was earned.
u) Collected $1,000 cash for revenue performed.
v) Paid $400 to a creditor.
w) Collected $1,050 from a credit customer.
x) The owner invested $5,000 of land.
Cash
+ Accounts
Receivable
a. $25,000
Investment
Equip- =
ment

Payable
Capital
of Change
$5,000
$30,000
b.
1,300
Rent Expense
$1,300
$23,700
$5,000
c.
$23,700
$28,700
+6,000
+6,000
$11,000
$6,000
d.
+ 500
Revenue
$24,200
e.
Revenue
f.
$11,000
$6,000
+$1,000
$24,200
$1,000
4,000
$20,200
$29,200
$11,000
$6,000
$30,200
$6,000
$30,200
+ 4,000
$1,000
$15,000
1,200
$19,000
$1,000
250
250
500
+ 1,000
g.
1,200
Wages Expense
h.
$28,700
$15,000

$6,000
$29,000
58
59
$19,250
i.
$750
$15,000
$6,000
6,000
$13,250
$29,000
6,000
$750
$15,000
$29,000
j. 250
Withdrawal
$13,000
$750
$15,000
$28,750
Revenue
($500 + $1,000)
=
Expenses
($1,300 + $1,200)

=
=
250
$28,750
$28,750
Net loss
$1,000
59
60

a.
c.

e.
f.

Assets
Cash
Liabilitie +
s

Receivable
t
Payable
Deweerd,
Capital
a)
b)
Totals
d)
Totals
Owner
+$2,500 Investment
+ $2,500
+ $4,000
$4,000
+$4,000 Revenue
$
c)
Totals
Owners Equity
$ 0
$2,500
+ $150
$4,000
$150
$ 0
$6,500
+ $150
$2,500
$150
$ 450
$6,500
$ 450 Sal. Expense
$3,550
$150
$2,500
$150
$6,050
$3,550
$150
$2,500
$150
$6,050
e)*
Totals
f)
Totals
g)
$ 1,400
$2,150
$ 1,400 Rent
Expense
$
$150
+ $2,000

$2,500
$150
$4,650
+$2,000 Revenue
60
61
Totals
$2,150
$2,000
$150
$6,800
$2,500
$150
=
$6,650
$6,800

61
62

Income Statement
Revenues:
$6,000
Operating expenses:
Salaries expense
$ 450
Rent expense
1,400
1,850
$4,15
0
Net income


Net income

$2,500
4,15
0
6,650
$6,65
0
62
63

Balance Sheet
March 31, 2011
Liabilities
Assets
Cash
$2,15
0
Accounts receivable
2,000
Supplies
Equipment
Accounts payable
$ 15
0
150
2,500
Owners Equity
Total assets
$6,80
0
6,650

equity
0

63
64

Analysis component:
g. Supplies of $150 were financed by accounts payable, a liability.
h. Equipment of $2,500 was financed by owner investment, an
equity transaction.
i. Cash of $2,150 and Accounts receivable of $2,000 were financed
Assets
Cash
a)
$500
+$400
$500
Owner
+$15,500 Investment
+$15,000
c)
Totals
Owners Equity

Receivable
t
Payable
Capital
b)
Totals
Liabilitie +
s
$400
+$400
$15,000
+$600
$400
$15,500
+$600
$500
$1,000
$15,000
$1,000
$15,500
$500
$1,000
$15,000
$1,000
$15,500
d)*
Totals
e)
Totals
+$550
$500
f)
$550
+$550 Revenue
$1,000
$15,000
$1,000
+$600
Totals
$500
g)
-$200
Totals
$300
h)
-$250
$1,150
$16,050
+$600 Revenue
$1,000
$15,000
$1,000
$16,650
-$200
$1,150
$1,000

$15,000
$800
$16,650
-$250 Adv. Expense
64
65
Totals
$50
$1,150
$1,000
$17,200
$15,000
$800
=
$16,400
$17,200

65
66

Petes Yard Care
Income Statement
Revenues:
Yard care revenue
$1,150
Operating expenses:
Advertising expense
250
Net income
$ 900
Petes Yard Care
$15,500
Net income
900
16,400
$16,40
0
Petes Yard Care

Balance Sheet
March 31, 2011
Liabilities
Assets
Cash
$ 50
Accounts receivable
1,150
Accounts payable

$ 800
66
67
Supplies
Equipment
1,000
15,000
Owners Equity
Pete Jong, capital
16,400

Total assets
$17,200
owners equity
$17,20
0
Analysis component:

67
68

Assets
Cash
Owners Equity

Receivable
t
Payable
Capital
n
Bal.
$4,000
$1,200
a)
+$1,000
-$1,000
Totals
$5,000
$200
b)
-$2,000
Totals
$3,000
c)
+$700
Totals
$3,700
d)
-$500
Totals
$3,200
e)
-$1,200
Totals
$2,000
f)
-$600
Totals
$1,400
g)
Totals
Liabilitie +
s
$900
$7,500
$4,000
$9,600
$900
$7,500
$4,000
$9,600
-$2,000
$200
$900
$7,500
$2,000
$9,600
+$700 Revenue
$200
$900
$7,500
$2,000
$10,300
-$500 Wage Exp.
$200
$900
$7,500
$2,000
$9,800
-$1,200 Rent Exp.
$200
$900
$7,500
$2,000
$8,600
-$600 Utilities
Exp.
$200
$900
$7,500
$2,000
+$400
$8,000
+$400 Revenue
$1,400
$600
$900
$7,500
$2,000
$8,400
$1,400
$600
$900
$7,500
$2,000
$8,400
h)*
Totals
$10,400
$10,400

68
69

Income Statement
Revenues:
Wrecking revenue
$1,100
Operating expenses:
Rent expense
$ 1,200
Wages expense
500
Utilities expense
600
2,300
$1,20
0
Net loss

$ 9,600
Less: Net loss
1,200
$ 8,40
0

Balance Sheet
July 31, 2011

69
70
Liabilities
Assets
Cash
$1,400
Accounts receivable
600
Supplies
900
Equipment
Accounts payable
$ 2,000
7,500
Owners Equity
8,400

Total assets
$10,400
$10,40
0
owners equity
Analysis component:
Chapter 3
Analyzing and Recording

Transactions
EXERCISES

Cash
(a)
25,500
Accounts Payable
750 (b)
(d)
3,000 14,100 (e)
(h)
2,250
Balance
1,050 (g)
2,000 (i)
12,850
(e)
14,100
14,100 (c)
0 Balance
Ella Tims, Capital
25,500 (a)
25,500 Balance
Accounts Receivable

70
71
(f)
5,400
Balance
3,150
Ella Tims, Withdrawals
2,250 (h)
(i)
2,000
Balance
2,000
Office Supplies
(b)
750
Balance
750
Fees Earned
3,000 (d)
5,400 (f)
Office Equipment
(c)
14,100
Balance
14,100
8,400 Balance
Rent Expense
(g)
1,050
Balance
1,050

Cash

Neil Simon, Capital
71
72
Jan. 31
Feb.
700
4,000
Feb. 14
2,800
60
23
20
2,400
1,000
25
800
26
Bal.
800 Jan. 31
800 Bal.
Neil Simon, Withdrawals
40
Accounts Receivable
Jan. 31
1,200
Feb. 12
15,000
18
1,900
Bal.
2,400
Feb. 20
Jan. 31
-0-
Feb. 25
1,000
Bal.
1,000
Service Revenue
2,600 Jan. 31
15,700
2,800 Feb.
Prepaid Insurance
Jan. 31
-0-
Feb. 14
4,000
Bal.
4,000
15,000
12
1,900
18
22,300 Bal.
Wages Expense
Computer Equipment
Jan. 31
480
Feb. 10
7,600
Bal.
8,080
Jan. 31
1,080
Feb. 26
800
Bal.
1,880
Accounts Payable
Feb. 23
60
60 Jan. 31
-0- Bal.

NOTE: There is no entry to be recorded

for February 21.
72
73
Notes Payable
-0- Jan. 31
7,600 Feb. 10
7,600 Bal.
Analysis component:
Revenue recognition requires that when a transaction has occurred, it must be
recorded whether cash has been received or not. A transaction has occurred when
there has been an economic exchange when something has been given up or
received. On February 12, services were performed and, although cash will not be
received until a future date, a revenue must be recorded because an economic
exchange has occurred.

73
74

Nels Sigurdsen, Withdrawals
Cash
Mar. 31
1,800
Apr. 2
780
19
2,000
Bal.
400 Apr. 10
Mar. 31
500
300
15
Apr. 29
1,000
1,000
29
Bal.
1,500
2,880
Repair Revenue
14,000 Mar. 31
Accounts Receivable
Mar. 31
4,800
Apr. 18
1,200
Bal.
4,000
2,000 Apr. 19
780 Apr.
1,200
18
15,980 Bal.
Repair Supplies
Rent Expense
Mar. 31
1,400
Mar. 31
950
Apr. 9
890
Apr. 25
250
Bal.
Bal.
2,290
1,200
Equipment
Mar. 31
7,400
Apr. 15
300
Bal.
7,700
Accounts Payable
Apr. 10
400
500 Mar. 31
890 Apr.
250
9
25

74
75
1,240 Bal.
Nels Sigurdsen, Capital
2,350 Mar. 31
2,350 Bal.
NOTE: There is no entry to be recorded for April 5.

75
76

2.
GENERAL JOURNAL
Account Titles and Explanations
PR
Date
2011
July 1 Cash ....................................................
Sue Ware, Capital........................
To record investment by owner.
Page 1
Credit
Debit
101
301
5,000
10 Equipment ..........................................
Accounts Payable .......................
Purchased equipment on credit.
150
201
2,500
12 Cash ....................................................
Revenue .......................................
Performed services for cash.
101
401
10,000
14 Expenses ............................................
Cash .............................................
Paid expenses.
501
101
3,500
15 Accounts Receivable ........................

Revenue .......................................
Completed services on account.
106
401
1,500
31 Sue Ware, Withdrawals......................

Cash .............................................
Owner withdrew cash.
302
101
250

5,000
2,500
10,000
3,500
1,500
250
76
77
Exercise 3-4 (continued)

*Note: The student could use T-accounts or balance column format accounts as their
general ledger. Both are shown in this solution.
1 and 3.
Cash
July 1
5,000
12
10,000
Balance
11,250
101
3,500 July 14
250
Accts. Receivable
July 15
150
2,500
Accounts Payable
2,500
Sue Ware,
Capital
5,000
Sue Ware,
Withdrawals
July 31
106
1,500
Equipment
July 10
31
201
July 10
301
July 1
302
250

77
78
Revenue
401
10,000
1,500
15
11,500
Balance
Expenses
July 14
July 12
501
3,500

78
79

1 and 3.
Account No. 101
Cash
Date
Explanation
PR
Debit
Credit
Balance
2011
July
G1
5,000
5,000
12
G1
10,000
15,000
14
G1
3,500
11,500
31
G1
250
11,250
Account No. 106
Accounts Receivable
Date
Explanation
PR
Debit
Credit
Balance
2011
July 15
G1
1,500
1,500
Account No. 150
Equipment
Date
Explanation
PR
Debit
Credit
Balance
2011
July 10
G1
2,500
2,500
Account No. 201
Accounts Payable
Date
Explanation
PR
Debit
Credit
Balance
2011
July 10
G1
2,500
Account No. 301
Sue Ware, Capital
Date
Explanation

2,500
PR
Debit
Credit
Balance
79
80
2011
July
G1
5,000
Account No. 302
Sue Ware, Withdrawals
Date
Explanation
5,000
PR
Debit
Credit
Balance
2011
July 31
G1
250
250
Account No. 401
Revenue
Date
Explanation
PR
Debit
Credit
Balance
2011
July 12
G1
10,000
10,000
15
G1
1,500
11,500
Account No. 501
Expenses
Date
Explanation
PR
Debit
Credit
Balance
2011
July 14
G1
3,500
3,500

4.
Acct.
No.
101
106
150
201
301
302
DelaWare
Trial Balance
July 31, 2011
Account Title
Cash .................................................
Accounts receivable .......................
Equipment ........................................
Accounts payable ............................
Sue Ware, capital .............................
Sue Ware, withdrawals ....................

Debit
$11,250
1,500
2,500
250
Credit
$ 2,500
5,000
80
81
401
501
Revenue ...........................................
Expenses..........................................
Totals................................................
5.
3,5
00
11,500
$19,000 $19,000
DelaWare
Income Statement
Revenue ..........................................................
Expenses.........................................................
Net income ......................................................
$11,500
3,500
$8,000
DelaWare
Sue Ware, capital, July 1 ................................
$
0
$5,000
Net income.............................................
8,000 13,000
Total .............................................................
13,000
Less: Withdrawals by owner .........................
250
Sue Ware, capital, July 31 ..............................
$12,750

81
82

5. (concluded)
DelaWare
Balance Sheet
July 31, 2011
Assets
Cash ......................................................
$11,250
Accounts receivable .......................
1,500
Equipment .........................................
2,500
Liabilities
Accounts payable .....................................
$ 2,500
Owners Equity
Sue Ware, capital ......................................
12,750

Total assets ........................................
$15,250
owners equity ......................................
$15,250
Analysis component:
Accounts receivable result from credit sales to customers (debit accounts
receivable and credit a revenue). Sales, or revenue, is part of equity. As
revenues on account are recorded, assets on the one side of the accounting
equation increase and equity on the opposite side of the accounting equation
also increases. Therefore, accounts receivable are financed by, or created by,
an equity transaction.
Note: Students could choose any account number within the specified range.
Account
Number
Account Name
110
Cash
115
Accounts Receivable
160
Office Equipment
210
Accounts Payable
215
Unearned Revenue

82
83
310
Wes Bosse, Capital
320
Wes Bosse, Withdrawals
410
Consulting Revenues
510
Salaries Expense
520
Rent Expense
530
Utilities Expense

83
84

Exercise 3-6 (30 Minutes)

2.
Bal
Feb 1
10
Bal
Cash
110
Accounts Receivable
11,500 2,000 Feb 5 Bal
6,000
8,500
500
17
2,500 10,000
28
10,000
Unearned Revenue
500
2,500
3,000
Salaries Expense
Bal
10,000
Feb 28 10,000
Bal
20,000
215
Bal
Feb 10
Bal
510
115
Wes Bosse, Capital

310
9,500 Bal
Rent Expense
Bal
7,500
160
Accounts Payable
210
Feb 5 2,000 3,000 Bal
1,000 Bal
Wes Bosse, Withdrawals 320

Bal
2,000
Feb 17
500
Bal
2,500
Consulting Revenues
410
37,500 Bal
8,500 Feb 1
46,000 Bal
Bal
520
Office Equipment
12,500
Utilities Expense
Bal
1,000
530
91
85

1.
Date
2011
Feb. 1
General Journal
PR
Page G1
Credit
Debit
Cash ..................................................
Consulting Revenues ...............
Performed work for cash.
101
410
8,500
Accounts Payable ............................

Cash ...........................................
Paid account.
210
101
2,000
10
Cash ..................................................
Unearned Revenue....................
Received cash in advance.
101
215
2,500
12
No entry.
17
Wes Bosse, Withdrawals .................

Cash ...........................................
Owner withdrew cash.
320
101
500
28
Salaries Expense..............................
Cash ...........................................
Paid salaries.
510
101
10,000
8,500
2,000
2,500
500
10,000
3.
Acct.
No.
101
115
160
210
215
310
320
410
510
520
530
Bosse Advisors
Trial Balance
February 28, 2011
Account Title
Cash...............................................................
Accounts receivable ....................................
Office equipment ..........................................
Accounts payable .........................................
Unearned revenue ........................................
Wes Bosse, capital .......................................
Wes Bosse, withdrawals ..............................
Consulting revenues ....................................
Salaries expense...........................................
Rent expense ................................................
Utilities expense ...........................................

Debit
$ 10,000
6,000
12,500
2,500
20,000
7,500
1,000
Credit
$ 1,000
3,000
9,500
46,000
85
86
Totals .............................................................

$59,500
$59,500
86
87

4.
Assets
Cash ....................................
Accounts receivable ...........
Office equipment ................
Total assets.........................
1 Capital
= 9,500
+ 46,000
28,500
2,500
= 24,500
Bosse Advisers
Balance Sheet
February 28, 2011
$10,000
6,000
12,500
Liabilities
Unearned revenue...................
Total liabilities .........................
$28,500
Owners Equity
Wes Bosse, capital .................
owners equity .....................
$ 1,000
3,000
$ 4,000
24,5001
$28,500
Opening Balance
Revenues
Salaries, Rent and Utilities expenses
Withdrawals
Closing Balance
Analysis component:
Unearned revenue occurs when cash is received from a customer in advance of the work being
done. The collection is not recorded as a revenue because it has not been earned until the work
is done. Unearned revenue is therefore a liability because the business owes the customer a
service (or work). For example, WestJet receives cash from customers in advance of the
customer actually flying. These cash collections are recorded as unearned revenue, a liability,
because the cash doesnt belong to WestJet until they have earned it which occurs when the
customer takes their flight.

87
88

a.
Cash ............................................................................................................
7,000
Equipment ...............................................................................................
5,600
Automobiles ............................................................................................
11,000
Jerry Steiner, Capital ................................................

23,600
Owner invested cash, an automobile and equipment in the business.
b. Prepaid Insurance ............................................................
Cash...................................................................................................
3,600
3,600
Purchased insurance coverage in advance.
c.
Office Supplies .................................................................
Cash...................................................................................................
600
600
Purchased supplies with cash.
d. Office Supplies .................................................................
Equipment ...............................................................................................
200
9,400
Accounts Payable.........................................................................
9,600
Purchased supplies and equipment on credit.
e.
Cash...................................................................................
Delivery Services Revenue ......................................................
2,500
2,500
Received cash from customer.
f.
Accounts Payable .............................................................
Cash...................................................................................................
2,400
2,400
Made payment on payables.
g. Gas and Oil Expense ........................................................
Cash...................................................................................................
700
700
Paid for gas and oil.

88
89

2011
April 5 Cash ......................................................................................................
1,500
Surgical Revenues ...............................................
1,500
Performed surgery and collected cash.
8 Supplies .......................................................................
3,000
Accounts Payable ..................................................................
3,000
Purchased surgical supplies on credit.
15 Salaries Expense .............................................................................
57,000
Cash ............................................................................................
57,000
Paid salaries.
20 Accounts Payable ............................................................................
3,000
Cash ............................................................................................
3,000
Paid for the credit purchase of April 8.
21 No entry.
22 Accounts Receivable ......................................................................
9,000
Surgical Revenues .................................................................
9,000
Performed six surgeries on credit;

$1,500 x 6 = $9,000
29 Cash ......................................................................................................
Accounts Receivable .............................................................

3,000
3,000
89
90
Collection from credit customers of April 22.
30 Utilities Expense .............................................................................

Cash ............................................................................................
1,800
1,800
Paid the April utilities.

90
91

b. Accounts Receivable..........................................................
Services Revenue .......................................................
Provided services on credit.
2,700
c.
3,150
Cash.....................................................................................
Services Revenue .......................................................
Provided services for cash.
2,700
3,150
Revenues are inflows of assets (or decreases in liabilities) received in exchange for
goods or services provided to customers. The other transactions did not create revenues
for the following reasons:
a.
This transaction brought in cash, but it was an investment in the company.
d. This transaction brought in cash, but it also created a liability because the services
have not yet been provided to the client.
e.
This transaction changed the form of the asset from accounts receivable to cash.
Total assets were not increased. Revenue was not generated.
f.
This transaction brought cash into the company and increased assets, but it also
increased a liability by the same amount.

b. Salaries Expense ..............................................................
Cash ...........................................................................
Paid the salary of the receptionist.
1,125
d. Utilities Expense ...............................................................

Cash ...........................................................................
Paid the utilities for the office.
930
1,125
930
Expenses are outflows or using up of assets (or the creation of liabilities) that occur in
the process of providing goods or services to customers. The transactions labelled a, c,
and e were not expenses for the following reasons:
a.
This transaction decreased assets in settlement of a previously existing liability.

Thus, the using up of assets did not reduce owners equity.
c.
This transaction was the purchase of an asset. The form of the companys assets
changed, but total assets did not change, and the equity did not decrease.
e.
This transaction was a distribution of cash to the owner. Even though owners equity
decreased, the decrease did not occur in the process of providing goods or services
to customers.

91
92

Parts a and b:
Account No. 101
Cash
Date
Explanation
PR
Debit
Credit
Balance
2010
Dec.
3
1 Beginning balance
850
2011
Jan.
G1
3,500
4,350
2
0
G1
3
1
G1
3
1
G1
3,000
4,350
3
1
G1
750
3,600
2,000
5,000
7,350
Account No. 106
Accounts Receivable
Date
Explanation
2,350
PR
Debit
Credit
Balance
2010
Dec.
3
1 Beginning balance
300
2011
Jan.
1
2
G1
3
1
G1

9,000
9,300
5,000
4,300
92
93
Account No. 167
Equipment
Date
Explanation
PR
Debit
Credit
Balance
2010
Dec.
3
1 Beginning balance
1,500
2011
Jan.
2
0
G1
12,000
Account No. 201
Accounts Payable
Date
Explanation
13,500
PR
Debit
Credit
Balance
2010
Dec.
3
1 Beginning balance
325
2011
Jan.
2
0
G1
10,000
Account No. 301
Jay Walker, Capital
Date
Explanation
10,325
PR
Debit
Credit
Balance
2010
Dec.
3
1 Beginning balance
2,325
2011
Jan.

G1
3,500
5,825
93
94
Exercise 3-11 (Parts a and b continued)

Account No. 302
Jay Walker, Withdrawals
Date
Explanation
PR
Debit
Credit
Balance
2010
Dec.
3
1 Beginning balance
300
2011
Jan.
3
1
G1
750
Fees Earned
Date
Explanation
1,050
Account No. 401

PR
Debit
Credit
Balance
2010
Dec.
3
1 Beginning balance
1,800
2011
Jan.
1
2
G1
9,000
Salaries Expense
Date
Explanation
10,800
Account No. 622

PR
Debit
Credit
Balance
2010
Dec.
3
1 Beginning balance
1,500
2011
Jan.
3
1

G1
3,000
4,500
94
95
Exercise 3-11 (Parts a and b continued)

Note: After posting the journal entries, the PR column in the General Journal would appear as
follows:
General Journal
Date
Page 1
PR
Debit
Credit
2011
Jan. 1 Cash ........................................................................................................ 10
1
3,500
Jay Walker, Capital.................................................................. 30

1
3,500
Additional owner investment.

12 Accounts Receivable ........................................................................ 10
6
9,000
Fees Earned ............................................................................... 40

1
9,000
Performed work for a customer on account.

20 Equipment ........................................................................................... 16
7
12,000
Cash .............................................................................................. 10
1
2,000
Accounts Payable .................................................................... 20

1
10,000
Purchased equipment paying cash and the

balance on credit.
31 Cash ........................................................................................................ 10
1
5,000
Accounts Receivable .............................................................. 10

6
5,000
Collected cash from credit customer.

31 Salaries Expense ............................................................................... 62

3,000
95
96
2
Cash .............................................................................................. 10
1
3,000
Paid month end salaries.

31 Jay Walker, Withdrawals ............................................................... 30
2
750
Cash .............................................................................................. 10
1
750
Jay Walker withdrew cash for personal use.

Analysis component:
All of the details regarding a transaction, such as serial numbers or invoice numbers,
form part of the journal entry recorded in the journal. The general ledger does not
accommodate these kind of very necessary details. Therefore, we need to journalize to
ensure important details are readily available.
The general ledger summarizes by account all of the transactions recorded in the journal.
For example, without the ledger, we would not be able to determine the balance in cash
without going through the journal and adding/subtracting all of the individual
transactions. The ledger allows us to have account balance information.
In summary, although it appears that journalizing and posting are recording the same
information twice, the journal and ledger each serve different and important functions in the
accounting system.

General Journal
Date
Page G1
PR
Debit
10
1
15,000
Credit
2011
Aug.
Cash............................................................

96
97
Photography Equipment .....................................
16
7
Tara Harper, Capital ...........................
30
1
17,000
32,000
Owner invested in the business.

1
Prepaid Rent.............................................................
13
1
Cash ....................................................................
10
1
6,500
6,500
Rented studio space.

5
Office Supplies .........................................................
12
4
Cash ....................................................................
10
1
1,800
1,800
Purchased office supplies.

20
Cash..............................................................................
10
1
Photography Fees Earned .........................
40
1
9,200
9,200
Collected photography fees.

31
Utilities Expense..........................................
69
0
Cash ....................................................
10
1
1,100
1,100
Paid for August utilities.
Note: The account numbers in the PR column above would be included only during the
posting of these journal entries into the ledger accounts in Exercise 3-13.

97
98

Cash
Date
Explanation
Account No. 101

PR
Debit
Credit
Balance
G1
15,000
G1
6,500
8,500
G1
1,800
6,700
2
0
G1
3
1
G1
2011
Aug.
9,200
Explanation
15,900
1,100
14,800
Account No. 124
Office Supplies
Date
15,000
PR
Debit
Credit
Balance
2011
Aug.
G1
1,800
Account No. 131
Prepaid Rent
Date
Explanation
1,800
PR
Debit
Credit
Balance
2011
Aug.
G1
6,500
Account No. 167
Photography Equipment
Date
Explanation
6,500
PR
Debit
G1
17,000
Credit
Balance
2011
Aug.

17,000
98
99
Account No. 301
Tara Harper, Capital
Date
Explanation
PR
Debit
Credit
Balance
2011
Aug.
G1
32,000
Account No. 401
Photography Fees Earned
Date
Explanation
32,000
PR
Debit
Credit
Balance
2011
Aug.
2
0
G1
9,200
Utilities Expense
Date
Explanation
9,200
Account No. 690

PR
Debit
Credit
Balance
2011
Aug.
3
1

G1
1,100
1,100
99
100
THE PIXEL SHOP

Trial Balance
August 31, 2011
Acct
No.
Account Title
Debit
101 Cash ......................................................
$ 14,800
124 Office supplies ..................................
1,800
131 Prepaid rent ......................................
6,500
167 Photography equipment ..............
17,000
Credit
301 Tara Harper, capital .......................
$32,000
401 Photography fees earned .............
9,200
690 Utilities expense ..............................
1,100
Totals ...................................................
$41,200
$41,200
Analysis component:
The trial balance is an internal working paper used to verify that debits and
credits in the general ledger are equal and to review account balances. The trial
balance format does not readily communicate information such as financial
performance and financial position, information that is desired by external
decision makers. Financial statements are used for external reporting because the
formats of these communicate information desired by external users. For example,
the income statement reports financial performance while the balance sheet
reports financial position.

100
101

Aug. 1
20
Bal
Cash
101
15,000 6,500 Aug. 1
9,200 1,800
5
1,100
31
14,800
Photography Equipment 167

Aug. 1
17,000
Photography Fees Earned 401

9,200 Aug. 20
Aug. 5
Office Supplies
1,800
124
Aug. 1
Prepaid Rent
6,500
131
Tara Harper, Capital 301

32,000 Aug. 1
Utilities Expense
Aug. 31 1,100
690
THE PIXEL SHOP

Trial Balance
August 31, 2011
Acct.
No.
Account Title Debit
Credit
101
Cash .........................................................................
$ 14,800
124
Office supplies.....................................................
1,800
131
Prepaid rent .........................................................
6,500
167
Photography equipment .................................
17,000
301
Tara Harper, capital ..........................................
$32,000
401
Photography fees earned................................
9,200
690
Utilities expense .................................................
1,100
Totals ......................................................................
$41,200
$41,200
Analysis component:
The trial balance is an internal working paper used to verify that debits and credits in the general
ledger are equal and to review account balances. The trial balance format does not readily
communicate information such as financial performance and financial position, information that is
desired by external decision makers. Financial statements are used for external reporting
because the formats of these communicate information desired by external users. For example,

101
102
the income statement reports financial performance while the balance sheet reports financial
position.

102
103

Hogans Consulting
Income Statement
For Year Ended December 31, 2011
Operating expenses:
Wages expense..........................................
Rent expense .............................................
Total operating expenses ....................
Net loss ...........................................................
$46,000
$37,000
14,000
51,000
$ 5,000
Hogans Consulting
Lisa Hogan, capital, January 1 ......................

Total .............................................................
Less: Withdrawals by owner .........................
Net loss .................................................
Lisa Hogan, capital, December 31 .................
Assets
$2,000
5,000
Hogans Consulting
Balance Sheet
December 31, 2011
$
0
50,000
$50,000
7,000
$43,000
Liabilities
Cash ......................................................
$12,000
Accounts payable .....................................
$ 800
Cleaning supplies ............................
8,300
Notes payable ............................................
53,500
Prepaid rent ......................................
5,000
Total liabilities ..........................................
$54,300
Equipment .........................................
72,000
Owners Equity
Lisa Hogan, capital...................................
43,000

Total assets ........................................
$97,300
owners equity ......................................
$97,300
Analysis component:
Losses cause equity to decrease. If equity decreases, either assets have to decrease and/or liabilities
must increase to keep the balance sheet in balance. Therefore, if Hogans Consulting continues to
experience losses, there are two short-term alternatives available to prevent a decrease in assets.
First, the business could borrow which would increase liabilities and temporarily increase assets until
payments had to be made. Longer term, the cash to make the payments cannot be borrowed. Second,
Copyright
2007 by
McGraw-Hill
rights reserved.
Lisa Hogan,
the
owner,Ryerson
could Limited.
investAlladditional
assets into the business which would increase equity
and assets. However, for the long-term, the owner does not want to support the business through 103
continual investments; the business must be able to support itself through positive performance (net
income).
104

JenCo
Income Statement
Revenues:
Service revenue .................................................................................................
$1,900
Operating expenses:
Salaries expense ................................................................................................
$ 800
Interest expense................................................................................................
10
Total operating expenses ..........................................................................
810
Net income................................................................................................................
$1,090
JenCo
Marie Jensen, capital, March 1 ..........................................................................
Add: Investment by owner ................................................................................
$2,050
Net income .....................................................................................................
1,090
$3,140
Total .......................................................................................................................
$3,140
Less: Withdrawal by owner ..............................................................................
1,500
Marie Jensen, capital, March 31 .......................................................................
$1,640
JenCo
Balance Sheet
March 31, 2011
Liabilities
Assets
Cash ................................................... $1,000
Accounts payable .............................. $ 260
Unearned service revenues ......................
950

250
104
105
Prepaid insurance........................
300
Equipment ......................................
700
Notes payable .................................................
800
Total liabilities .......................................... $1,310
Owners Equity
Marie Jensen, capital....................................
Total assets..................................... $2,950
1,640
Total liabilities and owners equity ....... $2,950

105
106

Bentley Marketing Services
Income Statement
Revenues:
Fees earned ...........................................................................................
$170,000
Operating expenses:
Wages expense .....................................................................................
$166,000
Office supplies expense ....................................................................
7,000
Total operating expenses ..............................................................
173,000
Net loss...........................................................................................................
$ 3,000

Dee Bentley, capital, March 1 ................................................................
$112,000
*
Add: Investment by owner ....................................................................
10,000
Total ..........................................................................................................
$122,000
Less: Withdrawal by owner ..................................................................
$ 18,000
Net loss ...............................................................................................
3,000
Dee Bentley, capital, March 31 .............................................................
21,000
$101,000

Balance Sheet
March 31, 2011
Liabilities
Assets
Cash ...........................
$ 30,000
Accounts payable ...........................
$ 46,000
Accounts receivable ......
14,000
Notes payable ..............................................
146,000

106
107
Office supplies .................
3,000
Total liabilities .......................................... $ 192,000
Building..............................
80,000
Land ....................................
116,000
Owners Equity
Machinery .........................
50,000
Dee Bentley, capital ......................................
101,000
Total assets.......................
$293,000
Total liabilities and owners equity .......
$293,000
*$122,000 March 31/11 Balance - $10,000 invested in March = $112,000 March 1/11
Balance

107
108
Description
a. A $2,400 debit to Rent Expense
was posted as a $1,590 debit.
b. A $42,000 debit to Machinery
was posted as a debit to
Accounts Payable.
(1)
(2)
Difference
Column
between Debit with the
and Credit
Larger
Columns
Total
$810
$0
(3)
Identify
account(s)
incorrectly
stated
(4)
Amount that
account(s) is
overstated or
understated
Credit
Rent
Expense
Rent Expense is
understated by
$810
Machinery
Machinery is
understated by
$42,000 and
Accounts Payable
is understated by
$42,000
Accounts
Payable
c. A $4,950 credit to Services
Revenue was posted as a $495
credit.
$4,455
Debit
Services
Revenue
Services Revenue
is understated by
$4,455
d. A $1,440 debit to Store

Supplies was not posted at all.
$1,440
Credit
Store
Supplies
Store Supplies is
understated by
$1,440
Prepaid
Insurance
Prepaid Insurance
is understated by
$2,250 and
Insurance Expense
is overstated by
$2,250
e. A $2,250 debit to Prepaid

Insurance was posted as a
debit to Insurance Expense.
$0
Insurance
Expense
f.
A $4,050 credit to Cash was

posted twice as two credits to
the Cash account.
$4,050
g. A $9,900 debit to the owners

withdrawals account was
debited to the owners capital
account.
$0

Credit
Cash
Cash is
understated by
$4,050
Owners
Capital
Owners Capital
account is
understated by
$9,900
Owners
Withdrawals
Owners
Withdrawals is
understated by
$9,900
108
109

109
110

a. 1. Dr = Cr
2. Accounts Receivable is understated (too low) by $3,500 and Revenue is
understated by $3,500.
b. 1. Dr = Cr
2. Accounts Payable is overstated (too high) by $600 and Cash is
overstated by $600.
c. 1. Dr Cr
2. Cash is overstated by $180.
d. 1. Dr Cr
2. Accounts Receivable is overstated.
e. 1. Dr = Cr
2. Accounts Payable is understated by $2,000 and Equipment is
understated by $2,000.
Case A:
1. Subtract total debits in the trial balance from total credits
5,010 4,290 = 720
2. Divide the difference by 9
720 9 = 80
3. The quotient equals the difference between the two transposed numbers.
The difference between the correct number and the incorrect number
is 80.
4. The number of digits in the quotient tells us the location of the transposition.
Look for a difference of 8 between the second number from the right
and the third number from the right.
Through a process of elimination, the incorrect value is Accounts Payable of $190.

The correct value must be $910.
Proof: Recalculate the trial balance replacing $910 for the incorrect $190 and the trial
balance now balances at $5,010.

110
111

Case B:
34,400 28,100 = 6,300
2. Divide the difference by 9 to reveal a slide error
6,300 9 = 700
3. The quotient identifies a slide error and equals the correct value.
Through a process of elimination, the incorrect value is Withdrawals for $7,000. The
correct value must be $700.
Proof: Recalculate the trial balance replacing $700 for the incorrect $7,000 and the trial
balance now balances at $28,100.
Case C:
942 906 = 36
2. Divide the difference by 9
36 9 = 4
3. The quotient equals the difference between the two transposed numbers.
The difference between the correct number and the incorrect number
is 4.
4. The number of digits in the quotient tells us the location of the transposition.
Look for a difference of 4 between the first number from the right and
the second number from the right.
Through a process of elimination, the incorrect value is Cash for $59. The correct
value must be $95.
Proof: Recalculate the trial balance replacing $95 for the incorrect $59 and the trial
balance now balances at $942.

111
112
Chapter 4
Adjusting Accounts for

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

112
113
2011
a) Dec.
31 Amortization Expense, Equipment ..........................

Accumulated Amortization, Equipment ............
To record amortization expense for the year.
32,000
b)
31 Insurance Expense .................................................

Prepaid Insurance ............................................
To record insurance coverage that expired
during the year; $14,000 $2,080.
11,920
c)
31 Office Supplies Expense .........................................

Office Supplies .................................................
To record office supplies consumed during
the year; $600 + $5,360 $708.
5,252
d)
31 Unearned Fee Revenue ..........................................

Fee Revenue ...................................................
To record earned portion of fee received in
advance; $30,000 2/3 = $20,000.
20,000
e)

during the year.
9,200
f)
31 Wages Expense ......................................................

Wages Payable ................................................
To record wages accrued but not yet paid.
8,000
6 Wages Payable .......................................................

Wages Expense ......................................................
Cash ...............................................................
To record the payment of wages.
8,000
12,000
2012
g) Jan.

32,000
11,920
5,252
20,000
9,200
8,000
20,000
113
114

2011
a)
Dec.
31 Unearned Revenue ......................................................
16,00
0
Revenue ...........................................................................
16,000
To record earned revenue;

$18,500 - $2,500 = $16,000.
31 Amortization Expense, Building .................................
b)
10,50
0
Accumulated Amortization, Building ....................
10,500
To record amortization expense.
c)
31 Spare Parts Expense .............................................................
350
Spare Parts Inventory .................................................
350
To record the use of spare parts inventory;

$450 - $100 = $350.
d)
31 Accounts Receivable ............................................................
3,550
Revenue ...........................................................................
3,550
To record accrued revenue.
e)
31 Utilities Expense ....................................................................

Utilities Payable (or Accounts Payable) ...............
1,300
1,300
To record accrued utilities.
2012

114
115
f)
Jan.
4 Cash ............................................................................................
3,550
Accounts Receivable .....................................................
3,550
To record collection of accrued revenues.
g)
14 Utilities Payable (or Accounts Payable) ........................
1,300
Cash ....................................................................................
1,300
To record payment of accrued utilities.

2011
a)
Sept.
30 Unearned Revenue .............................................................
12,00
0
Revenue .........................................................................
12,000
To record earned revenue.
30 Amortization Expense, Furniture .....................................................................
b)
150
Accumulated Amortization, Furniture ...............
150
To record amortization for one month;

7,200/4 yrs = 1,800/yr; 1,800/12 months =
150/month.

c)
Sept.
30 Office Supplies Expense ..................................................
5,000
Office Supplies ...........................................................
5,000
To record the use of office supplies.
d)
30 Accounts Receivable ........................................................

Revenue .......................................................................

28,00
0
28,000
115
116
e)
30 Rent Expense ......................................................................
7,000
Rent Payable (or Accounts Payable) .................
7,000
To record accrued rent.
f)
Oct.
3 Cash ...................................................................................
28,00
0
Accounts Receivable............................................
28,000
To record collection of accrued revenue.
g)
4 Rent Payable (or Accounts Payable) .....................
7,000
Cash ...........................................................................
7,000
To record payment of accrued rent.

2011
a)
Mar.
31 Unearned Rent .......................................................................................................... 7,500

Rent Earned ..........................................................................
7,500
Earned five months rent previously paid in

advance;
$1,500 x 5 = $7,500.
b)
31 Rent Receivable ........................................................................... 2,700

Rent Earned ..........................................................................
2,700
Earned two months rent that has not yet

been collected; $1,350 x 2 = $2,700.

116
117
c)
Apr.
22 Cash .................................................................................................. 4,050

Rent Receivable ...................................................................
2,700
Rent Earned ..........................................................................
1,350
Collected rent for February, March, and April.

117
118

2011
a)
Dec.
31 Accounts Receivable ...........................................................................................
2,000
Fees Earned (or Revenue) ...........................................
2,000
To record accrued fees earned.

b)
31 Rent Expense ............................................................................
8,000
Prepaid Rent ....................................................................
8,000
To record expired rent.

c)
31 Amortization Expense, Machinery ....................................
400
Accumulated Amortization, Machinery ..................
400

d)
31 Unearned Fees ..........................................................................
2,800
2,800
To record fees earned.

e)
31 Salaries Expense ......................................................................

Salaries Payable ..............................................................
5,000
5,000
To record accrued salaries.

a. $1,650 (300 + 2,100 750 = 1,650)
b. $5,700 (1,600 + 5,400 1,300 = 5,700)
c. $10,080 (9,600 + 1,840 1,360 = 10,080)
d. $1,375 (6,575 + 800 6,000 = 1,375)
Proof:
118
119
(a)
(b)
Supplies on handJanuary 1 ............................
$ 300
$1,600
$ 1,360
$1,375
Supplies purchased during the year ...............
2,100
5,400
10,080
6,000
Total supplies available ......................................
$2,400
$7,000
$11,440
$7,375
Supplies on handDecember 31 .....................

Supplies expense for the year ...........................

(750)
$1,650
(5,700)
$1,300
(c)
(1,840)
$ 9,600
(d)
(800)
$6,575
119
120

Adjusting entry:
2012
Dec. 31
Wages Expense ..................................................................

Wages Payable ...........................................................
Adjusting entry to record accrued wages for one
day; 5 $200.
1,000
Wages Expense ..................................................................

Wages Payable ...................................................................
Cash ............................................................................
Paid employees' accrued and current wages;
5 employees x $200/day x 4 days = $4,000.
3,000
1,000
1,000
Payday entry:
2013
Jan.
4,000

201
1
a)
Apr.
30 Interest Expense ........................................................
2,080
Interest Payable ..........................................................
2,080
To record accrued interest expense;

0.8% $780,000 10/30.
May
20 Interest Payable...................................................................
2,080
Interest Expense ..................................................................
4,160
Cash .................................................................................
6,240
To record payment of accrued and current

expense; 0.8% $780,000 20/30.
201
1
b)
Apr.
30 Salaries Expense ..................................................................

3,600
120
121
Salaries Payable ..........................................................
3,600
To record accrued salaries;

$9,000/5 days = $1,800/day;
2 days x $1,800 = $3,600.
May
3 Salaries Payable...................................................................
3,600
Salaries Expense ..................................................................
5,400
Cash .................................................................................
9,000

salaries; 3 days x $1,800 = $5,400.

201
1
c)
Apr.
30 Legal Fees Expense .............................................................
2,500
Legal Fees Payable .....................................................
2,500
To record accrued legal fees.
May
12 Legal Fees Payable ..............................................................
2,500
Cash .................................................................................
2,500
To pay accrued legal fees.

2011
Dec. 31
Accounts Receivable ..........................................................

Fees Earned ................................................................
To record unbilled fees; 30% $12,000.
3,600
31
Unearned Fees ...................................................................

Fees Earned ................................................................
8,400

3,600
8,400
121
122
To record earned fees that had been

collected in advance; 70% $12,000.
31
Amortization Expense, Computers ......................................

Accumulated Amortization, Computers ........................
To record amortization on computers.
3,000
31
Amortization Expense, Office Furniture...............................

Accumulated Amortization,
Office Furniture ........................................................
To record amortization on office furniture.
3,500
31
Salaries Expense ................................................................

Salaries Payable..........................................................
4,900
31
Insurance Expense .............................................................

Prepaid Insurance .......................................................
To record expired prepaid insurance.
2,600
31
Office Supplies Expense .....................................................

Office Supplies ............................................................
To record use of office supplies.
960
31
Utilities Expense ...................................................................

Utilities Payable .............................................................
To record unpaid utility costs.
3,000
3,500
140
4,900
2,600
960
140

Analysis component:
The GAAP of matching and revenue recognition requires that adjusting entries
be recorded at the end of each accounting period to ensure revenues and
expenses are allocated to the period in which they were incurred. If the
December 31, 2011 adjustments for Javelin Company were not recorded,
revenues would be understated by $12,000; expenses would be understated
by $15,100; and net income would be overstated by the difference of $3,100
($15,100 - $12,000 = $3,100).

122
123
Ayotte Music
Partial Work Sheet
February 28, 2011
Unadjusted
Trial Balance
Account
Debit
Cash...........................................................
5,000
Accounts receivable ............................
4,500
Prepaid insurance ...............................
700
Credit
Adjustments
Debit
Credit
c) 1,400
Credit
5,900
b) 250
450
12,000
6,000
equipment ........
Debit
5,000
Equipment .............................................. 12,000

Accumulated amortization,
Adjusted Trial
Balance
a)2,400
8,400
Accounts payable .................................
1,200
1,200
Jane Adams, capital .............................
9,000
9,000
Jane Adams, withdrawals..................
3,000
Revenues .................................................
3,000
45,000
Amortization expense, equipment
c) 1,400
a)2,400
2,400
Salaries expense ................................... 29,000

Insurance expense...............................
7,000
Totals ....................................................... 61,200 61,200

46,400
29,000
b) 250
4,050
7,250
4,050
65,000 65,000
123
124

Ayotte Music
Income Statement
For Year Ended February 28, 2011
Revenue........................................................................................................
$46,400
Operating expenses:
Salaries expense ...................................................................................
$29,000
Insurance expense ...............................................................................
7,250
Amortization expense, equipment ................................................
2,400
38,650
Net income ..................................................................................................
$ 7,750
Ayotte Music
Jane Adams, capital, March 1 ................................................................

Add: Net income ........................................................................................
$ 9,000
7,750
Total..........................................................................................................
$16,750
Less: Withdrawal by owner..................................................................
3,000
Jane Adams, capital, February 28 .......................................................
$13,750
Ayotte Music
Balance Sheet
February 28, 2011
Assets
124
125
Cash................................................................................................................
$ 5,000
Accounts receivable .................................................................................
5,900
Prepaid insurance ....................................................................................
450
Office equipment.......................................................................................
$12,000
Less: Accumulated amortization, office equipment ...............
8,400
Total assets .................................................................................................
3,600
$14,950
Liabilities
Accounts payable ......................................................................................
$ 1,200
Owners Equity
Jane Adams, capital ..................................................................................
13,750
Total liabilities and owners equity ...................................................
$14,950

125
126

Analysis component:
The GAAP which requires the preparation of financial statements is the time period
principle. The time period principle assumes that an organizations activities can be
divided into specific time periods. Since information must reach decision makers
frequently and promptly, the accounting system needs to prepare reports regularly.
The standard reporting period is one year although many companies report
quarterly.
*Exercise 4-13
a)
Cash ............................................................................
Accounts Payable ........................................................

1,800
1,800
126
127
To correct the original entry.
OR
1,800
Cash ...........................................................................
1,800
Office Supplies ...................................................
To reverse the incorrect entry.
1,800
Office Supplies ..........................................................

127
128
1,800
Accounts Payable ..............................................
To journalize the correct entry.

b)
Revenue ......................................................................
Accounts Receivable ..................................................

4,500
4,500
128
129
OR
4,500
Revenue .....................................................................
4,500
Cash ....................................................................
4,500
Cash ...........................................................................

129
130
4,500
Accounts Receivable .........................................

c)
Withdrawals .................................................................
Salaries Expense..........................................................

1,500
1,500
130
131
OR
Cash ............................................................................
1,500
Salaries Expense........................................................
1,500
Withdrawals ..........................................................................

1,500
131
132
Cash ....................................................................
1,500

132
133
*Exercise 4-13 (concluded)

d)
Accounts Receivable ....................................................................
750
Revenue .............................................................................
750

OR
Accounts Receivable ..............................................................................
750
Cash ....................................................................................................
750
Cash.............................................................................................
750
Revenue ............................................................................................
750
Analysis component:
If the error in (b) is not corrected, revenue and net income on the income
statement will be overstated each by $4,500. On the balance sheet, assets
(accounts receivable) and equity will be overstated each by $4,500.
*Exercise 4-14 (30 minutes)

2011
a) Dec.
Supplies Expense ........................................................

Cash .....................................................................
Purchased supplies.
b)
2 Insurance Expense ......................................................
Cash .....................................................................
Paid insurance premiums.
c)
15 Cash ............................................................................
Remodelling Fees Earned ....................................
Received fees for work to be done.
Adjusting entries:
2011
d) Dec.31 Supplies ..............................................................................
Supplies Expense .................................................
Adjusted expense for unused supplies on hand.
e)
31 Prepaid Insurance .......................................................
6,000
2,880
24,000
3,840
6,000
2,880
24,000
3,840
2,400
133
134
f)
Insurance Expense ...............................................

Adjusted expense for unexpired coverage;
$2,880 $480.
31 Remodelling Fees Earned ...........................................
Unearned Remodelling Fees ................................
Adjusted revenues for unfinished projects;
$24,000 $7,200.

2,400
16,800
16,800
134
135

a) Initial credit recorded in Unearned Fees account:
July
1
Cash ....................................................................
Unearned Fees .............................................
2,000
Cash ....................................................................
Unearned Fees .............................................
8,400
12
Unearned Fees ....................................................

Fees Earned .................................................
Completed work for customer.
2,000
18
Cash ....................................................................
Unearned Fees .............................................
7,500
27
Unearned Fees ....................................................

Fees Earned .................................................
8,400
31
No entry.
b) Initial credit recorded in Fees Earned account:

July
1
Cash ....................................................................
Fees Earned .................................................
6
Cash ....................................................................
Fees Earned .................................................
12
No entry.
18
Cash ....................................................................
Fees Earned .................................................
27
No entry.
31
Fees Earned ........................................................

Unearned Fees .............................................

2,000
8,400
7,500
7,500
2,000
8,400
2,000
7,500
8,400
2,000
8,400
7,500
7,500
135
136
Adjusting entry to reflect unearned fees for unfinished job.

c)
Under the first method:

Unearned fees = $2,000 + $8,400 $2,000 + $7,500 $8,400 = $7,500
Fees earned = $2,000 + $8,400 = $10,400
Under the second method:
Unearned fees = $7,500
Fees earned = $2,000 + $8,400 + $7,500 $7,500 = $10,400
Chapter 4
Adjusting Accounts for

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

136
137

2011
a) Dec.
31 Amortization Expense, Equipment ..........................

Accumulated Amortization, Equipment ............
To record amortization expense for the year.
32,000
b)

during the year; $14,000 $2,080.
11,920
c)
31 Office Supplies Expense .........................................

Office Supplies .................................................
To record office supplies consumed during
the year; $600 + $5,360 $708.
5,252
d)
31 Unearned Fee Revenue ..........................................

Fee Revenue ...................................................
To record earned portion of fee received in
advance; $30,000 2/3 = $20,000.
20,000
e)

during the year.
9,200
f)
31 Wages Expense ......................................................

Wages Payable ................................................
To record wages accrued but not yet paid.
8,000
6 Wages Payable .......................................................

Wages Expense ......................................................
Cash ...............................................................
To record the payment of wages.
8,000
12,000
2012
g) Jan.

32,000
11,920
5,252
20,000
9,200
8,000
20,000
137
138

2011
a)
Dec.
31 Unearned Revenue ......................................................
16,00
0
Revenue ...........................................................................
16,000
To record earned revenue;

$18,500 - $2,500 = $16,000.
31 Amortization Expense, Building .................................
b)
10,50
0
Accumulated Amortization, Building ....................
10,500
c)
31 Spare Parts Expense .............................................................
350
Spare Parts Inventory .................................................
350
To record the use of spare parts inventory;

$450 - $100 = $350.
d)
31 Accounts Receivable ............................................................
3,550
Revenue ...........................................................................
3,550
e)
31 Utilities Expense ....................................................................

Utilities Payable (or Accounts Payable) ...............
1,300
1,300
To record accrued utilities.
2012

138
139
f)
Jan.
4 Cash ............................................................................................
3,550
Accounts Receivable .....................................................
3,550
To record collection of accrued revenues.
g)
14 Utilities Payable (or Accounts Payable) ........................
1,300
Cash ....................................................................................
1,300
To record payment of accrued utilities.

2011
a)
Sept.
30 Unearned Revenue .............................................................
12,00
0
Revenue .........................................................................
12,000
To record earned revenue.
30 Amortization Expense, Furniture .....................................................................
b)
150
Accumulated Amortization, Furniture ...............
150
To record amortization for one month;

7,200/4 yrs = 1,800/yr; 1,800/12 months =
150/month.

c)
Sept.
30 Office Supplies Expense ..................................................
5,000
Office Supplies ...........................................................
5,000
To record the use of office supplies.
d)

Revenue .......................................................................

28,00
0
28,000
139
140
e)
30 Rent Expense ......................................................................
7,000
Rent Payable (or Accounts Payable) .................
7,000
To record accrued rent.
f)
Oct.
3 Cash ...................................................................................
28,00
0
Accounts Receivable............................................
28,000
To record collection of accrued revenue.
g)
4 Rent Payable (or Accounts Payable) .....................
7,000
Cash ...........................................................................
7,000
To record payment of accrued rent.

2011
a)
Mar.
31 Unearned Rent .......................................................................................................... 7,500

Rent Earned ..........................................................................
7,500
Earned five months rent previously paid in

advance;
$1,500 x 5 = $7,500.
b)
31 Rent Receivable ........................................................................... 2,700

Rent Earned ..........................................................................
2,700
Earned two months rent that has not yet

been collected; $1,350 x 2 = $2,700.

140
141
c)
Apr.
22 Cash .................................................................................................. 4,050

Rent Receivable ...................................................................
2,700
Rent Earned ..........................................................................
1,350
Collected rent for February, March, and April.

141
142

2011
a)
Dec.
31 Accounts Receivable ...........................................................................................
2,000
2,000
To record accrued fees earned.

b)
31 Rent Expense ............................................................................
8,000
Prepaid Rent ....................................................................
8,000
To record expired rent.

c)
31 Amortization Expense, Machinery ....................................
400
Accumulated Amortization, Machinery ..................
400

d)
31 Unearned Fees ..........................................................................
2,800
2,800
To record fees earned.

e)
31 Salaries Expense ......................................................................

Salaries Payable ..............................................................
5,000
5,000

a. $1,650 (300 + 2,100 750 = 1,650)
b. $5,700 (1,600 + 5,400 1,300 = 5,700)
c. $10,080 (9,600 + 1,840 1,360 = 10,080)
d. $1,375 (6,575 + 800 6,000 = 1,375)
Proof:
142
143
(a)
(b)
Supplies on handJanuary 1 ............................
$ 300
$1,600
$ 1,360
$1,375
Supplies purchased during the year ...............
2,100
5,400
10,080
6,000
Total supplies available ......................................
$2,400
$7,000
$11,440
$7,375
Supplies on handDecember 31 .....................

Supplies expense for the year ...........................

(750)
$1,650
(5,700)
$1,300
(c)
(1,840)
$ 9,600
(d)
(800)
$6,575
143
144

Adjusting entry:
2012
Dec. 31
Wages Expense ..................................................................

Wages Payable ...........................................................
Adjusting entry to record accrued wages for one
day; 5 $200.
1,000
Wages Expense ..................................................................

Wages Payable ...................................................................
Cash ............................................................................
Paid employees' accrued and current wages;
5 employees x $200/day x 4 days = $4,000.
3,000
1,000
1,000
Payday entry:
2013
Jan.
4,000

201
1
a)
Apr.
30 Interest Expense ........................................................
2,080
Interest Payable ..........................................................
2,080
To record accrued interest expense;

0.8% $780,000 10/30.
May
20 Interest Payable...................................................................
2,080
Interest Expense ..................................................................
4,160
Cash .................................................................................
6,240

expense; 0.8% $780,000 20/30.
201
1
b)
Apr.
30 Salaries Expense ..................................................................

3,600
144
145
Salaries Payable ..........................................................
3,600
To record accrued salaries;

$9,000/5 days = $1,800/day;
2 days x $1,800 = $3,600.
May
3 Salaries Payable...................................................................
3,600
Salaries Expense ..................................................................
5,400
Cash .................................................................................
9,000

salaries; 3 days x $1,800 = $5,400.

201
1
c)
Apr.
30 Legal Fees Expense .............................................................
2,500
Legal Fees Payable .....................................................
2,500
To record accrued legal fees.
May
12 Legal Fees Payable ..............................................................
2,500
Cash .................................................................................
2,500
To pay accrued legal fees.

2011
Dec. 31
Accounts Receivable ..........................................................

Fees Earned ................................................................
To record unbilled fees; 30% $12,000.
3,600
31
Unearned Fees ...................................................................

Fees Earned ................................................................
8,400

3,600
8,400
145
146
To record earned fees that had been

collected in advance; 70% $12,000.
31
Amortization Expense, Computers ......................................

Accumulated Amortization, Computers ........................
To record amortization on computers.
3,000
31
Amortization Expense, Office Furniture...............................

Accumulated Amortization,
Office Furniture ........................................................
To record amortization on office furniture.
3,500
31
Salaries Expense ................................................................

Salaries Payable..........................................................
4,900
31
Insurance Expense .............................................................

Prepaid Insurance .......................................................
To record expired prepaid insurance.
2,600
31
Office Supplies Expense .....................................................

Office Supplies ............................................................
To record use of office supplies.
960
31
Utilities Expense ...................................................................

Utilities Payable .............................................................
To record unpaid utility costs.
3,000
3,500
140
4,900
2,600
960
140

Analysis component:
The GAAP of matching and revenue recognition requires that adjusting entries
be recorded at the end of each accounting period to ensure revenues and
expenses are allocated to the period in which they were incurred. If the
December 31, 2011 adjustments for Javelin Company were not recorded,
revenues would be understated by $12,000; expenses would be understated
by $15,100; and net income would be overstated by the difference of $3,100
($15,100 - $12,000 = $3,100).

146
147
Ayotte Music
Partial Work Sheet
February 28, 2011
Unadjusted
Trial Balance
Account
Debit
Cash...........................................................
5,000
4,500
Prepaid insurance ...............................
700
Credit
Adjustments
Debit
Credit
c) 1,400
Credit
5,900
b) 250
450
12,000
6,000
equipment ........
Debit
5,000
Equipment .............................................. 12,000

Accumulated amortization,
Adjusted Trial
Balance
a)2,400
8,400
Accounts payable .................................
1,200
1,200
Jane Adams, capital .............................
9,000
9,000
Jane Adams, withdrawals..................
3,000
Revenues .................................................
3,000
45,000
Amortization expense, equipment
c) 1,400
a)2,400
2,400
Salaries expense ................................... 29,000

Insurance expense...............................
7,000
Totals ....................................................... 61,200 61,200

46,400
29,000
b) 250
4,050
7,250
4,050
65,000 65,000
147
148

Ayotte Music
Income Statement
Revenue........................................................................................................
$46,400
Operating expenses:
Salaries expense ...................................................................................
$29,000
Insurance expense ...............................................................................
7,250
Amortization expense, equipment ................................................
2,400
38,650
Net income ..................................................................................................
$ 7,750
Ayotte Music
Jane Adams, capital, March 1 ................................................................

Add: Net income ........................................................................................
$ 9,000
7,750
Total..........................................................................................................
$16,750
Less: Withdrawal by owner..................................................................
3,000
Jane Adams, capital, February 28 .......................................................
$13,750
Ayotte Music
Balance Sheet
February 28, 2011
Assets
148
149
Cash................................................................................................................
$ 5,000
Accounts receivable .................................................................................
5,900
Prepaid insurance ....................................................................................
450
Office equipment.......................................................................................
$12,000
Less: Accumulated amortization, office equipment ...............
8,400
Total assets .................................................................................................
3,600
$14,950
Liabilities
Accounts payable ......................................................................................
$ 1,200
Owners Equity
Jane Adams, capital ..................................................................................
13,750
Total liabilities and owners equity ...................................................
$14,950

149
150

Analysis component:
The GAAP which requires the preparation of financial statements is the time period
principle. The time period principle assumes that an organizations activities can be
divided into specific time periods. Since information must reach decision makers
frequently and promptly, the accounting system needs to prepare reports regularly.
The standard reporting period is one year although many companies report
quarterly.
*Exercise 4-13
a)
Cash ............................................................................
Accounts Payable ........................................................

1,800
1,800
150
151
OR
1,800
Cash ...........................................................................
1,800
Office Supplies ...................................................
1,800
Office Supplies ..........................................................

151
152
1,800
Accounts Payable ..............................................

b)
Revenue ......................................................................
Accounts Receivable ..................................................

4,500
4,500
152
153
OR
4,500
Revenue .....................................................................
4,500
Cash ....................................................................
4,500
Cash ...........................................................................

153
154
4,500

c)
Withdrawals .................................................................
Salaries Expense..........................................................

1,500
1,500
154
155
OR
Cash ............................................................................
1,500
Salaries Expense........................................................
1,500
Withdrawals ..........................................................................

1,500
155
156
Cash ....................................................................
1,500

156
157

d)
Accounts Receivable ....................................................................
750
Revenue .............................................................................
750

OR
Accounts Receivable ..............................................................................
750
Cash ....................................................................................................
750
Cash.............................................................................................
750
Revenue ............................................................................................
750
Analysis component:
If the error in (b) is not corrected, revenue and net income on the income
statement will be overstated each by $4,500. On the balance sheet, assets
(accounts receivable) and equity will be overstated each by $4,500.

2011
a) Dec.
Supplies Expense ........................................................

Cash .....................................................................
Purchased supplies.
b)
2 Insurance Expense ......................................................
Cash .....................................................................
Paid insurance premiums.
c)
15 Cash ............................................................................
Remodelling Fees Earned ....................................
Adjusting entries:
2011
d) Dec.31 Supplies ..............................................................................
Supplies Expense .................................................
Adjusted expense for unused supplies on hand.
e)
31 Prepaid Insurance .......................................................
6,000
2,880
24,000
3,840
6,000
2,880
24,000
3,840
2,400
157
158
f)
Insurance Expense ...............................................

Adjusted expense for unexpired coverage;
$2,880 $480.
31 Remodelling Fees Earned ...........................................
Unearned Remodelling Fees ................................
Adjusted revenues for unfinished projects;
$24,000 $7,200.

2,400
16,800
16,800
158
159

a) Initial credit recorded in Unearned Fees account:
July
1
Cash ....................................................................
Unearned Fees .............................................
2,000
Cash ....................................................................
Unearned Fees .............................................
8,400
12
Unearned Fees ....................................................

Fees Earned .................................................
2,000
18
Cash ....................................................................
Unearned Fees .............................................
7,500
27
Unearned Fees ....................................................

Fees Earned .................................................
8,400
31
No entry.
b) Initial credit recorded in Fees Earned account:

July
1
Cash ....................................................................
Fees Earned .................................................
6
Cash ....................................................................
Fees Earned .................................................
12
No entry.
18
Cash ....................................................................
Fees Earned .................................................
27
No entry.
31
Fees Earned ........................................................

Unearned Fees .............................................

2,000
8,400
7,500
7,500
2,000
8,400
2,000
7,500
8,400
2,000
8,400
7,500
7,500
159
160
Adjusting entry to reflect unearned fees for unfinished job.

c)
Under the first method:

Unearned fees = $2,000 + $8,400 $2,000 + $7,500 $8,400 = $7,500
Fees earned = $2,000 + $8,400 = $10,400
Under the second method:
Unearned fees = $7,500
Fees earned = $2,000 + $8,400 + $7,500 $7,500 = $10,400
Chapter 5
Accounting
Completing the
Cycle and Classifying
Accounts
EXERCISES
1.
5.
9. C
13.
2.
6.
10. C
14.
3.
7.
11. D
15.
4.
8.
12. D
16.

Adjusted
Trial
Balance
No.
Title Debit
101 Cash ........................ 3,000
106 Accounts receivable ..............
153 Trucks ...................... 41,000
Balance Sheet
and
Income
Statement of
Statement Owners Equity
Credit Debit Credit
Debit
3,000
13,100
13,100
41,000

Credit
160
161
154
193
201
209
233
301
302
401
611
622
640
677
Accum. amortization, trucks .. 16,500

16,500
Franchise .............................. 15,000
15,000
Accounts payable..................
7,000
7,000
Salaries payable ...................
1,600
1,600
Unearned fees ......................
1,300
1,300
Bo Webber, capital................
37,750
37,750
Bo Webber, withdrawals.. 7,200
7,200
Plumbing fees earned ...........
49,000 49,000
Amortization expense, trucks5,500
5,500
Salaries expense .................. 18,500
18,500
Rent expense........................
6,000
6,000
Misc. expenses .....................
3,850
3,850
Totals ................................ 113,150 113,150 33,85049,00079,300 64,150
Net income............................
15,150
15,150
Totals ................................
49,00049,00079,300
79,300

161
162

326
Exercise 5-3 (25 minutes) Parts 1, 2, and 3
Musical Sensations
Work Sheet
Unadjusted
Trial Balance
Account
Debit
Credit
Adjusted Trial
Balance
Adjustments
Debit
Credit
Debit
Credit
Income
Statement
Debit
Credit
Balance Sheet &

Statement of
Owners Equity
Debit
Cash .................................. 14,000
14,000
14,000
Accounts receivable .... 26,000
26,000
26,000
520
520
212,00
0
212,00
0
Office supplies ..............
950
d)
430
Musical equipment...... 212,00

0
Fundamental Accounting Principles, Twelfth Canadian Edition
Accum. amort.
musical equip. ......
16,200
Accounts payable .........
3,350
Unearned
performance
revenue ...........................
12,400
Jim Daley, capital .........
b)
16,200
a)
10,600
272,00
0
Jim Daley,
52,000
withdrawals...................
Performance revenue
32,400
32,400
3,350
3,350
1,800
1,800
272,00
0
272,00
0
52,000
119,00

a)
Credit
52,000
129,60
129,60
162
163
0
Salaries expense .......... 76,000
10,600
c)
13,800
Travelling expense ...... 42,000
89,800
89,800
42,000
42,000
16,200
16,200
Totals ........................... 422,95 422,95

0
0
Amortization
expense,
musical equip. ...............
b)
16,200
Salaries payable ...........
c)
13,800
Office supplies
expense ...........................
d)
430
Totals ...........................
41,030
13,800
430
13,800
430
41,030 452,95 452,95 148,43 129,60 304,52 323,35

0
0
0
0
0
0
Net loss ............................

Totals ...........................

18,830 18,830
148,43 148,43 323,35 323,35
0
0
0
0
163

Part 4
$272,000 $52,000 $18,830 = $201,170
or
Jim Daley, Capital
(With.)
52,000
(Net Loss)
18,830
272,000
(Beg. bal.)
201,170
(End. bal.)

1. (a) Income = $36,800
2. (a)
Mar. 31 Income Summary...................................................................
36,800
Capital ...................................................................................
36,800
To close the income summary account to capital.
3. (a)
Capital
63,000
$63,000 + $36,800 $17,000 = $82,800 OR
(With. 17,000 36,800

)
82,800

(Beg. bal.)
(Net income)
(End. bal.)
164
165
1. (b) Net Loss = $60,000

2. (b)
June 30
Capital .......................................................................................
Income Summary ..............................................................
60,000
60,000
To close the income summary account to capital.
3. (b)
Capital
114,000 (Beg. bal.)
$114,000 $60,000 = $54,000 OR
(Net loss) 60,000

54,000 (End. bal.)

165
166

Debit
Rent earned .....................................................................................
99,000
Salaries expense ............................................................................
35,300
Insurance expense ........................................................................
4,400
Dock rental expense .....................................................................
12,000
Boat supplies expense .................................................................
6,220
Amortization expense, boats .....................................................
21,500
Totals...................................................................................
79,420
Net income...............................................................................
19,580
Totals .................................................................................................
99,000
2011
Credit
99,000
99,000
Closing entries:
Dec. 31 Rent Earned .................................................................................... 99,000

Income Summary..................................................................
99,000
To close the revenue account.
31 Income Summary .......................................................................... 79,420

Salaries Expense ...................................................................
35,300
Insurance Expense ...............................................................
4,400
Dock Rental Expense ...........................................................
12,000
Boat Supplies Expense ........................................................
6,220
Amortization Expense, Boats ...........................................
21,500
To close the expense accounts.
31 Income Summary ................................................................. 19,580
Carl Winston, Capital ....................................................

19,580
166
167
To close Income Summary.

31 Carl Winston, Capital ........................................................... 18,000
Carl Winston, Withdrawals ............................................
18,000
To close the withdrawals account.

167
168

2011
Apr.
3
0
Closing entries:
Plumbing Fees Earned ............................................
39,500
Income Summary.................................................
39,500
To close revenue to the income summary.
3
0
Income Summary .....................................................
31,100
Amortization Expense, Trucks .......................
5,500
Salaries Expense ..................................................
15,750
Rent Expense.........................................................
6,000
Advertising Expense ...........................................
3,850
To close expense accounts to income

summary.
3
0
Income Summary .....................................................
8,400
Frank Block, Capital ...........................................
8,400
To close income summary to capital.
3
0
Frank Block, Capital ................................................

Frank Block, Withdrawals ................................
7,200
7,200
To close withdrawals to capital.

Block Plumbing Co.
Post-Closing Trial Balance
April 30, 2011
168
169
Acct.
No.
Debit
Account
Credit
101
Cash
106
Accounts receivable .......................................................
12,000
153
Trucks .................................................................................
20,500
154
Accumulated amortization, trucks ...........................
193
Franchise ...........................................................................
201
Accounts payable ............................................................
7,000
209
Salaries payable ..............................................................
1,600
233
Unearned fees ..................................................................
1,300
301
Frank Block, capital .......................................................
33,450*
Totals ..................................................................................
4,100
8,250
15,000
$51,600
$51,600
Frank Block, Capital
*Calculated as:
(Adj. Bal,
32,250 + 8,400 7,200 = 33,450 or
32,250 Apr. 30)

(Withdrawals)
7,200
8,400 (Net income)

(Post-closing
33,450 Bal., Apr. 30)

169
170

2011
Closing entries:
January 31 Subscription Revenues .............................................
62,000
Interest Revenue .........................................................
450
Income Summary ...................................................
62,450
To close revenues to the income summary.
31 Income Summary ........................................................
65,400
Amortization Expense, Equipment ..................
2,000
Rent Expense ...........................................................
7,400
Salaries Expense .....................................................
56,000

summary.
31 Kate Goldberg, Capital...............................................
2,950
Income Summary ...................................................
2,950
31 Kate Goldberg, Capital...............................................

Kate Goldberg, Withdrawals ..............................
4,000
4,000

170
171

2011
Dec. 31
Closing entries:
Services Revenue .............................................
Income Summary ......................................
To close the revenue account to the
income summary.
31
Income Summary ..............................................

Amortization Expense, Equipment ...........
Salaries Expense .......................................
Insurance Expense ....................................
Rent Expense .............................................
Supplies Expense ......................................
To close the expense accounts to the
income summary.
73,400
31
Jo Weller, Capital ...............................................

Income Summary ......................................
To close the income summary to capital.
1,400
31
Jo Weller, Capital ..............................................

Jo Weller, Withdrawals .............................
12,000
72,000
72,000
4,000
42,000
3,000
22,000
2,400
1,400
12,000

2011
Closing entries:
Sept. 30 Consulting Fees Earned ...........................................
68,000
Income Summary ..................................................
68,000
To close revenues to the income summary.
30 Income Summary .......................................................
18,750
Amortization Expense, Office Equipment ....
3,500
Rent Expense ..........................................................
1,750
Wages Expense ......................................................
13,500

summary.
171
172
30 Income Summary .......................................................
49,250
Sandra Sloley, Capital ..........................................
49,250
30 Sandra Sloley, Capital ...............................................
19,000
Sandra Sloley, Withdrawals ..............................
19,000

Closing entries:
2011
(1)
Dec.
31
Services Revenue ................................................
73,000
Income Summary ..............................................
73,000
To close the revenue account to the

Income Summary.
(2)
31
Income Summary .................................................................. 48,100

Rent Expense .................................................................
8,600
Salaries Expense ...........................................................
20,000
Insurance Expense .......................................................
3,500
Amortization Expense ................................................
16,000
To close the expense accounts to the

income summary.
(3)
31
Income Summary .................................................................. 24,900

Marcy Jones, Capital ...................................................
24,900
To close the income summary to capital.

172
173
(4)
31
Marcy Jones, Capital ............................................................ 24,000

Marcy Jones, Withdrawals.........................................
24,000

173
174

Posted accounts:
Assets
Dec. 31
Rent Expense
80,000
Dec. 31
Balance
8,600
8,600 (2)
Liabilities
38,10
0
Dec. 31
Salaries Expense
Dec. 31
Marcy Jones, Capital

(4)
24,000 41,00
0
Balance
20,000
20,000 (2)
Dec. 31
24,90
0
(3)
41,90
0
Balance
Insurance Expense
Dec. 31
Balance
3,500
3,500 (2)
Marcy Jones, Withdrawals

Dec. 31
Balance
24,000 24,00
0
(4)
Amortization Expense
Dec. 31
Balance
16,000
16,000 (2)
Income Summary
(2)
48,100
73,00 (1)
0
(3)
24,900
24,90 Balance
0
0 Balance

174
175
Services Revenue
(1)
73,000
73,00 Dec. 31
0
0 Balance

Jones Consulting
December 31, 2011
Account
Assets ......................................................................
Debit
Credit
$ 80,000
Liabilities ...........................................................................
$ 38,100
Marcy Jones, Capital .......................................................
41,900
Totals...................................................................................

$80,000
$80,000
175
176

1.
Bill Duggan, Withdrawals; Interest Revenue, and Other Expenses have not been closed.
2.
2011
June 30
Bill Duggan, Capital ..........................................
71,000
Interest Revenue ....................................................
1,150
Bill Duggan, Withdrawals ..............................
72,000
Other Expenses ..................................................
150
To close interest earned, withdrawals and

other expenses directly to capital.
Bill Duggan,
Capital
216,20
0
3.
$216,200 $71,000 = $145,200 OR
71,000
145,20 (Balance)
0

176
177
Exercise 5-13 (15 minutes) Part A
Accounts payable ...........................................................

Accounts receivable .......................................................
Accumulated amortization, equipment..........................
Accumulated amortization, truck ...................................
Amortization expense .....................................................
Cash .................................................................................
Equipment .......................................................................
Franchise .........................................................................
Gas and oil expense .......................................................
Interest expense ..............................................................
Interest payable ...............................................................
Land not currently used in business operations ..........
Long-term notes payableNote 1.........................................
Notes payable, due February 1, 2012 ............................
Notes receivableNote 2.......................................................
Patent ...............................................................................
Prepaid rent .....................................................................
Rent expense...................................................................
Repair revenue ................................................................
Repair supplies ...............................................................
Repair supplies expense ................................................
Sid Whimsly, capital .......................................................
Sid Whimsly, withdrawals ..............................................
Truck ...................................................................................
Unearned repair revenue ................................................
Adjusted Trial
Balance
Credit
Debit
$ 11,000
$ 59,000
9,000
21,000
3,800
29,000
13,000
17,800
7,500
4,500
750
52,000
35,000
7,000
6,000
7,000
14,000
39,000
247,000
17,000
14,000
24,050
49,000
26,000
3,800
Totals ...............................................................................
$358,600 $358,600
Account Title
X
X
X
X
X
X
X
b.
$24,050 -$3,800 - $7,500 - $4,500 - $39,000 + $247,000 - $14,000 - $49,000 =

$153,250.
Analysis component:
Amortization expense, gas and oil expense, interest expense, rent expense, repair
revenue, repair supplies expense, and withdrawals are all temporary accounts and do
not appear on the post-closing trial balance because their balances were transferred to
177
178
capital during the closing process leaving each with a zero post-closing balance. The
adjusted balance of $24,050 in capital is the balance prior to closing all temporary
accounts into it. A capital account balance does appear on the post-closing trial balance
but it is the post-closing balance of $153,250 as determined in part (b) above. Therefore,
the adjusted capital balance of $24,050 will not appear on the post-closing trial balance
Note to instructor: Reinforce to the student that the question asks which account balances
from the adjusted trial balance will not appear on the post-closing trial balance.

178
179

a.
b.
c.
d.
e.
f.
g.
h.
i.
Current assets = $59,000 + $29,000 + $2,000 + $14,000 + $17,000 = $121,000.

Property, plant and equipment = -$9,000 - $21,000 + $13,000 + $26,000 = $9,000.
Intangible assets = $17,800 + 7,000 = $24,800.
Long-term investments = $4,000 + $52,000 = $56,000.
Total assets = $121,000 + $9,000 + $24,800 + $56,000 = $210,800.
Current liabilities = $11,000 + $750 + $5,000 + $7,000 + $3,800 = $27,550
Long-term liabilities = $30,000.
Total liabilities = $27,550 + $30,000 = $57,550.
Total liabilities and owners equity = $210,800.

179
180

DOVER PACIFIC TOURS
Balance Sheet
November 30, 2011
Assets
Current assets:
Cash .........................................................................................................................
$ 5,000
Accounts receivable .................................................................................................
13,000
Prepaid insurance .....................................................................................................
700
Prepaid rent ..............................................................................................................
9,000
Supplies ....................................................................................................................
2,250
Current portion of notes receivable...........................................................................
7,500
$ 37,45
0
Total current assets ..................................................................................................
Long-term investments:
13,000
Notes receivable, less $7,500 current portion .........................................................
Property, plant and equipment:

Vehicles ....................................................................................................................
$64,000
Less: Accumulated amortization ...........................................................................
17,000
Office furniture ..........................................................................................................
$ 6,500
Less: Accumulated amortization ...........................................................................
3,600
Total property, plant and equipment .........................................................................
$47,000
2,900
49,900
Intangible assets:
Copyright...............................................................................................................
1,000
Total assets .....................................................................................................................
$101,35

180
181
Liabilities
Current liabilities:
Accounts payable ............................................................................................
$ 11,000
Salaries payable ..............................................................................................
900
Unearned touring revenue ...............................................................................
23,000
Notes payable ..................................................................................................
4,000
Current portion of long-term notes payable .....................................................
10,000
Total current liabilities ...........................................................................................
$ 48,900
Long-term liabilities:
Long-term notes payable, less $10,000 current
portion ...................................................................................................................
Total liabilities ...........................................................................................................
10,500
$59,400
Owners Equity
Pat Dover, capital* ....................................................................................................
41,950
Total liabilities and owners equity ...................................................................................
$101,35
0
*Calculated as Total assets of $101,350 less Total liabilities of $59,400 = $41,950.

181
182
HANSON TRUCKING COMPANY

Balance Sheet
December 31, 2011
Assets
Current assets:
Cash .................................................................................
$ 7,000
Accounts receivable ..................................................
16,500
Office supplies .............................................................
2,000
Total current assets...................................................
$ 25,500

Land ................................................................................
$ 75,000
Trucks ............................................................................
$170,000
Less: Accumulated amortization ......................
35,000
135,000
Total property, plant and equipment .................
$210,000
Total assets ...........................................................................
$235,500
Liabilities
Accounts payable .......................................................
$ 11,000
Interest payable ..........................................................
3,000
Total current liabilities ............................................
$ 14,000
Long-term notes payable .............................................
52,000
Total liabilities ................................................................
$ 66,000
Owners Equity
Stanley Hanson, capital ...............................................
169,500
Total liabilities and owners equity ..............................
$235,500

182
183

183
184

a. Withdrawals, tutoring fees earned, rent expense, amortization expense, and
advertising expense have zero balances because each account was closed at
December 31, 2011 resulting in each balance being transferred to capital leaving a
zero balance behind.
b.
2012
Jan. 15 Accounts Receivable .........................................
8,000
Tutoring Fees Earned ...............................
8,000
To record revenues earned on

account.
Feb. 20 Advertising Expense .........................................
2,000
Cash .................................................................
2,000
To record payment for advertising.
July 7 Cash.........................................................................
9,000
Accounts Receivable .................................
9,000
To record collection from customers.
Dec. 10 Leda Svenson, Withdrawals ...........................

Cash .................................................................
3,000
3,000
To record cash withdrawals by owner.

184
185

340

b.
Cash
Dec
31/11
2,000
9,000
2,000
3,000
Jul
07/12
Unadj
Bal
Accounts Receivable
Feb
20/12
5,000
Jan. 15/12
8,000
Unadj Bal
4,000
9,00
0
Jul
07/12
Dec
31/11
3,00
0
Dec
10/12
6,000
Office Equip.
Dec
31/11
Dec 31/11
Prepaid Rent
Accum. Amort., Office Equipment
20,0
00
10,0
00
Leda Svenson, Capital
Dec
31/11
Leda Svenson, Withdrawals

17,10
0
Rent Expense
Dec
31/11
Unearned Fees
2,90
0
Tutoring Fees Earned
Dec 31/11
-0-
Dec 10/12
3,000
8,00
0
Unadj Bal
3,000
8,00
0
Dec
31/11
-0-
Dec
31/11
Jan.
15/12
Advertising Expense
Unadj
Bal
186
Dec 31/11
-0-
Dec 31/11
-0-
Dec
31/11
Feb
20/12
Unadj
Bal
-02,00
0
2,00
0

c.
Svensons Tutoring Clinic

Unadjusted Trial Balance
December 31, 2012
Account
Cash .................................................................................
Accounts receivable........................................................
Prepaid rent .....................................................................
Office equipment .............................................................
Accumulated amortization, office equipment .................
Unearned fees..................................................................
Leda Svenson, capital .....................................................
Leda Svenson, withdrawals ............................................
Tutoring fees earned .......................................................
Advertising expense .......................................................
Totals................................................................................
Debit
$ 6,000
4,000
3,000
20,000
3,000
2,000
$38,000
Credit
$10,000
2,900
17,100
8,000
$38,000
d. Journalize adjustments:
2012
Dec. 31
Amortization Expense........................................
2,000
Accum. Amort., office equipment ...........
2,000
To record annual amortization.
31
Unearned Fees ......................................................
2,400
Tutoring Fees Earned .................................
2,400
To record earned fees.
31
Rent Expense .........................................................

Prepaid Rent ..................................................
3,000
3,000
To record expired prepaid rent.

187
188

342

d. Post adjustments:
Cash
Dec
31/11
2,000
9,000
2,000
3,000
Jul 07/12
Accounts Receivable
Feb
20/12
9,000 Jul 07/12
Jan. 15/12 8,000
Dec
31/11
3,000
Adj Bal
-0-
3,000 Dec 31/12
Dec
10/12
Unadj Bal 6,000
Unadj Bal
Office Equip.
Dec
31/11
Dec 31/11 5,000
Prepaid Rent
4,000
Accum. Amort., Office Equipment
20,000
10,000 Dec 31/11

2,000 Dec 31/12
12,000
Leda Svenson,
Capital
17,100
Adj Bal
Dec
31/11
Dec 31/11 -0-
Unearned Fees
Dec
31/12
2,400
2,900 Dec 31/11
500
Adj Bal

-0- Dec 31/11
Dec 10/12 3,000
8,000 Jan 15/12
Unadj Bal
8,000
3,000
Unadj Bal
2,400 Dec 31/12

10,400
Adj Bal
189
Rent Expense
Dec 31/11
Dec 31/12
Adj Bal
-0-
Dec 31/11 -0-
3,000
Dec 31/12 2,000
3,000
Adj Bal
2,000
Advertising Expense
Dec
31/11
Feb
20/12
-02,000
Unadj Bal 2,000
Exercise 517 (continued)

e.
Adjusted Trial Balance
December 31, 2012
Account
Cash ........................................................................
Accounts receivable ..............................................
Office equipment....................................................
Accumulated amortization, office equipment .......
Unearned fees ........................................................
Leda Svenson, capital ...........................................
Leda Svenson, withdrawals ..................................
Tutoring fees earned..............................................
Rent expense..........................................................
Amortization expense ............................................
Advertising expense ..............................................
Totals ......................................................................

Debit
$ 6,000
4,000
20,000
3,000
3,000
2,000
2,000
$40,000
Credit
$12,000
500
17,100
10,400
$40,000
190
191

f.
Income Statement
Revenue ........................................................................................................
$10,400
Operating expenses:
Rent expense..........................................................................................
$3,000
Advertising expense ............................................................................
2,000
Amortization expense ........................................................................
2,000
7,000
Net income...................................................................................................
$ 3,400

Leda Svenson, capital, January 1 .........................................................
Add: Investments by owner..................................................................
Net income .........................................................................................
$17,100
$
3,400
3,400
Total ..........................................................................................................
$20,500
Less: Withdrawals by owner ................................................................
3,000
Leda Svenson, capital, December 31 ..................................................
$17,500

Balance Sheet
December 31, 2012

191
192
Assets
Current assets:
Cash ...................................................................................................................................
$ 6,000
Accounts receivable ...........................................................................................................
4,000
$ 10,000
Total current assets ............................................................................................................

Office equipment ................................................................................................................
$20,000
Less: Accumulated amortization .....................................................................................
12,000
8,000
$18,000
Total assets ...............................................................................................................................
Liabilities
$ 500
Unearned fees ....................................................................................................................
Owners Equity
Leda Svenson, capital ............................................................................................................
17,500
Total liabilities and owners equity .............................................................................................
$18,000

g. Journalize the closing entries:
2012
(1)
Dec. 31 Tutoring Fees Earned ......................................

10,400
Income Summary .......................................
10,400
To close the revenue account to

the income summary.
(2)
31 Income Summary ..............................................7,000

192
193
Rent Expense ...............................................
3,000
Amortization Expense ..............................
2,000
Advertising Expense .................................
2,000
To close the expense accounts

to the income summary.
(3)
31 Income Summary ..............................................3,400

Leda Svenson, Capital ...............................
3,400
To close the income summary to

capital.
(4)
31 Leda Svenson, Capital ......................................3,000

Leda Svenson, Withdrawals ...................
3,000

193

346

g. Post the closing entries:
Cash
Dec 31/11
Jul 07/12
Unadj Bal
2,000
9,000
Accounts Receivable
2,000 Feb 20/12
Dec 31/11 5,000
3,000 Dec 10/12
Jan. 15/12 8,000
6,000
Unadj Bal
Office Equip.
Dec 31/11
9,000
Prepaid Rent
Jul
07/12
4,000
Dec
31/11
Adj Bal
Accum. Amort., Office Equip.
20,000
10,00 Dec
0 31/11
3,000 3,000
Dec
31/12
-0-
Unearned Fees
Dec
31/12
2,400 2,900 Dec

31/11
2,000 Dec
31/12
12,00 Adj Bal
0
Leda Svenson, Capital

(4) 3,000

17,100 Dec 31/11
3,400 (3)
17,500
Dec 31/11
-0-
Unadj Bal
3,000

-0- Dec
31/11
8,000
Jan
15/12
Dec 10/12 3,000
Postclosing
500 Adj Bal
3,000 (4)
8,000 Unadj
Bal
195
balance
2,400 Dec
31/12
(1) 10,400 10,40 Adj Bal
0
-0-
-0-
Rent Expense
Dec 31/11
Dec 31/12
Adj Bal
-0-
Dec 31/11
3,000
3,000
-0-
Dec
31/11
Dec 31/12 2,000
3,000 (2)
-0-
Adj Bal
2,000
Advertising Expense
Feb
20/12
2,000 (2)
Unadj
Bal
7,000
(3)
3,400
10,400 (1)
3,400 Bal.
-0-

2,000
-0-
-0-
Income Summary
(2)
-02,000
195
2,000 (2)
196
Exercise 517 (concluded)

h.
December 31, 2012
Account
Cash .......................................................................
Accounts receivable .............................................
Office equipment ...................................................
Accumulated amortization, office equipment.......
Unearned fees .......................................................
Leda Svenson, capital...........................................
Totals .....................................................................

Debit
$ 6,000
4,000
20,000
$30,000
Credit
$12,000
500
17,500
$30,000
196
197

Reversing entries are appropriate for adjustments (a) and (e):
2011
Sept. 1
Service Fees Earned ...........................................

5,000
Accounts Receivable .................................
To reverse accrued revenues.
1
Salaries Payable ..................................................
2,400
Salaries Expense ........................................
To reverse accrued
salaries.
1. Adjusting entries:
2011
Oct. 31
Rent Expense .....................................................
3,200
Rent Payable ...............................................
To record accrued rent expense.
31
Rent Receivable...................................................
750
.................................................................. Rent Earned
To record accrued rent
revenue.
2. Subsequent entries without reversing:
Nov. 5Rent Payable ........................................................ 3,200
Rent Expense .....................................................
3,200
Cash .........................................................
To record payment of two
months rent.
8Cash ...................................................................... 1,500
Rent Receivable ......................................
.................................................................. Rent Earned
To record collection of two
months rent.
3. Reversing entries and subsequent entries:
Nov. 1Rent Payable ........................................................ 3,200
Rent Expense ..........................................
To reverse the accrual of rent
expense.
1Rent Earned.......................................................... 750
Rent Receivable ......................................
To reverse the accrual of rent
revenue.
5,000
2,400
3,200
750
6,400
750
750
3,200
750
197
198
5Rent Expense ....................................................... 6,400

Cash .........................................................
To record payment of two
months rent.
8Cash ...................................................................... 1,500
.................................................................. Rent Earned
To record collection of two
months rent.
Chapter 6
6,400
1,500
Accounting for
Merchandising Activities
EXERCISES

a
Sales .................................................
$ 240,000
$ 140,000
$ 75,000
$462,000
$85,000
Cost of goods sold .................................

126,000
86,000
42,000
268,000
46,000
Gross profit from sales........................

$ 114,000
$ 54,000
$33,000
$194,000
$ 39,000
Operating expenses .............................

95,000
82,000
41,000
146,000
53,000
Net Income (Loss) .................................

$ 19,000 $
(28,00 ($ 8,000) $
0)
48,000 ($ 14,000)

Feb.
1 Merchandise Inventory ..................................................
7,000
Accounts Payable .......................................................
7,000
To record purchase; terms 1/10, n30.
2,400
Cash .................................................................................
2,400
To record purchase for cash.

10,000
198
199
10,000
9 Office Supplies ...................................................................
900
900
To record purchase; n15.
1 No entry.
0
1 Accounts Payable ..............................................................

1
7,000
Cash .................................................................................
6,930
Merchandise Inventory............................................
70
To record payment within discount period;

$7,000 x 1% = $70 discount.

4
900
Cash .................................................................................
900
To record payment.
Mar.

3
Cash .................................................................................
10,000
10,000
To record payment.

199
200

2011
Mar.
Merchandise Inventory .....................................

Accounts Payable Blanton Company ...
Purchased merchandise on credit.
3,600

Cash ............................................................
Paid shipping charges on purchased
merchandise.
200
Accounts Payable Blanton Company .........

Merchandise Inventory ..............................
Returned unacceptable merchandise.
600
17
Accounts Payable Blanton Company ..........

Merchandise Inventory...............................
Cash ............................................................
Paid balance within the discount period;
3,600 600 = 3,000; 3,000 x 2% = 60.
3,000
18

Accounts Payable Fleming Corp. .........
7,500
21
Accounts Payable Fleming Corp. .................

Received an allowance on purchase.
2,100
28
Accounts Payable Fleming Corp. .................

Cash ............................................................
7,500 2,100 = 5,400; 5,400 x 2% = 108.
5,400

3,600
200
600
60
2,940
7,500
2,100
108
5,292
200
201

Jan.
4,000
Sales ................................................................................
4,000
To record sale; terms 1/10, n30.
5 Cost of Goods Sold.............................................................
3,200
3,200
To record cost of sales.
7 Cash .......................................................................................
3,600
Sales ................................................................................
3,600
To record cash sale.
3,000
3,000
9,600
Sales ................................................................................
9,600
8,200
8,200
1 Cash .......................................................................................
5
3,960
201
202
Sales Discounts ..................................................................
40
Accounts Receivable .................................................
4,000
To record collection within discount period;

$4,000 x 1% = $40 discount.
Feb.
4 Cash .......................................................................................
9,600
9,600
To record collection.

202
203

Feb.
2,400
Sales ................................................................................
2,400
To record sale; terms 2/10, n30, FOB destination.
2,000
2,000
2 Delivery Expense or Freight-Out .................................
150
Cash .................................................................................
150
To record delivery expenses for goods sold.
3 Sales Returns and Allowances .....................................
1,200
1,200
To record return of merchandise.
1,000
Cost of Goods Sold ......................................................
1,000
To return merchandise to inventory.
3,800
Sales ................................................................................
3,800

3,100
3,100
203
204
1 Cash .......................................................................................
1
1,176
Sales Discounts ..................................................................
24
1,200
To record collection, less return and discount;

$2,400 - $1,200 = $1,200 x 2% = $24 discount.
2 Cash .......................................................................................
3
1,200
Sales ................................................................................
1,200

3
950
950
2 Cash .......................................................................................
8
3,800
3,800

204
205

a.
Mar. 1
Merchandise Inventory .................................................

Accounts Payable - Raintree....................................
11,000
Accounts Payable - Raintree .........................................

Merchandise Inventory .............................................
Cash ........................................................................
Paid account payable within the discount period;
11,000 x 3% = 330.
11,000
Accounts Receivable Sundown Company ..................

Sales ........................................................................
Sold merchandise on account.
11,000
Cost of Goods Sold ......................................................

Merchandise Inventory ............................................
To record cost of sale.
7,500
11
Cash ..............................................................................
Sales Discounts .............................................................
Accounts Receivable Sundown Company.............
Collected account receivable.
10,670
330
11
b.
Mar. 1
11,000
330
10,670
11,000
7,500
11,000
Analysis component:
Amount borrowed to pay the balance owing ...........................
Annual rate of interest ............................................................
Interest per year......................................................................
$10,670.00
8%
$ 853.60
Interest per day ($853.60/365) ................................................
2.34
Discount taken ........................................................................

Interest paid on the 50-day* loan (50 $2.34)........................
Net savings from borrowing to pay within
the discount period ..............................................................
330.00
(117.00)
213.00
*60 days in credit period 10 days in discount period = 50 days.

205
206

a.
2011
May 11

Accounts Payable Hostel Sales..............
30,000
11

Cash ............................................................
Paid shipping charges on purchased
merchandise.
335
12
Accounts Payable Hostel Sales .........................

Merchandise Inventory ..................................
1,200
20
Accounts Payable Hostel Sales .........................

Merchandise Inventory...................................
Cash ................................................................
30,000 1,200 = 28,800; 28,800 x 3% = 864.
28,800
May 11
Accounts Receivable Wilson Purchasing .........

Sales ................................................................
30,000
11
Cost of Goods Sold ...............................................

Merchandise Inventory...................................
20,000
12
Sales Returns and Allowances .............................

Accounts Receivable Wilson Purchasing..
Accepted a return from a customer.
1,200
12
Merchandise Inventory .........................................

Cost of Goods Sold ........................................
Returned goods to inventory.
800
21
Cash ........................................................................
Sales Discounts .....................................................
27,936
864
30,000
335
1,200
864
27,936
b.
2011

30,000
20,000
1,200
800
206
207
Accounts Receivable Wilson Purchasing..

Collected account receivable;
30,000 12,000 = 28,800; 28,800 x 3% = 864.

28,800
207
208

Analysis Component
Amount borrowed to pay the amount owing ..........................

Annual rate of interest ..........................................................
Interest per year ....................................................................
$27,936.00
5%
$ 1,396.80
Interest per day ($1,396.80/365) ...........................................
3.83
Discount taken.......................................................................
Interest paid on the 80-day* loan (80 $3.83) ......................
Net savings from borrowing to pay within
the discount period ..........................................................
864.00
(306.40)
557.60
*90 days in credit period 10 days in discount period = 80 days.

1.
d.
6.
e.
2.
c.
7.
j.
3.
f.
8.
i.
4.
a.
9.
b.
5.
h.
10.
g.

208
209

Merchandise Inventory
Balance, Dec. 31, 2010 ............
37,000
Invoice cost of purchases ........
190,500
Returns by customers .............
2,200
allowances received .................
4,100
Transportation-in .....................
1,900
Cost of sales transactions ............
186,000
Shrinkage ..........................................
32,000
Balance, Dec. 31, 2011 .............
Purchase discounts received ......
1,600
Purchase returns and
7,900
Cost of Goods Sold

Represents all entries to record the cost
component of sales transactions ..................
Represents all entries to record merchandise returned

by customers and restored to inventory during 2011
186,000
2,200
Inventory shrinkage
recorded in December 31,
2011, adjusting entry ...............
32,000
Balance .........................................
215,800
Analysis component:
The shrinkage was $32,000. The cost of merchandise actually sold to
customers was $186,000. The cost of goods sold was $215,800. Shrinkage
therefore was 17% of the actual cost of merchandise sold ($32,000/$186,000
100) or 15% of the total cost of goods sold ($32,000/$215,800 100). As
the inventory manager, I would want to know the cause of this significant
shrinkage. Is it breakage or spoilage that can be controlled? Is it theft caused
by weak internal controls? Reviewing the numbers allows the inventory
manager to ask appropriate questions for the purpose of making good
decisions.

a) 500,000 17,000 3,000 = 480,000 net sales
209
210
b) 28,000 + 124,000 = 152,000 total operating expenses

c) 480,000 124,000 = 356,000 cost of goods sold
d) (124,000/480,000) 100 = 25.83%

Analysis component:
The change in the gross profit ratio for the year ended May 31, 2010 was 2.83%
(from 23% to 25.83%). This is a favourable change because Westlawn is generating
more gross profit per sales dollar that will contribute towards the covering of
operating expenses.

210
211

Company A
2011
Company B
2010
2011
2010
Sales ............................................................
256,000
160,000
110,000
50,000
Sales discounts ........................................2,560
1,600
1,100
500
Sales returns and allowances ............

51,200
16,000
5,500
2,500
Net sales ....................................................

202,240
142,400
103,400
47,000
Cost of goods sold ...................................

153,600
88,000
55,000
25,000
Gross profit from sales .........................

48,640
54,400
48,400
22,000
Selling expenses .....................................

17,920
16,000
24,200
9,000
Administrative expenses .....................

25,600
24,000
29,700
11,000
Total operating expenses ....................

43,520
40,000
53,900
20,000
Net income (loss) ...................................5,120
14,400
(5,500)
2,000
Gross profit ratio ....................................

24.05%1 38.20%2 46.81%3 46.81%4
Calculations:
1.
2.
3.
4.
(48,640/202,240) 100 = 24.05%

(54,400/142,400) 100 = 38.20%
(48,400/103,400) 100 = 46.81%
(22,000/47,000) 100 = 46.81%
Analysis component:
Company B has more favourable gross profit ratios for both 2010 and 2011.
Company A is showing a lower gross profit ratio than Company B and
decreasing gross profit as a percentage of net sales.
Note to instructor:
You may wish to engage students in a discussion of other interesting
comparisons in this information. For example:
COGS as a percentage of sales is lower for Company B than Company A.
211
212
Sales discounts as a percentage of sales is constant for both companies.

Sales returns and allowances are higher as a percentage of sales for
Company A than Company B (which is particularly interesting
considering that Company A has a higher COGS than Company B you
might assume higher quality but then why the higher
returns/allowances?).
Company B has higher operating expenses as a percentage of sales than
Company A.
Company B has more than doubled its sales from 2010 to 2011 in comparison to
the growth for Company A.

212
213

Purchases ................................................
Purchases discounts .....................................
(a)
$ 90,000
(4,000)
Purchases returns and allowances .........
(3,000)
Transportation-in..........................................
(b)
$ 160,000
(10,000)
(c)
$ 122,000
(2,600)
(6,000)
(4,400)
6,400
14,000
16,000
Cost of goods purchased..............................
$ 89,400
$ 158,000
$ 131,000
Beginning inventory .....................................
7,000
$38,400
$ 36,000
Cost of goods purchased..............................
89,400
158,000
131,000
Ending inventory ...........................................
(4,400)
(30,000)
(30,480)
Cost of goods sold ..........................................
$92,000
$ 166,400
$ 136,520
a.
Transportation-in is calculated as the amount needed to make cost of

goods purchased equal the given amount. Cost of goods sold is
calculated the usual way.
b.
Purchases discounts is calculated as the amount needed to make cost of

goods purchased equal the given amount. The beginning inventory is
calculated as the amount needed to make cost of goods sold equal the
given amount.
c.
Cost of goods purchased is calculated the usual way. Then, that amount
is transferred to the lower section and the ending inventory is
calculated as the amount needed to make cost of goods sold equal the
given amount.

213
214

Company A
2011
2011
2010
180,000
90,000
45,000
Merchandise inventory
(beginning) .........................................18,700
22,300
9,875
9,000
Net cost of merchandise

purchases ............................................72,000
104,400
49,500
26,100
(ending) ....................................................
(16,400) (18,700)
(8,920)
(9,875)
Sales............................................................
120,000
2010
Company B
Cost of goods sold:
Cost of goods sold ...............................74,300
108,000
50,455
25,225
Gross profit from sales ........................45,700
72,000
39,545
19,775
Operating expenses ..............................36,000
54,000
27,000
13,500
Net income (loss) ................................... 9,700
18,000
12,545
6,275
Gross profit ratio ...................................

38.08%1 40.00%2 43.94%3 43.94%4
Calculations:
1.
2.
3.
4.
(45,700/120,000) 100 = 38.08%

(72,000/180,000) 100 = 40.00%
(39,545/90,000) 100 = 43.94%
(25,225/45,000) 100 = 43.94%
Analysis component:
Company B has a stable and more favourable gross profit ratio than Company
A. Company As gross profit ratio decreased from 2010 to 2011 which is
unfavourable.

214
215

Invoice cost of merchandise purchases .....
(a)
(b)
(c)
$ 45,000
$ 20,000
$ 15,250
Purchase discounts received ...........................
(2,000)
Purch. returns and allow. received ...............
(1,500)
Cost of transportation-in ..................................
3,200
1,750
2,000
Total cost of merchandise purchases ...........
$ 44,700
$ 19,750
$ 16,375
Merchandise inventory (beginning) .............
3,500
$ 4,800
$ 4,500
Total cost of merchandise purchases ...........
44,700
19,750
16,375
Merchandise inventory (ending) ...................
(2,200)
(3,750)
(3,810)
Cost of goods sold ................................................
$46,000
(1,250)
(750)
$ 20,800
(325)
(550)
$ 17,065
a.
Transportation-in is calculated as the amount needed to make cost of

merchandise purchased equal the given amount. Cost of goods sold is
calculated the usual way.
b.
Purchase discounts is calculated as the amount needed to make cost of

merchandise purchases equal the given amount. The merchandise inventory
(beginning) is calculated as the amount needed to make cost of goods sold equal
the given amount.
c.
Total cost of merchandise purchases is calculated the usual way. Then, that
amount is transferred to the lower section and the merchandise inventory
(ending) is calculated as the amount needed to make cost of goods sold equal
the given amount.

215
216

a) Multiple-step income statement:
COMPU-SOFT
Income
Statement
Net sales ...............................................................................
$26,935*
Cost of goods sold .............................................................
14,800
Gross profit from sales....................................................
$12,135
Operating expenses:
Wages expense ..........................................................
$4,200
Utilities expense .......................................................
2,100
Amortization expense, store equipment .........
120
Total operating expenses .................................
6,420
Income from operations .................................................
$ 5,715
Other revenues and expenses:

Rent revenue .............................................................
850
Net income ..........................................................................
$ 6,565
*Calculated as: 27,700 45 720 = 26,935

b)
2011
Nov.
Closing entries:
3
0
Rent Revenue..................................................................
850
Sales ...................................................................................
27,700
Income Summary..................................................
28,550
To close temporary credit balance accounts.

216
217
3
0
Income Summary ..........................................................
21,985
Sales returns and allowances...........................
720
Sales discounts ......................................................
45
Cost of goods sold .................................................
14,800
Amortization expense, store equipment .....
120
Wages expense ......................................................
4,200
Utilities expense ...................................................
2,100
To close temporary debit balance accounts.
3
0
Income Summary ..........................................................
6,565
Peter Delta, capital...............................................
6,565
3
0
Peter Delta, capital .......................................................
3,500
Peter Delta, withdrawals ...................................
3,500

c)
Peter Delta, Capital
$1,635 $3,500 + $6,565 = $4,700 OR
(With.
)

3,50
0
1,635
(Beg. bal.)
6,565
(Net income)
4,700
(End. bal.)
217
218
Analysis component:
The gross profit ratio for October is 40% ($32,000 - $19,200 = $12,800 gross
profit; $12,800/$32,000 100 = 40%). The gross profit ratio for November is
45% ($12,135/$26,935 100 = 45.05%). Compu-Soft generated a higher
gross profit per sales dollar in November than in October which is favourable
because this represents a greater contribution towards the coverage of
operating expenses.

218
219
464

a)
Perdu Sales
Work Sheet
Unadjusted
Account
Cash
Adjustments
Trial Balance
Debit
Credit
Debit
Credit
Income
Statement
Debit
Credit
Balance Sheet
and Statement
of Owners
Equity
Debit
26,000
26,00
0
2,000
2,000
Prepaid selling expenses
8,000
Store equipment
40,000
Accumulated amortization, store eq.
2,500
11,500
14,840
Salaries payable
Eldon Perdu, capital
Sales
6,500
40,00
0
9,000
Accounts payable
Eldon Perdu, withdrawals
1,500
Credit
14,840
3,200
3,200
45,600
45,600
3,600
3,600
858,00
0
858,00
0
220
Sales returns and allowances
33,000
33,000
8,000
8,000
Cost of goods sold
424,84
0
424,84
0
Sales salaries expense
94,000
Utilities expense, store
28,000
Sales discounts
Amortization expense, store equip.
3,200
97,200
28,000
2,500
2,500
Other selling expenses
70,000
1,500
71,500
Other administrative expenses
190,00
0
Totals
927,44
0
190,00
0
927,44
0
7,200
7,200
855,04
0
Net Income
2,960
Totals
858,00
0
858,00
0
78,10
0
75,140
2,960
858,00
0
75,60
0
75,600
221

b) Classified multiple-step income statement:
PERDU SALES
Income Statement
Sales .....................................................................................................................
$858,000
Less: Sales returns and allowances ..........................................
$33,000
Sales discounts ...........................................................
8,000
41,000
Net sales .....................................................................................
$817,000
Cost of goods sold....................................................................
424,840
Gross profit from sales .........................................................................................
$392,160
Operating expenses:
Selling expenses:
Sales salaries expense ..................................................
Other selling expenses .................................................
$97,20
0
71,500
Utilities expense, store ................................................
28,000
Amortization expense, store ........................................
2,500
Total selling expenses ..................................................
$199,200
General and administrative expenses: .......................
190,000
Total operating expenses ................................................
389,200
Net income.................................................................................
$ 2,960
c) 2011
Dec.
31
Closing entries:
Sales ...................................................................................................................
Income Summary..................................................

858,000
858,000
221
222
To close sales.
31
Income Summary ...............................................................................................
855,040
Sales Returns and Allowances..................................
33,000
Sales Discounts ..............................................................
8,000
Cost of Goods Sold.........................................................
424,840
Sales Salaries Expense ................................................
97,200
Utilities Expense ...........................................................
28,000
Selling Expenses ............................................................
71,500
Amortization Expense, Store Equipment ...............
2,500
Administrative Expenses ...........................................
190,000
3
1
Income Summary .........................................................
2,960
Eldon Perdu, Capital ....................................................
2,960
To close the Income Summary account to capital.
3
1
Eldon Perdu, Capital....................................................

Eldon Perdu, Withdrawals ........................................
3,600
3,600

222
223

Analysis component:
The gross profit ratio for 2011 is $392,160/$817,000 100 = 48%. The gross profit ratio
for 2010 was $330,000*/$600,000 100 = 55%. The gross profit ratio decreased from
2010 to 2011 which is unfavourable since the gross profit generated per net sales dollar
has decreased thereby contributing less towards the coverage of operating expenses in
2011 than in 2010.
*Sales COGS = GP Operating Expenses = Net Loss, therefore, $600,000 - ? =

? - $344,000 = -$14,000; GP - $344,000 = -$14,000 so GP = $330,000.
a) 531,000 14,000 7,000 = 510,000

b) Single-step income statement:
SABBA CO.
Income Statement
For Year Ended January 31, 2011
Revenues:
Net sales .......................................................................
$510,000
Expenses:
Cost of goods sold .............................................
$301,000
Selling expenses ................................................
117,000
General and administrative expenses ..............
109,000
Interest expense .......................................................
750
Total expenses ...........................................................

527,750
223
224
Net loss .............................................................................

$ 17,750
224
225

1)
Nov 1
.
Periodic
Purchases ...............................
Perpetual
2,80
0
Merchandise Inventory ......

2,800
Accounts Payable .............

To record purchases on
2,800
Accounts Payable .........
2,800
To record purchases on
account.
account.
2)
Nov 5
.
Accounts Payable ..................
2,80
0
Accounts Payable ..............
Purchases Discount .
56
Cash ...............................
2,744
To record cash payment

within
discount period;
2,800
56
Cash...............................
2,744
To record cash payment

within
discount period;
2,800 x 2% = 56.
2,800 x 2% = 56.
3)
Nov 7
.
Cash ........................................
196
Purchases Returns and

Allowances ............
Cash ...........................................
196
To record cheque received

for return of purchases
previously paid for with
discount already taken;
200 2% = 196.
196
196
To record cheque received

for
return of merchandise
previously paid for with
discount already taken;
200 2% = 196.
4)
Nov. 1
Transportation-In ....................
160

160
225
226
0
160
Cash .................................
To record payment of
freight
charges.
160
Cash .....................................
To record payment of
freight
charges.
5)
Nov 1
.
3
Accounts Receivable .............

Sales ..............................
1
3
3,00
0
Accounts Receivable ............

3,000
3,000
Sales ..................................
To record sale of
merchandise
on credit.
To record sale of
merchandise
on credit.
No entry.
Cost of Goods Sold ................

3,000
1,500
1,500
To record cost of
merchandise
sold.

226
227

6)
Nov 1
.
6
Sales Returns and

Allowances ..........................
Accounts Receivable
400
Sales Returns and

Allowances ..........................
400
To record return of
merchandise bought on
account.
1
6
No entry.
400
Accounts Receivable
400
To record return of
merchandise bought on
account.

Cost of Goods Sold ........
200
200
To record return of
merchandise by customer.
*Exercise 6-19
Feb.
1 Purchases.............................................................................
7,000
7,000
5 Purchases.............................................................................
2,400
Cash .................................................................................
2,400
To record purchase for cash.
6 Purchases.............................................................................
10,000
10,000
9 Office Supplies ...................................................................


900
900
227
228
To record purchase; n15.
1 No entry.
0

1
7,000
Cash .................................................................................
6,930
Purchase Discounts ...................................................
70
To record payment within discount period;

$3,500 x 1% = $35 discount.

4
900
Cash .................................................................................
900
To record payment.
Mar.

3
10,000
Cash .................................................................................
10,000
To record payment.

2011
Mar
2 Purchases ...............................................................................................................
3,600
Accounts Payable Blanton Company ...............................................
3,600
3 Transportation-in .....................................................................
200
228
229
Cash ..................................................................................
200
Paid shipping charges on purchased merchandise.
4 Accounts Payable Blanton Company.............................
600
Purchase Returns and Allowances ......................................
600
17 Accounts Payable Blanton Company.............................
3,000
Purchase Discounts ................................................................................................
60
Cash ................................................................................................
2,940

3,600 600 = 3,000; 3,000 x 2% = 60.
18 Purchases .....................................................................................
7,500
Accounts Payable Fleming Corp......................................
7,500
21 Accounts Payable Fleming Corp. ....................................
2,100
Purchase Returns and Allowances ......................................
2,100
Received an allowance on purchase.
28 Accounts Payable Fleming Corp. ....................................
5,400
Purchase Discounts ..................................................................
108
Cash ................................................................................................
5,292

7,500 2,100 = 5,400; 5,400 x 2% = 108.

229
230

Jan.
4,000
Sales ................................................................................
4,000
7 Cash........................................................................................
3,600
Sales ................................................................................
3,600
9,600
Sales ................................................................................
9,600
1 Cash........................................................................................
5
3,960
Sales Discounts ..................................................................
40
4,000
To record collection within discount period;

$2,000 x 1% = $20 discount.
Feb.
4 Cash........................................................................................
9,600
9,600

230
231

Feb.
2,400
Sales ................................................................................
2,400
2 Delivery Expense or Freight-Out .................................
150
Cash .................................................................................
150
To record delivery expenses for goods sold.
3 Sales Returns and Allowances ......................................
1,200
1,200
3,800
Sales ................................................................................
3,800
1 Cash........................................................................................
1
1,176
Sales Discounts ..................................................................
24
1,200
To record collection, less return and discount;

$2,400 - $1,200 = $1,200 x 2% = $24 discount.
2 Cash........................................................................................
3
Sales ................................................................................

1,200
1,200
231
232
2 Cash........................................................................................
8
3,800
3,800

232
233

a)
2011
Mar. 1 Purchases ...............................................................................................................
11,000
Accounts Payable Raintree ..................................
11,000
11 Accounts Payable Raintree .................................................................................
11,000
Purchase Discounts .............................................................................
330
Cash .................................................................................
10,670
Paid account payable within the discount period;

11,000 x 3% = 330.
b)
2011
Mar. 1 Accounts Receivable Sundown Company ......................
11,000
Sales ................................................................................
11,000
11 Cash ................................................................................................
10,670
Sales Discounts ..........................................................................
330
Accounts Receivable Sundown Company .......
11,000
Collected account receivable.

233
234

a)
2011
May 11 Purchases ...............................................................................................................
30,000
Accounts Payable Hostel Sales .........................................................
30,000
11 Transportation-In ....................................................................................................
335
Cash .....................................................................................................
335
Paid shipping charges on purchased merchandise.
13 Accounts Payable Hostel Sales ..........................................
1,200
Purchase Returns and Allowances .......................................................
1,200
20 Accounts Payable Hostel Sales ..................................
28,800
Purchase Discounts ..............................................................................
864
Cash .................................................................................
27,936

30,000 1,200 = 28,800; 28,800 x 3% = 864.
b)
2011
May 11 Accounts Receivable Wilson Purchasing ............................................................
Sales .....................................................................................................

30,000
30,000
234
235
12 Sales Returns and Allowances ...............................................................................
1,200
Accounts Receivable Wilson Purchasing ........
1,200
Accepted a return from a customer.
21 Cash .......................................................................................................................
27,936
Sales Discounts ..........................................................................
864
Accounts Receivable Wilson Purchasing ........
28,800
Collected account receivable;

30,000 1,200 = 28,800; 28,800 x 3% = 864.

235
236

a.
b.
c.
Gross profit from sales ........................................

Less: Operating expenses ...................................
?
Net income ............................................................
Therefore:
Total operating expenses.....................................
$145,000
Sales ......................................................................
Less: Sales discounts ..........................................
Sales returns...............................................
Net sales ................................................................
Less: Cost of goods sold .....................................
?
Gross profit from sales ........................................
Therefore:
Cost of goods sold ...............................................
$340,000
Merchandise inventory (beginning) ....................

Invoice cost of merchandise purchases ............
Less: Purchase discounts ...................................
Purchase returns ........................................
Net purchases ......................................................
Add: Transportation-in ........................................
Total cost of merchandise purchased ................
Goods available for sale ......................................
Less: Merchandise inventory (ending) ...............
?
Cost of goods sold (from b) .................................
Therefore:
Merchandise inventory (ending) ..........................
$ 65,000
$ 80,000
$ 5,500
14,000
19,500
$320,500
$145,000
$175,500
$175,000
3,600
6,000
$165,400
11,000
$ 30,000
176,400
$206,400
$175,500
$ 30,900
d. (145,000/320,500) x 100 = 45.24% Gross Profit Ratio (rounded to two decimal places)
Analysis component:
The gross profit ratio for 2011 is 45.24%. In comparison with the 2010 gross profit ratio
of 47%, this represents an unfavourable change. This is unfavourable because the gross
profit generated per net sales dollar decreased in 2011 from 2010 thereby contributing
less towards the coverage of operating expenses in 2011 than in 2010.

236
237

DEWERS STOPN SHOP
Work Sheet
No.
101
106
119
125
201
209
301
302
413
414
Unadjusted
Trial
Balance
Debit
Credit
7,400
3,600
2,400
1,200
280
505
506
507
622
Account
Cash ...................................
Accounts receivable .........
Merchandise inventory .....
Store supplies ...................
Accounts payable .............
Salaries payable ................
Mi Dewer, capital ...............
Mi Dewer, withdrawals ......
Sales ..................................
Sales returns and
allowances.........................
Purchases..........................
Purchase discounts ..........
Transportation-in ..............
Salaries expense ...............
640
651
Rent expense ....................

Store supplies expense ....
500
Totals..............................
Net income ........................
24,100
750
290
6,400
160
1,400
Adjustments
Debit
Credit
(a) 300
2,400
2,720
(b) 120
11,570
12,000
290
6,400
250
(b)
120
(a) 300
24,100
Income Statem
ent
Debit
Credit
420
160
1,520
500
30
0
420 11,570
3,400
12,000
Balance Sheet
and
Statement of
Owners Equity
Debit
Credit
7,400
3,600
2,720
900
280
120
11,570
750
250
14,970 15,370
11,970
3,400
475
238
Totals
14,970
14,970 15,370
15,370
239

a)
Net Sales:
Sales ........................................................................................
Sales returns and allowances ....................................................
Sales discounts ......................................................................
Net sales ......................................................................................
$445,000
(25,000)
(16,000)
$404,000
b)
Cost of goods purchased:

Purchases.........................................................................................
Purchases returns and allowances ............................................
Purchase discounts.........................................................................
Transportation-in .........................................................................
Cost of goods purchased ...............................................................
$286,000
(22,000)
(11,400)
8,800
$261,400
c)
Cost of goods sold:

Beginning inventory ....................................................................
Cost of goods purchased ...............................................................
Goods available for sale..................................................................
Ending inventory .........................................................................
Cost of goods sold ..........................................................................
$ 15,000
261,400
$276,400
(11,000)
$265,400
d) Multiple-step income statement:
FOX
Income
For Year Ended March 31, 2011
FIXTURES
Net sales
..............................................................
Cost of goods sold ......................................................
265,400
Gross profit from sales ................................................
$138,600
Operating expenses:
Selling expenses ......................................................
General and administrative expenses ......................
Total operating expenses .....................................
102,500
Income from operations...............................................
36,100
CO.
Statement
$404,000
$69,000
33,500
$
240
Interest revenue.......................................................
1,200
Net income ..............................................................
$ 37,300
241

a)
$33,700 $1,740 = $31,960 Net sales
b)
$6,200 + $16,676 $110 $28 + $380 $2,460 = $20,658 Cost of goods sold
c) Classified multiple-step income statement:
JOHNS ELECTRONICS
Income Statement
For Month Ended April 30, 2011
Sales ..............................................................................
$33,700
Less: Sales returns and allowances ................................
1,740
Net sales .......................................................................
$31,960
Cost of goods sold:

Merchandise inventory, March 31, 2011 .....................
$ 6,200
Purchases ................................................................. $16,676

Less: Purchase discounts................................................
28
Purchase returns and allowances .....................
110
Net purchases...........................................................
$16,538
Add: Transportation-in.........................................
380
Cost of goods purchased ........................................
16,918
Cost of goods available for sale..............................
$23,118
Less: Merchandise inventory, April 30, 2011 ........
2,460
Cost of goods sold .......................................................
20,658
Gross profit from sales.........................................................
$ 11,302
242
Operating expenses:. ............................................................

Selling expenses:
Wages expense, selling ...........................................
$8,000
Amortization expense, delivery trucks ......................
640
Telephone expense, store ...............................................
340
Total selling expenses .............................................
$8,980
General and administrative expenses:
Wages expense, office .............................................
2,800
Telephone expense, office ..............................................
150
Total general and administrative expenses
2,950
Total operating expenses ........................................
11,930
Operating loss .........................................................................
$ 628

Interest expense ................................................................
130
Net loss ......................................................................................
$ 758
243

d)
2011
Apr. 3
0
Closing entries:
Merchandise Inventory ................................................
2,460
Purchases Returns and Allowances .........................
110
Purchases Discounts .....................................................
28
Sales ....................................................................................
33,700
Income Summary ..............................................
36,298
To close temporary credit balance accounts.
3
0
Income Summary............................................................
37,056
6,200
Sales Returns and Allowances ..............................
1,740
Purchases ....................................................................
16,676
Transportation-In.....................................................
380
Amortization Expense, Delivery Trucks ...........
640
Wages Expense, Office .............................................
2,800
Wages Expense, Selling ...........................................
8,000
Telephone Expense, Office.....................................
150
Telephone Expense, Store .....................................
340
Interest Expense .......................................................
130
3
0
John Yu, Capital ....................................................

Income Summary ..............................................
758
758
244
3
0
John Yu, Capital ...............................................................
9,200
John Yu, Withdrawals.......................................
9,200
Part e:
John Yu, Capital
$30,300 $9,200 - $758 = $20,342 OR
(Net loss)
758
(With.)
9,200
30,300 (Beg. bal.)
20,342 (End. bal.)
245
June

GST Receivable .................................................
Accounts Payable ......................................
To record credit purchase;
$2,000 x 6% = 120 GST.
2,000
120
Accounts Receivable ........................................

PST Payable ...............................................
GST Payable ..............................................
Sales ...........................................................
To record credit sale; $1,400 x 8% = 112 PST;
$1,400 x 6% = $84 GST.
1,596
Cost of Goods Sold ...........................................

1,000
2,120
112
84
1,400
1,000
June
Chapter 7
Purchases ..........................................................
GST Receivable .................................................
Accounts Payable ......................................
To record credit purchase;
$2,000 x 6% = $120 GST.
2,000
120

PST Payable ...............................................
GST Payable ..............................................
Sales ...........................................................
To record credit sale; $1,400 x 8% = 112 PST;
$1,400 x 6% = $84 GST.
1,596
Merchandise Inventory and Cost of Sales
EXERCISES
2,120
112
84
1,400
246
(a) FIFO perpetual

Date
Purchases
Units
Jan.
Unit
Cost
Inventory
Balance
Sales (at cost)

Total
Cost
Unit
s
Unit
Cost
Cost of
Goods
Sold
Units
Total
Cost
1 Beginning inventory
100 @ $10. = $ 1,000
00
1
0
Mar
.
Unit
Cost
1
4
100 @ $10. = $ 1,000

00
90 @ $10. = $
00
900
250 @ $15. = $ 3,750

00
100
10 @ $10. = $
00
100
250 @ 15.0 =
0
10 @ $10. =
00
1
5
10 @ $10. = $
00
130 @ 15.0 =
0
3,750
10
0
1,950
120 @ $15. = $ 1,800

00
120 @ $15. = $ 1,800
00
Jul.
3
0
400 @ $20. = $ 8,000

00
400 @ 20.0 =
0
8,000
120 @ $15. = $ 1,800

00
Oct.
Total
180 @ 20.0 =
0
750
$12,750 530
Cost of goods available for

sale
Gross profit calculation under FIFO:
3,600
$8,350
Cost of goods sold
220 @ $20. = $ 4,400

00
220
$4,400
Ending inventory
247
Sales (530 units $40) ..........
$21,200
Cost of goods sold.....................
8,350
Gross profit ................................
$12,850
248

(b) Moving weighted-average perpetual
Inventory Balance
Date
Purchases
Units
Sales (at cost)
Unit
Cost
Total
Cost
Units
(a)
Cost of
Goods
Sold
Unit
Cost
(b)
(b) (a)
Total Average
Units Cost/Unit
Total
Cost
Inventory Balance Calculations
Beginning inventory
Jan.
100 @ $10 = $
1000
100
$10.00 $
1,000.0
0
100
10
90 @ $10.00 = $
900.00
90 @ $10.00 =
10
Mar.
14
250 @ $15 = $
400 @ $20 = $
$14.81 $
1,776.6
0
8,000
$18.80 $
9,776.6
0
30 @ $18.80 = $ 5,640.00
0
750
$12,750
100.0
0
10
100.0
0
$ 3,850.0
0
260
$ 3,850.0
0
53
0
$8,613.40
220
4,136.6
0
$ 4,136.60
2,073.40
120
$ 1,776.6
0
120
$ 1,776.6
0
8,000.00
520
$ 9,776.6
0
520
$ 9,776.6
0
300 @ $18.80 =
$18.80 $
3,750.00
260
400 @ $20.00 =
220
Total
3,850.0
0
900.00
10
140 @ $14.81 =
520
Oct.
$14.81 $
14 @ $14.81 = $ 2,073.40
0
120
30
100.0
0
250 @ $15.00 =
260
July
$10.00 $
3,750
15
$ 1,000.0
0
220
5,640.00
$ 4,136.6
0
249
Cost of goods available for

sale
Cost of goods sold
Gross profit calculation under Weighted-average:
Sales (530 units $40) ........
$21,200.00
Cost of goods sold...................
8,613.40
Gross profit ..............................
$12,586.60
Ending inventory
250

(c) LIFO perpetual
Date
Purchases
Unit
s
Jan.
Unit
Cost
Inventory
Balance
Sales (at cost)

Total
Cost
Unit
s
Cost of
Goods
Sold
Units
Unit
Cost
Total
Cost
100 @ $10. = $ 1,00
00
0
1
0
Mar
.
Unit
Cost
1
4
100 @ $10. = $ 1,000

00
90 @ $10. =
00
900
250 @ $15. = $ 3,75

00
0
10 @ $10. = $
00
100
10 @ $10. = $
00
100
250 @ 15.0 =
0
10 @ $10. = $
00
1
5
140 @ $15.
00
$ 2,100
110 @ 15.0 =
0
10 @ $10. = $
00
110 @ 15.0 =
0
Jul.
3
0
400 @ $20. = $ 8,00

00
0
400 @ 20.0 =
0
10 @ $10. = $
00
110 @ 15.0 =
0
Oct.
300 @ $20. = $ 6,000

00
100 @ 20.0 =
0
3,750
100
1,650
100
1,650
8,000
100
1,650
2,000
251
Total
750
$12,750 530
Cost of goods available for sale

=
Cost of goods sold
Gross profit calculation under LIFO:
Sales (530 units $40) ........
$21,200
9,000
Gross profit ..............................
$12,200
$9,000
+
220
$3,750
Ending inventory
252

Specific identification
Date
Purchases
Unit
s
Jan.
Unit
Cost
Total
Cost
Unit
s
Unit
Cost
Cost of
Goods
Sold
Units
Unit
Cost
Total
Cost
100 @ $10. = $
00
1,00
0
1
0
Mar
.
Inventory
Balance
Sales (at cost)
1
4
100 @ $10. = $ 1,000

00
90 @ $10. =
00
250 @ $15. = $
00
900
3,75
0
100
10 @ $10. = $
00
100
250 @ 15.0 =
0
10 @ $10. =
00
1
5
10 @ $10. = $
00
130 @ 15.0 =
0
3,750
10
0
1,950
120 @ $15. = $ 1,800

00
120 @ $15. = $ 1,800
00
Jul.
3
0
400 @ $20. = $
00
8,00
0
400 @ 20.0 =
0
60 @ $15. =
00
Oct.
Total
240 @ 20.0 =
0
750
$12,750 530

Cost of goods sold
=
+
Gross profit calculation under Specific Identification:
900
4,800
$8,650
60 @ $15.
00
= $
160 @ 20.0 =
0
220
8,000
900
3,200
$4,100
Ending inventory
253
Sales (530 units $40) ........
$21,200
8,650
Gross profit ..............................
$12,550
254

1.
Jan. 1
Mar. 7
July 28
Oct. 3
Totals
120 units
250 units
500 units
450 units
1,320 units
@
@
@
@
$6.00
5.60
5.00
4.60
available for
=
=
=
=
$720
1,400
2,500
2,070
$6,690
cost of goods
sale
available for sale
2.
Units sold:
Jan.
10
Mar.
15
Oct. 5
Totals
Units remaining in ending inventory:

70 units
1,320 units available for sale less 795 units sold
125 units
= 525 units remaining in ending inventory.
600 units
795 units
3.(a) Moving weighted-average perpetual

Inventory Balance
Date
Purchases
Unit
s
Unit
Cost
Sales (at cost)
Total
Cost
Units
Unit
Cost
(a)
(b)
(a)
Tota
l
Averag
Cost of
Unit e Cost/
Goods Sold s
Unit
(b)
Total
Cost
Inventory Balance
Calculations
Beginning inventory
Jan.
120 @ $6.0 = $
0
720.0
0
120
$6.00 $
720.0
0
120
10
70 @ $6.0 = $
0
420.0
0
70 @ $6.0 =
0
50
$6.00 $
300.0
0
$ 720.0
0
420.00
50
$ 300.0
0
50
$ 300.0
255
0
Mar.
250 @ $5.6 = $ 1,400.0

0
0
250 @ 5.60 =
1,400.00
300
125 @ $5.6 = $
7
15
708.7
5
28
991.2
5
*cost/unit changed due to rounding
175
$ 991.2
5
175
$ 991.2
5
$5.17 $ 3,491.
25
675
$3,491.2
5
675
$3,491.2
5
2,070.00
$6,690.00 795

=
$1,700.0
0
450 @ 4.60 =
600 @ $4.9 = $
4
1,320
300
2,500.00
450 @ $4.6 = $ 2,070.0

0
0
$1,700.0
0
500 @ 5.00 =
1,12
5
Total
$5.66* $
500 @ $5.0 = $ 2,500.0

0
0
675
Oct.
300
@ 5.67 = 708.75
125
175
July
$5.67 $ 1,700.
00
2,964.
00
$4,092.75
Cost of goods sold
$4.94 $ 5,561.
25
1,12
5
$5,561.2
5
1,12
5
$5,561.2
5
@ 4.96 =
600
2,964.00
525
$4.95* $ 2,597.
25
525
$2,597.2
5
Ending inventory
525
$2,597.2
5
256

3.(b) FIFO perpetual
Date
Purchases
Unit
s
Jan.
Unit
Cost
Sales (at cost)

Total
Cost
Units
Unit
Cost
Inventory Balance
Cost of
Goods
Sold Units
Total
Cost
120 @ $6.0 =
0
720
1
0
Mar. 7
70 @ $6.0 =
0
$
1
5
2
8
120 @ $6.00 = $
72
0
50 @ $6.00 = $
30
0
50 @ $6.00 = $
30
0
42
0
250 @ $5.6 = $ 1,400

0
250 @ 5.60 =
1,400
50 @ $6.0 = $
0
Jul.
Unit
Cost
75 @ 5.60 =
30
0
420
500 @ $5.0 = $ 2,500

0
175 @ $5.60 = $
98
0
175 @ $5.60 = $
98
0
500 @ 5.00 =
2,500
175 @ $5.60 = $
Oct.
450 @ $4.6 = $ 2,070

0
175 @ $5.6 = $
0
98
0
@ 5.00 =
425
98
0
500 @ 5.00 =
2,500
450 @ 4.60 =
2,07
0
75 @ $5.00 = $
37
5
450 @ 4.60 =
2,125
2,070
257
Total
1,320
$6,690 795

=
$4,245
Cost of goods sold
+
525
$2,445
Ending inventory
258

3.(c) LIFO perpetual
Date
Purchases
Unit
s
Jan.
Unit
Cost
Total
Cost
Unit
s
Unit
Cost
Cost of
Goods
Sold
Units
Unit
Cost
Total
Cost
120 @ $6.0 =
0
720
1
0
Mar
.
Inventory
Balance
Sales (at cost)
70 @ $6.0 =
0
420
250 @ $5.6 = $ 1,400

0
120 @ $6.0 = $
0
720
50 @ $6.0 = $
0
300
50 @ $6.0 = $
0
300
250 @ 5.60 =
50 @ $6.0 = $
0
1
5
125 @ $5.6 =
0
700
125 @ 5.60 =
50 @ $6.0 = $
0
Jul.
2
8
500 @ $5.0 = $ 2,500

0
450 @ $4.6 = $ 2,070

0
300
700
300
125 @ 5.60 =
700
500 @ 5.00 =
2,500
50 @ $6.0 = $
0
Oct.
1,400
300
125 @ 5.60 =
700
500 @ 5.00 =
2,500
450 @ 4.60 =
2,070
50 @ $6.0 = $
300
259
5
Total
1,32
0
450 @ $4.6 = $ 2,070

0
125 @ 5.60 =
700
150 @ 5.00 =
350 @ 5.00 =
1,750
$6,690 795

=
750
$3,940
Cost of goods sold
525
$2,750
Ending inventory
260

Specific identification perpetual
Date
Purchases
Unit
s
Jan.
Unit
Cost
Total
Cost
Unit
s
Unit
Cost
Cost of
Goods
Sold
Units
Unit
Cost
Total
Cost
120 @
$6.0 = $
0
72
0
1
0
Mar
.
Inventory
Balance
Sales (at cost)
70 @ $6.0 =
0
250 @
$ 420
$5.6 = $ 1,40
0
0
1
5
120 @ $6.0 = $
0
720
50 @ $6.0 = $
0
300
50 @ $6.0 = $
0
300
250 @ 5.60 =
25 @ $6.0 =
0
$ 150
100 @ 5.60 =
560
25 @ $6.0 = $
0
150 @ 5.60 =
25 @ $6.0 = $
0
Jul.
2
8
500 @
$5.0 = $ 2,50
0
0
450 @
$4.6 = $ 2,07
0
0
150
840
150
150 @ 5.60 =
840
500 @ 5.00 =
2,500
25 @ $6.0 = $
0
Oct.
1,400
150
150 @ 5.60 =
840
500 @ 5.00 =
2,500
450 @ 4.60 =
2,070
25 @ $6.0 = $
150
261
5
Total
1,32
0
150 @ 5.60 =
840
320 @ $5.0 = $ 1,600

0
180 @ 5.00 =
900
280 @ 4.60 =
170 @ 4.60 =
782
$6,690 795
Cost of goods available for sale =
1,288
$4,018
Cost of goods sold
525
$2,672
Ending inventory
262

TROUT COMPANY
Income Statement
For year ended December 31, 2011
Specific
Identification
Sales ....................................
(795 units $15 selling price)
Cost of goods sold ...................
Gross profit ..............................
Operating expenses .................
Net income................................
Moving
Weighted
Average
$11,925
4,018
$ 7,907
1,250
$ 6,657
FIFOLIFO
$11,925.00
$11,925
$11,925
4,092.75
$ 7,832.25
1,250.00
$ 6,582.25
4,245
$ 7,680
1,250
$ 6,430
3,940
$ 7,985
1,250
$ 6,735
1) The LIFO method results in the highest net income with $6,735.
2) The weighted average net income of $6,582.25 does fall between FIFO net
income ($6,430) and LIFO net income ($6,735).
3) If costs were rising instead of falling then the FIFO method would probably
result in the highest net income.
Exercise 7-6
Purchases/Transportatio
Cost of Goods Sold/
n-In/ (Purchase
Returns/Discounts)
(Returns to Inventory)
Cost/Un
Units it
Total $
Date
Cost/Un
Unit Avg
Units it
Total $ s Cost/Unit
Brought
Forwar
d
Mar. 1
25
Balance in Inventory
$97.00 $2,425.00
Total $
50
$4,750.0
$95.00
0
75
95.67 7,175.00
95.67 6,026.96
12
1,148.0
95.67
4 63
(2)
95.67
(191.3
4) 65
95.67 6,218.30
48
95.67
4,592.1
6 17
95.66 1,626.14
32
93.94 3,006.14
15
92.00
1,380.00
263
7
2
8
25
93.94
2,348.5
0
93.95
Analysis component:
The gross profit ratio for Product W506 for March 2011 is 35.71% calculated
as net March sales of $12,284 (83 units $148) less March cost of goods sold
of $7,897.36 = $4,386.64 gross profit $12,284 = .3571 100.
657.64
264

a. LCM applies to inventory as a whole: $14,260
b. LCM applied separately to each product: $13,792
Calculations:
Per Unit
Inven
tory
Items
BB
FM
MB
SL
c.
Unit
s
on
Han
d
22
15
36
40
C
o
s
t
$100
156
190
72
N
R
V
$108
144
182
87
Tota
l
Cost
Tota
l
NRV
$2,200
2,340
6,840
2,880
$14,260
$2,376
2,160
6,552
3,480
$14,568
LCM applied to:

a.
b.
Invent
Eac
ory
h
as a
Prod
Whole
uct
$14,260
$2,200
2,160
6,552
2,880
$13,792
2011
Dec. 31 Cost of Goods Sold ............................................................
468
Merchandise Inventory ........................................
468
To write inventory down to market;

14,260 13,792 = 468

1. $900,000 $500,000 = $400,000
2.
For years ended
Income statement information
December 31, 2011, 2012, and

2013
actually reported for

years ended December 31,
income statement information

should have been reported as:
2011
2012
2013
265
Sales
$900,000
$900,00
0
$900,0
00
$900,0
00
Cost of goods sold:

Beginning
inventory
Add: Purchases
Less: Ending
inventory
Cost of goods sold
Gross profit
$200,000
$200,00
0
$180,00
0
$200,0
00
500,000
500,000
500,000
500,00
0
180,000
200,000
200,00
0
200,000
500,000
$400,000
520,000
480,00
0
500,00
0
$380,00
0
$420,0
00
$400,0
00
266

Goods available for sale:
Inventory, January 1
Purchases
Purchase returns
Transportation-in
Goods available for sale
Less: Estimated cost of goods sold:
Sales
Estimated cost of goods sold
[$2,000,000 (1 30%)]
.....
$ 450,000
$1,590,000
(23,100)
37,600 1,604,500
.....
$2,054,500
$2,000,000
.....
(1,400,000)
Estimated March 31 inventory

654,500

At Cost
Goods available for sale:
Beginning inventory
$ 128,400.00
Net purchases
196,800.00
Goods available for sale
$325,200.00
Deduct net sales at retail
260,000.00
Ending inventory at retail
65,200.00
Cost ratio: ($179,420/$325,200) 100 = 55.17%
Ending inventory at cost ($65,200 55.17%)
At Retail
$63,800.00
115,620.00
$179,420.00
$
$35,970.84

a.
$54,600 55.17% = $30,122.82
b.
At Cost
Estimated inventory that should have
been on hand .......................................
$65,200.00
At Retail
$35,970.84
267
Physical inventory .......................................................

Inventory shrinkage .....................................................
10,600.00
30,122.82 54,600.00
$ 5,848.02
$
268

Ending Cost of
Inventory Goods Sold
a.
b.
c.
Weighted-average cost ($6,600/1,320 = $5.00):

$5.00 50 .................................................................
$6,600 $250 ...........................................................
250
FIFO:
50 $4.40 .................................................................
$6,600 $220 ...........................................................
220
LIFO:
50 $6.00 .................................................................
$6,600 $300 ...........................................................
300
6,350
6,380
6,300
FIFO provides the lowest net income because it has the highest cost of goods sold
due to decreasing unit costs.
Ending Cost of
Inventory Goods Sold
a.
b.
c.
FIFO:
(50 $2.86) + (100 $2.50) .....................................
(120 $2.00) + (250 $2.30) + (400 $2.50) ...........
393
LIFO:
(120 $2.00) + (30 $2.30) .....................................
(50 $2.86) + (500 $2.50) + (220 $2.30) ............
309
Weighted-average cost ($2,208/920 = $2.40):

$2.40 150 ...............................................................
$2.40 770 ...............................................................
360
LIFO provides the lowest net income because it has the highest cost of goods sold
due to rising unit costs.
1,815
1,899
1,848
269

Ending inventory:
Units
Cost/Unit
Total Cost
Beginning inventory
80 @
$2.00 =
$160.00
March 7 purchase
22 @
2.30 =
50.60
July 28 purchase
48 @
2.50 =
120.00
150
$330.60
Cost of goods sold:

Cost of goods available for sale less Ending inventory = Cost of goods sold
$2,208.00 $330.60 = $1,877.40

Merchandise turnover
2012:
$ 643,825
($96,400 + $86,750)/2
2011:
$ 426,650
= 7.0 times
= 4.8 times
($86,750 + $91,500)/2
Days sales in inventory
2012:
2011:
$ 96,400 365
$643,825
= 54.7 days
$ 86,750 365
$426,650
= 74.2 days
270
It appears that Russo has lower levels of merchandise inventory on hand

which is generally favourable provided customers are not being turned away
because of out-of-stock items.
Chapter 8
Accounting Information
Systems

EXERCISES

Sales Journal
Date
Invoice
Number
Account Debited
Accounts Receivable
Dr. Sales Cr.
PR
Cost of Goods Sold

Merchandise Inven
Cr.
2011
Feb. 7
J. Eason
5704
1,150
700
12
P. Lathan
5705
320
170
25
S. Summers
5706
550
300

SALES JOURNAL
Page 2
Invoice
Date
Account Debited
Numbe
r
A/R Dr.
PR
Sales Cr.
2011
Feb
.
7 J. Eason
5704
1,150
12 P. Lathan
5705
320
25 S. Summers
5706
550

641
Cash Receipts Journal
Date
Account
Credited
PR
Explanation
Cash
Dr.
Sales
Discou
nt Dr.
Accounts
Receivabl
e Cr.
Sales
Cr.
O
Ac
271
2011
Sept. 9
Notes payable
Note to bank
5,500
13
Dale Trent,
capital
Owner
investment
7,000
18
Sales
Cash sale
27
J. Namal
Invoice, Sept. 7
460
1,764
460
36
1,800
272

642

CASH RECEIPTS JOURNAL
Account
Date
Credited
Explanation
PR
Page 2
Sales
Accts.
Other
Cash
Disc.
Rec.
Sales
Accts.
Debit
Debit
Credit
Credit
Credit
2011
Sept
.
9 Notes payable
Note to bank
5,500
5,500
1 Dale Trent,
3 capital
Owner
investment
7,000
7,000
1 Sales
8
Cash sale
2 J. Namal
7
Invoice, Sept. 7
460
1,764
460
36
1,800
273
Purchases Journal
Date
Account Credited
Date of
Invoice
Terms
PR
Page 1
Accounts
Payable Cr.
Merchandi
se
Inventory
Dr.
8,100
Office
Supplies
Dr.
Other
Accounts
Dr.
2011
July
Angler, Inc.
Ju
l
n/30
8,100
14 Store Supplies/ Steck

Company
Ju
l
14
2/10,
n/30
240
17
Ju
l
17
n/30
2,600
Marten Company
240
2,600

PURCHASES JOURNAL
Page 2
Accounts
Date
of
Date
Account Credited
Invoic
e
Terms
PR
Office
Other
Payable
Purchases
Supplie
s
Accounts
Credit
Debit
Debit
Debit
2011
July
1 Angler, Inc.
July
1
14 Store Supplies/Steck Company July
n/30
2/10,n/30
8,100
240
8,100
240
274
14
17 Marten Company
July
17
n/30
2,600
2,600
275


Cash Disbursements Journal
Ch.
No.
Date
Payee
Account Debited
PR
Cash Cr.
Page 1
Merchandise
Inventory Cr.
Other
Accounts Dr.
Accounts
Payable Dr.
2011
Mar. 9
210
Narlin Corp.
Store Supplies
900
900
17
211
City Bank
Notes Payable
3,000
3,000
29
212
LeBaron
LeBaron
6,860
31
213
E. Brandon
Salaries
Expense
3,400
31
214
Pace, Inc.
Pace, Inc.
5,500
140
7,000
3,400
5,500

CASH DISBURSEMENTS JOURNAL
Ch.
Date
No.
Payee
Account Debited
PR
Other
Cash
Discoun
t
Accts.
Payable
Credit
Credit
Debit
Debit
2011
Mar.
Page 2
Purchas
e
9 21
0
Narlin Corp.
Store Supplies
900
900
1 21
City Bank
Notes Payable
3,000
3,000
Accts.
643
276
7 1
2 21
9 2
LeBaron
LeBaron
6,860
3 21
1 3
E. Brandon
Salaries Expense
3,400
3 21
1 4
Pace, Inc.
Pace, Inc.
5,500
140
7,000
3,400
5,500
277

644

Part 1 Wilson Purchasing
Purchases Journal
Date
Account Credited
Date of
Invoice
Terms
PR
Page 1
Accounts
Payable Cr.
Merchandi
se
Inventory
Dr.
30,000
30,000
Office
Supplies
Dr.
Other
Accounts
Dr.
2011
May
11
Hostel Sales
May 11
3/10,
n/90

Ch.
No.
Date
Payee
Account Debited
PR
Cash Cr.
Page 1
Merchandise
Inventory Cr.
Other
Accounts Dr.
Accounts
Payable Dr.
2011
May
11
84
Express
Shipping
Merchandise
Inv.
20
85
Hostel Sales
Hostel Sales
335
27,9361
General Journal
Date
12 Accounts Payable Hostel Sales .......................
864
Page: 1
PR
Debit
2011
May
335
1,200
Credit
28,800
278
Merchandise Inventory ..........................................

Calculations:
1. 30,000 1,200 = 28,800; 28,800 x 3% = 864; 28,800 864 = 27,936.
1,200
279


Part 2 Hostel Sales
Sales Journal
Date
Invoice
Number
Account Debited
PR
Page 1
Accounts Receivable
Dr. Sales Cr.
Cost of Goods Sold Dr.

Cr.
30,000
20,000
2011
May
11
Wilson
Purchasing
1601
Date
Account
Credited
PR
Explanation
Cash
Dr.
Page 1
Sales
Discou
nt Dr.
Accounts
Receivabl
e Cr.
864
28,800
2011
May
21
Wilson
Purchasing
Wilson
Purchasing
27,93
61
General Journal
Date
Page: 1
PR
Debit
2011
May
12 Sales Returns and Allowances ...........................
1,200
Credit
Sales
Cr.
Other
Account
s Cr.
Cost of Goods
Sold Dr.
Merchandise
Inventory Cr.
645
280
Accounts Receivable Wilson Purchasing ......
1,200
To record sales return.
12 Merchandise Inventory .............................................

Cost of Goods Sold ...................................................
To record cost of merchandise returned to
inventory.
Calculations:
1. 30,000 1,200 = 28,800; 28,800 x 3% = 864; 28,800 864 = 27,936.
800
800
281

646

PURCHASES JOURNAL
Page 2
Accounts
Date
Date
Account Credited
Invoic
o
f
Terms
PR
Office
Other
Payable
Purchases
Supplie
s
Account
s
Credit
Debit
Debit
Debit
30,000
30,000
2011
Ma
11 Hostel Sales
y
May
3/10,n/90
1
1

Ch.
Date
No.
Payee
Account Debited
PR
Page 2
Purchas
e
Other
Accts.
Cash
Discoun
t
Accts.
Payable
Credit
Credit
Debit
Debit
2011
May
1 84 Express
Transportation-In
1
Shipping
2 85 Hostel Sales
0
A/P Hostel Sales
335
27,936
335
864
28,800
282
General Journal
Date
Page: 1
PR
Debit
Credit
2011
May

Purchase Returns and Allowances ....................
To record return of merchandise purchased.
1,200
1,200
283


Part 2 Hostel Sales
SALES JOURNAL
Page 2
Invoice
Date
Account Debited
Numbe
r
A/R Dr.
PR
Sales Cr.
2011
Ma
y
11 Wilson Purchasing
30,000
1601

Account
Date
Credited
Explanation
PR
Accts.
Cash
Disc.
Rec.
Sales
Accts.
Debit
Debit
Credit
Credit
Credit
27,936
864
28,800
2011
May
2 Wilson
1 Purchasing
Sale of May 11
General Journal
Date
Page: 1
PR
Debit
2011
May
Page 2
Sales
1,200
Credit
Other
647
284

1,200
285

The June 5 purchase would have been recorded in the Purchases Journal and the June 14
payment would have been recorded in the Cash Disbursements Journal. The error in journalizing
the June 14 transaction should be discovered in the process of crossfooting the Cash
Disbursements Journal at the end of the month.
a.
When the schedule of accounts payable is prepared.
b.
When crossfooting the Purchases Journal.
c.
When the trial balance is prepared.
d.
e.

285
286

Part 1
ACCOUNTS RECEIVABLE SUBLEDGER
Sanders Farrell
May 17
1,700 May 20
Bal.
1,200
Don Holland
500 May 10 3,880
25 680
Brad Smithers
May 6 5,760
Bal.
4,560
Part 2
GENERAL LEDGER
Accounts Receivable
May 31
12,020 May 20
Bal.
11,520
Sales Returns
and Allowances
Sales
500
May 3112,020
ay 20
M
500
Part 3
VALUE-MART GOODS
Schedule of Accounts Receivable
May 31, 2011
Sanders Farrell ...................................................
$ 1,200
Dan Holland ...............................................................................
4,560
Brad Smithers .....................................................
5,760
Total accounts receivable ...............................
$11,520
Accounts Receivable Controlling Account
Total debit ............................................................

Credit for return .................................................
$12,020
(500)
286
287
Balance as of May 31, 2011 ............................

$11,520
287
288
GENERAL LEDGER
Cash
38,878
Accounts Payable
23,044
1,500
23,200
Sales Discounts
472
18,300
Accounts Receivable
26,200
Notes Payable
600
Purchases
9,000
23,200
23,600
Prepaid Insurance
Purchase Returns
and Allowance
Sales
1,700
26,200
1,500
5,750
Sales Returns
and Allowances
Store Equipment
3,500
1,000
Purchase Discounts
600
456

Jack Hertz
7,400
Trudy Stone
600
16,800
Dave Waylon
16,800
2,000
6,800
ACCOUNTS PAYABLE SUBLEDGER

Grass Corp.
1,500
McGrew Company
10,800

3,400
Sulter, Inc.
9,000
9,000
288
289
9,300

289
290

Part 1
Adrian Carr
Jan. 8
Lisa Mack
7,076
Jan. 14
Jay Newton
23,780
Kathy Olivias
Jan. 2
4,176
Jan. 10
15,544
29
8,468
20
12,992
Part 2
Jan. 31
Accounts Receivable ...........................................

Sales ............................................................
GST Payable ................................................
PST Payable ................................................
72,036
62,100
3,726
6,210
Part 3
GENERAL LEDGER
Accounts Receivable
Jan. 31
Sales
72,036
62,100 Jan. 31
Part 4
SKILLERN COMPANY
January 31, 2011
Adrian Carr .........................................
$ 7,076
Jay Newton ..................................................
12,644
Kathy Olivas ...............................................
28,536
Lisa Mack .....................................................

23,780
290
291
Total accounts receivable ......................

$72,036
291
292

652
Page X
Sales Journal
Date
Account Debited
Invoice
No.
PR
A/R Dr
PST
Payable CR
GST
Payable CR
COGS DR
Merchandise
Inventory CR
Sales Cr
2011
Aug. 5
11
Jay Smith
50
50,160
3,520
2,640
44,000
21,000
Dee Oliver
51
38,760
2,720
2,040
34,000
16,200
Date
Account
Credited
Explanatio
n
PR
Other
Account
s CR
A/R
CR
PST
Payabl
e CR
Page X
GST
Payabl
e CR
Sale
s CR
Cash DR
Sales
Disc
Dr
2011
Aug. Jay Smith

20
21 Dee Oliver
Inv. 50
50,16
0
50,160
Inv. 51
38,76
0
38,420
Purchases Journal
Date
Account Credited
Terms
PR
A/P CR
340*
Page X
Merchandise
Inventory
DR
Other
Accounts DR
GST Recble
DR
COGS/DR
Merchandise
Inventory/
CR
293
2011
Aug. 1
Arden Sheet Metal
2/10,
n/30
10,600
JayCee Equipment
n/
30
6,360
Date
Ch #
Account Debited
10,000

Other
Accounts
GST Recble
PR
DR
DR
600
6,000
360
Page X
A/P DR
Merchandis
e Inventory
CR
Cash CR
2011
Aug. 10
28
A/P Arden Sheet Metal
*Discount on sales amount only
10,600
200
10,400
294


SALES JOURNAL
Date
2011
Aug.
Invoice
Number
Account Debited
5 Jay Smith
11 Dee Oliver
PR
50
51
Date
Account Credited
Explanation
2011
Aug.20 A/R Jay Smith
Inv. 50
21 A/R Dee Oliver
Inv. 51
PR
Accts.
Rec.
Debit
PST
Payable
Credit
50,160
38,760
3,520
2,720

Accts.
PST
GST
Rec.
Payable
Payable
Credit
Credit
Credit
Other
Accts.
Credit
Date
2011
Date of
Invoice
Account Credited
1 Arden Sheet Metal
7 JayCee Equipment
Ch.
No.
Aug.10 28
Payee
A/P Arden
2,6
2,0
Page X
Sales
Credit
50,160
38,760
PURCHASES JOURNAL
Date
2011
Aug.
GST
Payable
Credit
Terms
Aug. 1
Aug. 7
Account Debited
2/10,n/30
n/30
PR
Page X
Accts.
Payable
Credit
10,600
6,360

Other
GST
Accts.
Recble
PR
Debit
Debit
Arden Sheet Metal
Purchases
Debit
10,000
Page X
Accts.
Payable
Debit
10,600
653
Current
edition
CAMOSUN COLLEGE
73050199
BAYE
MP MGRL ECON/BUS STRAT

W/DD
70877386
BUCKWO
LD
CDN INCOME TAX/8CE

294
295
Chapter 9
EXERCISES
Internal Control and Cash

Lombard Companys internal control system failed to require a separation of asset
custody and recordkeeping. The bookkeeper should not have been allowed to sign
the companys cheques. In addition, since a loss was incurred, the company
apparently had not bonded its employee. Otherwise, the loss would have been
insured by the bonding company. Finally, if regular, independent reviews of the
accounting records had been done, the payments of salary cheques to a
nonemployee may have been discovered sooner.
You have several concerns. First, there is no mechanism in the parking meters to
track the input of coins (a meter reading that could be documented and subsequently
verified against the collection); this means there is no verifiable means by which to
reconcile the contents of each meter. Second, because of the first shortcoming, the
employee emptying the contents of the meters could withhold some of the coins
since the dollar value cannot be verified. Third, the canvas bag is not secure; it can
be opened at any time by an unauthorized individual. Fourth, after emptying several
parking meters, the contents of each canvas bag can easily exceed a thousand
dollars; there is a safety risk to a lone employee carrying a canvas bag of money.
To correct the situation, optimally, the parking meters should be mechanized such
that the contents can be reconciled. However, a major investment in new parking
meters seems unlikely, therefore, civic employees collecting coins from parking
meters should operate in pairs; there is less risk of fraud if two employees are
responsible for emptying the parking meters (unless there is collusion). The canvas
bag used to collect the coins is also problematic. It should be redesigned so that
coins can go in but cannot be removed unless done so by an authorized individual.
Finally, for safety of the individuals involved and for security over the coins, full
moneybags should not be stored in an unattended vehicle. Full moneybags should
be transferred to a secure location immediately; arrangements could be made with
an armored vehicle to rendezvous with the pair of employees regularly at specified
points along the route.

295
296

a. If a cash register cannot be used, the total sales value of the shirts and
sunglasses given to the employee each day should be calculated. Then, the
employee should sign a receipt for the merchandise and the amount of cash
that he or she has been given. At the end of each day, the employee should be
required to return cash plus remaining shirts and sunglasses equal to the
amount taken to the stand.
b.
The employee should sign a receipt for the total amount of cash he or she is
given each weekend. Then, each time the employee makes a purchase, he or
she should obtain a signed sales receipt for the payment. The sales receipt
should list the items purchased and the prices paid. When the employee returns
to the business office, the total value of the signed sales receipts plus any
remaining cash should equal the amount of cash originally given to the
employee. Also, the merchandise brought back by the employee should be the
same as the items listed on the signed sales receipts.

The internal control problem is that the bookkeeper has physical control over the
cash receipts and also has control over the accounting records. Nothing in the
system prevents the bookkeeper from taking cash from the mail and using it
personally. The bookkeeper might delay recording the cash receipt from a customer
until more cash comes in at a later date from a second customer. Then, the new
cash receipt would be deposited and recorded as a payment made by the first
customer. No entry would be made in the second customers account until cash was
received from a third customer. (This type of fraud is called lapping.) Also, the
bookkeeper may pocket cash and claim that a payment was never received and
apparently lost in the mail.
If only one person is present when the mail is opened, that person may steal cash
and claim it was never received. If possible, two people should be present.
Otherwise, the honesty and integrity of the person chosen to open the mail is critical.
Most importantly, the bookkeeper should not have physical control over cash.

296
297

Part 1
a.
Jan. 1
b.
Petty Cash .................................................................

Cash ...................................................................
To establish the fund.
200.00
200.00
Eanes Co.
Petty Cash Payments Report
January 1 8, 2011
Receipts:
Postage expense ..........................................................
$64.00
Merchandise inventory .............................................
19.00
Store supplies ...............................................................
36.50
Jim Eanes, Withdrawals ............................................
53.00
Total receipts ..........................................................................................................
Fund total....................................................................
$200.0
0
Less: Cash remaining ...............................................
27.50
$172.50
Equals: Cash required to replenish petty cash .........
172.50
Cash over/(short) ................................................................
Jan.
Part 2
Jan. 8
Postage Expense .......................................................

Merchandise Inventory ...............................................
Store Supplies Expense* ...........................................
Jim Eanes, Withdrawals .............................................
Cash ...................................................................
To reimburse the fund.
64.00
19.00
36.50
53.00
Postage Expense .......................................................

Petty Cash .................................................................
Cash ...................................................................
64.00
19.00
36.50
53.00
300.00

-0-
172.50
472.50
297
298
To reimburse the fund and increase it by $300.

Analysis Component
If the January 8 entry to reimburse the fund was not recorded, net income would be
overstated.
* Either Store Supplies Expense (an expense) or Store Supplies (an asset) could be
debited. However, if supplies are being purchased through Petty Cash it is likely
that they are for immediate use which justifies using an expense account over an
asset.

298
299

a.
Sept.
b.
Petty Cash .................................................................

Cash ...................................................................
400.00
400.00
Brady Company
September 9 30, 2011
Receipts:
Merchandise inventory ......................................
$ 32.4
5
Office supplies .............................................................
113.55
Repairs expense..........................................................
87.60
Total receipts ..............................................................
$233.60)
Fund total...................................................................
$400.0
0
Less: Cash remaining ..............................................
146.40
Equals: Cash required to replenish petty cash ........
253.60)
Cash over/(short) ...............................................................
($ 20.00
)
Sept. 30

Office Supplies Expense*...........................................
Repairs Expense........................................................
Cash Over and Short .................................................
Petty Cash ..........................................................
Cash ...................................................................
To reimburse the fund and decrease it by $100.
32.45
113.55
87.60
20.00
100.00
153.60
Analysis component:
There are several things that could be done. The Marketing Manager should
review the prior months petty cash journal entries to determine if the
shortage is an anomaly or a recurring event. Hopefully it is an anomaly but,
299
300
regardless, the manager will need to question the Petty Cash Custodian about
the $20 cash shortage recorded in September. It is important to recognize
that honest errors do occur. It is also possible that the Petty Cash Custodian
requires training to help him manage the petty cash fund. If it is determined
that the error was based on dishonesty, appropriate action will have to be
taken (which normally results in the dismissal of the employee as a minimum).
* Either Office Supplies Expense (an expense) or Office Supplies (an asset) could
be debited. However, if supplies are being purchased through Petty Cash it is
likely that they are for immediate use which justifies using an expense account
over an asset.

300
301

a.
Oct. 31 Cleaning Expense .......................................................
Postage Expense ........................................................
Delivery Expense ........................................................
Cash Over and Short .........................................
Cash ..................................................................
120.00
79.00
60.00
b.
Nov. 30 Computer Repair Expense ..........................................
Entertainment Expense ...............................................
Cash Over and Short...................................................
Cash ...................................................................
75.00
156.00
2.00
c.
Dec. 31 Gas Expense...............................................................
Office Supplies Expense* ............................................
Petty Cash...................................................................
Cash ...................................................................
To reimburse and increase the fund.
80.00
140.00
62.00
100.00
4.00
255.00
233.00
382.00
over an asset.

301
302

Oct.
Cash ..........................................................................
Debit Card Expense ...................................................
Service Revenue ................................................
To record sale of services less debit card
expense; 0.5% x 105,000 = 525.
104,475
525
Cash ..........................................................................
Service Revenue ................................................
To record sale of services provided for cash.
37,000
Cash ..........................................................................
Credit Card Expense..................................................
Service Revenue ................................................
To record sale of services less credit card
expense; 2% x 61,000 = 1,220.
59,780
1,220
10
Accounts Receivable Edson CHC ...........................

Service Revenue ................................................
To record sale of services.
84,000
25
Cash ..........................................................................
Sales Discounts .........................................................
Accounts Receivable Edson CHC ...................
To record collection of Oct. 10 credit sale;
2% x 84,000 = 3,680.
80,320
3,680

302
105,000
37,000
61,000
84,000
84,000
303

Jan. 15
Cash ..........................................................................
Sales ..................................................................
To record sale of merchandise to cash customers.
56,000
15
Cost of Goods Sold ....................................................

Merchandise Inventory .......................................
36,400
17

Sales ..................................................................
To record sale of merchandise on terms 2/10, n30.
15,800
17

12,000
20
Cash ..........................................................................
Sales ..................................................................
To record sale of merchandise less credit card
expense; 114,000 x 2% = 2,280.
111,720
2,280
20

74,100
25
Cash ..........................................................................
Sales ..................................................................
To record sale of merchandise less debit card
expense; 0.5% x 72,000 = 360.
71,640
360

46,800
25

303
56,000
36,400
15,800
12,000
114,000
74,100
72,000
46,800
304

Analysis component
Cash sales would be preferable, however, often it is not convenient for
customers. The inconvenience of cash might prevent customers from
making purchases if that was the only means of payment accepted by
LenCon. Credit sales allow customers to purchase on impulse. However,
two disadvantages: receipt of cash by LenCon is delayed and credit sales
require administrative time to monitor the timely collection from credit
customers. Debit cards have the advantage of allowing customers to
make impulse purchases but only if the cash balance is available in their
bank account. Debit cards are also comparable to cash (no subsequent
collection required) but the bank does charge a fee for this service
although it is normally significantly less than the fee charged by banks
for credit card transactions. Bank credit cards have the advantages of
cash being collected by LenCon immediately (positive effect on cash flow)
and customers are limited only to their credit card limit (not their bank
account balance); customers are buying on credit but the risk of
collection is transferred to the credit card company. The disadvantage of
credit cards is the fee charged by the administering bank. LenCon will
likely accept all forms of payment to enhance sales and in so doing
recognize the costs and risks of each.

304
305

1.
PELZER HOLDINGS
Bank Reconciliation
July 31, 2011
Bank statement balance ...................
$9,848
Book balance........................
$9,740
Add:
Outstanding deposit........................
572
Bank error (Peltza cheque) ..........
560
$10,98
0
Deduct:
Deduct:
Outstanding cheques:
NSF Jim Anderson ..........
240
#14: $ 600
#54:
140 ....................................
1,480
Adjusted bank balance......................
$9,500
2.
July 31
Adjusted book balance ........ $9,500
Accounts Receivable Jim Anderson ..................
240
Cash ............................................................................
240
To reinstate customer account.
Analysis component
If the journal entry in (2) is not recorded, net income, liabilities, and owners
equity would not be affected. Assets would be increased and decreased by the
same amount causing a net change of zero.

305
306
MEDLINE SERVICE CO.

Bank Reconciliation
July 31, 2011
Bank statement balance ...................................
$10,332
Add: .....................................................
Deposit of July 31 ..................
Book balance of cash ....................................
$11,352
Add:
2,724
Error on Ch. No. 919 ........
$13,056
Deduct:...............................................
Outstanding cheques ...........
$11,361
Deduct:
1,713
Bank service charge ........
18
Adjusted bank balance................. $11,343
Adjusted book balance ............
$11,343

b.
July
31
Cash ..........................................................................
Utilities Expense .................................................
To correct error.
31
Bank Service Charges Expense ................................

Cash ...................................................................
To record bank service charges.
18
Analysis component
If the journal entries in part (a) were not recorded, net income, assets, and
owners equity would each be overstated by a net amount of $9 ($18 - $9 = $9);
liabilities are not affected by the entries in (a).

306
18
307

Bank Balance
1. Interest earned on the account.
2. Deposit made on September 30
after the bank was closed.
3. Cheques outstanding on August
31 that cleared the bank in
September.
4. NSF cheque from customer
returned on September 15 but
not recorded by the company.
5. Cheques written and mailed to
payees on September 30.
that was processed on
September 8.
7. Bank service charge.
payees on October 5.
9. Cheque written by another
depositor but charged against
the company's account.
10. Principal and interest
collected by the bank but not
recorded by the company.
11. Special charge for collection
of note in No. 10 on company's
behalf.
12. Cheque written against the
account and cleared by the
bank; erroneously omitted by
the bookkeeper.
Book Balance
Must
Add Deduct Add Deduct Adjust
x
Dr.

Not Shown
on the
Reconciliation
x
x
x
Cr.
Cr.
x
x
x
x
x
Dr.
x
Cr.
Cr.
307
308

Case X
Case Y
Case Z
Cash ...........................................................
$ 800
$ 910
$1,100
Short-term investments.....................
-0-
-0-
500
-0-
990
800
Quick assets ...........................................
$ 800
$1,900
$2,400
Current liabilities .................................
$2,200
$1,100
$3,650
Acid-test ratio ........................................
0.36
1.73
0.66
Case Y exhibits the superior ability to meet short-term obligations as they come due.
The acid-test ratio of 1.73 exceeds the common benchmark of 1.0. Cases X and Z
fall short of the 1.0 benchmark.
Chapter 9
EXERCISES
Internal Control and Cash

Lombard Companys internal control system failed to require a separation of asset
custody and recordkeeping. The bookkeeper should not have been allowed to sign
the companys cheques. In addition, since a loss was incurred, the company
apparently had not bonded its employee. Otherwise, the loss would have been
insured by the bonding company. Finally, if regular, independent reviews of the
accounting records had been done, the payments of salary cheques to a
nonemployee may have been discovered sooner.
You have several concerns. First, there is no mechanism in the parking meters to
track the input of coins (a meter reading that could be documented and subsequently
verified against the collection); this means there is no verifiable means by which to
reconcile the contents of each meter. Second, because of the first shortcoming, the
employee emptying the contents of the meters could withhold some of the coins
308
309
since the dollar value cannot be verified. Third, the canvas bag is not secure; it can
be opened at any time by an unauthorized individual. Fourth, after emptying several
parking meters, the contents of each canvas bag can easily exceed a thousand
dollars; there is a safety risk to a lone employee carrying a canvas bag of money.
To correct the situation, optimally, the parking meters should be mechanized such
that the contents can be reconciled. However, a major investment in new parking
meters seems unlikely, therefore, civic employees collecting coins from parking
meters should operate in pairs; there is less risk of fraud if two employees are
responsible for emptying the parking meters (unless there is collusion). The canvas
bag used to collect the coins is also problematic. It should be redesigned so that
coins can go in but cannot be removed unless done so by an authorized individual.
Finally, for safety of the individuals involved and for security over the coins, full
moneybags should not be stored in an unattended vehicle. Full moneybags should
be transferred to a secure location immediately; arrangements could be made with
an armored vehicle to rendezvous with the pair of employees regularly at specified
points along the route.

309
310

a. If a cash register cannot be used, the total sales value of the shirts and
sunglasses given to the employee each day should be calculated. Then, the
employee should sign a receipt for the merchandise and the amount of cash
that he or she has been given. At the end of each day, the employee should be
required to return cash plus remaining shirts and sunglasses equal to the
amount taken to the stand.
b.
The employee should sign a receipt for the total amount of cash he or she is
given each weekend. Then, each time the employee makes a purchase, he or
she should obtain a signed sales receipt for the payment. The sales receipt
should list the items purchased and the prices paid. When the employee returns
to the business office, the total value of the signed sales receipts plus any
remaining cash should equal the amount of cash originally given to the
employee. Also, the merchandise brought back by the employee should be the
same as the items listed on the signed sales receipts.

The internal control problem is that the bookkeeper has physical control over the
cash receipts and also has control over the accounting records. Nothing in the
system prevents the bookkeeper from taking cash from the mail and using it
personally. The bookkeeper might delay recording the cash receipt from a customer
until more cash comes in at a later date from a second customer. Then, the new
cash receipt would be deposited and recorded as a payment made by the first
customer. No entry would be made in the second customers account until cash was
received from a third customer. (This type of fraud is called lapping.) Also, the
bookkeeper may pocket cash and claim that a payment was never received and
apparently lost in the mail.
If only one person is present when the mail is opened, that person may steal cash
and claim it was never received. If possible, two people should be present.
Otherwise, the honesty and integrity of the person chosen to open the mail is critical.
Most importantly, the bookkeeper should not have physical control over cash.

310
311

Part 1
a.
Jan. 1
b.
Petty Cash .................................................................

Cash ...................................................................
200.00
200.00
Eanes Co.
January 1 8, 2011
Receipts:
Postage expense ..........................................................
$64.00
Merchandise inventory .............................................
19.00
Store supplies ...............................................................
36.50
Jim Eanes, Withdrawals ............................................
53.00
Total receipts ..........................................................................................................
Fund total....................................................................
$200.0
0
Less: Cash remaining ...............................................
27.50
$172.50
Equals: Cash required to replenish petty cash .........
172.50
Cash over/(short) ................................................................
Jan.
Part 2
Jan. 8
Postage Expense .......................................................

Cash ...................................................................
64.00
19.00
36.50
53.00
Postage Expense .......................................................

Petty Cash .................................................................
Cash ...................................................................
64.00
19.00
36.50
53.00
300.00

-0-
172.50
472.50
311
312
To reimburse the fund and increase it by $300.

Analysis Component
If the January 8 entry to reimburse the fund was not recorded, net income would be
overstated.
* Either Store Supplies Expense (an expense) or Store Supplies (an asset) could be
debited. However, if supplies are being purchased through Petty Cash it is likely
that they are for immediate use which justifies using an expense account over an
asset.

312
313

a.
Sept.
b.
Petty Cash .................................................................

Cash ...................................................................
400.00
400.00
Brady Company
September 9 30, 2011
Receipts:
Merchandise inventory ......................................
$ 32.4
5
Office supplies .............................................................
113.55
Repairs expense..........................................................
87.60
Total receipts ..............................................................
$233.60)
Fund total...................................................................
$400.0
0
Less: Cash remaining ..............................................
146.40
Equals: Cash required to replenish petty cash ........
253.60)
Cash over/(short) ...............................................................
($ 20.00
)
Sept. 30

Office Supplies Expense*...........................................
Repairs Expense........................................................
Cash Over and Short .................................................
Petty Cash ..........................................................
Cash ...................................................................
To reimburse the fund and decrease it by $100.
32.45
113.55
87.60
20.00
100.00
153.60
Analysis component:
There are several things that could be done. The Marketing Manager should
review the prior months petty cash journal entries to determine if the
shortage is an anomaly or a recurring event. Hopefully it is an anomaly but,
313
314
regardless, the manager will need to question the Petty Cash Custodian about
the $20 cash shortage recorded in September. It is important to recognize
that honest errors do occur. It is also possible that the Petty Cash Custodian
requires training to help him manage the petty cash fund. If it is determined
that the error was based on dishonesty, appropriate action will have to be
taken (which normally results in the dismissal of the employee as a minimum).
over an asset.

314
315

a.
Oct. 31 Cleaning Expense .......................................................
Postage Expense ........................................................
Delivery Expense ........................................................
Cash Over and Short .........................................
Cash ..................................................................
120.00
79.00
60.00
b.
Nov. 30 Computer Repair Expense ..........................................
Cash Over and Short...................................................
Cash ...................................................................
75.00
156.00
2.00
c.
Dec. 31 Gas Expense...............................................................
Office Supplies Expense* ............................................
Petty Cash...................................................................
Cash ...................................................................
To reimburse and increase the fund.
80.00
140.00
62.00
100.00
4.00
255.00
233.00
382.00
over an asset.

315
316

Oct.
Cash ..........................................................................
Service Revenue ................................................
To record sale of services less debit card
expense; 0.5% x 105,000 = 525.
104,475
525
Cash ..........................................................................
Service Revenue ................................................
To record sale of services provided for cash.
37,000
Cash ..........................................................................
Service Revenue ................................................
To record sale of services less credit card
expense; 2% x 61,000 = 1,220.
59,780
1,220
10
Accounts Receivable Edson CHC ...........................

Service Revenue ................................................
To record sale of services.
84,000
25
Cash ..........................................................................
Sales Discounts .........................................................
Accounts Receivable Edson CHC ...................
To record collection of Oct. 10 credit sale;
2% x 84,000 = 3,680.
80,320
3,680

316
105,000
37,000
61,000
84,000
84,000
317

Jan. 15
Cash ..........................................................................
Sales ..................................................................
To record sale of merchandise to cash customers.
56,000
15

36,400
17

Sales ..................................................................
To record sale of merchandise on terms 2/10, n30.
15,800
17

12,000
20
Cash ..........................................................................
Sales ..................................................................
To record sale of merchandise less credit card
expense; 114,000 x 2% = 2,280.
111,720
2,280
20

74,100
25
Cash ..........................................................................
Sales ..................................................................
To record sale of merchandise less debit card
expense; 0.5% x 72,000 = 360.
71,640
360

46,800
25

317
56,000
36,400
15,800
12,000
114,000
74,100
72,000
46,800
318

Analysis component
Cash sales would be preferable, however, often it is not convenient for
customers. The inconvenience of cash might prevent customers from
making purchases if that was the only means of payment accepted by
LenCon. Credit sales allow customers to purchase on impulse. However,
two disadvantages: receipt of cash by LenCon is delayed and credit sales
require administrative time to monitor the timely collection from credit
customers. Debit cards have the advantage of allowing customers to
make impulse purchases but only if the cash balance is available in their
bank account. Debit cards are also comparable to cash (no subsequent
collection required) but the bank does charge a fee for this service
although it is normally significantly less than the fee charged by banks
for credit card transactions. Bank credit cards have the advantages of
cash being collected by LenCon immediately (positive effect on cash flow)
and customers are limited only to their credit card limit (not their bank
account balance); customers are buying on credit but the risk of
collection is transferred to the credit card company. The disadvantage of
credit cards is the fee charged by the administering bank. LenCon will
likely accept all forms of payment to enhance sales and in so doing
recognize the costs and risks of each.

318
319

1.
PELZER HOLDINGS
Bank Reconciliation
July 31, 2011
Bank statement balance ...................
$9,848
Book balance........................
$9,740
Add:
Outstanding deposit........................
572
Bank error (Peltza cheque) ..........
560
$10,98
0
Deduct:
Deduct:
Outstanding cheques:
NSF Jim Anderson ..........
240
#14: $ 600
#54:
140 ....................................
1,480
Adjusted bank balance......................
$9,500
2.
July 31
Adjusted book balance ........ $9,500
Accounts Receivable Jim Anderson ..................
240
Cash ............................................................................
240
To reinstate customer account.
Analysis component
If the journal entry in (2) is not recorded, net income, liabilities, and owners
equity would not be affected. Assets would be increased and decreased by the
same amount causing a net change of zero.

319
320
MEDLINE SERVICE CO.

Bank Reconciliation
July 31, 2011
Bank statement balance ...................................
$10,332
Add: .....................................................
Deposit of July 31 ..................
Book balance of cash ....................................
$11,352
Add:
2,724
Error on Ch. No. 919 ........
$13,056
Deduct:...............................................
Outstanding cheques ...........
$11,361
Deduct:
1,713
Bank service charge ........
18
Adjusted bank balance................. $11,343
Adjusted book balance ............
$11,343

b.
July
31
Cash ..........................................................................
Utilities Expense .................................................
To correct error.
31
Bank Service Charges Expense ................................

Cash ...................................................................
To record bank service charges.
18
Analysis component
If the journal entries in part (a) were not recorded, net income, assets, and
owners equity would each be overstated by a net amount of $9 ($18 - $9 = $9);
liabilities are not affected by the entries in (a).

320
18
321

Bank Balance
1. Interest earned on the account.
after the bank was closed.
3. Cheques outstanding on August
31 that cleared the bank in
September.
4. NSF cheque from customer
returned on September 15 but
not recorded by the company.
payees on September 30.
that was processed on
September 8.
7. Bank service charge.
payees on October 5.
9. Cheque written by another
depositor but charged against
the company's account.
10. Principal and interest
collected by the bank but not
recorded by the company.
11. Special charge for collection
of note in No. 10 on company's
behalf.
12. Cheque written against the
account and cleared by the
bank; erroneously omitted by
the bookkeeper.
Book Balance
Must
Add Deduct Add Deduct Adjust
x
Dr.

Not Shown
on the
Reconciliation
x
x
x
Cr.
Cr.
x
x
x
x
x
Dr.
x
Cr.
Cr.
321
322

Case X
Case Y
Case Z
Cash ...........................................................
$ 800
$ 910
$1,100
Short-term investments.....................
-0-
-0-
500
-0-
990
800
Quick assets ...........................................
$ 800
$1,900
$2,400
Current liabilities .................................
$2,200
$1,100
$3,650
Acid-test ratio ........................................
0.36
1.73
0.66
Case Y exhibits the superior ability to meet short-term obligations as they come due.
The acid-test ratio of 1.73 exceeds the common benchmark of 1.0. Cases X and Z
fall short of the 1.0 benchmark.
Chapter 10
aaExercises
Receivables

Apr. 6
Cash ....................................................................
Credit Card Expense ($9,200 .04) ..................
Sales ............................................................
8,832.00
368.00
COGS ..................................................................
5,300.00
10
Accounts ReceivableColonial .......................

Sales ............................................................
310.00
10
COGS ..................................................................
160.00
17
No entry required.
28
Cash ....................................................................

9,200.00
5,300.00
310.00
160.00
5,370.40
322
323
Credit Card Expense ($5,480 .02)...................

Accounts ReceivableColonial ................

109.60
5,480.00
323
324

1.
GENERAL LEDGER
Accounts Receivable
Nov. 3 8,834 Nov. 19
Bal.
Sales Returns
and Allowances
Sales
378
Nov. 3 8,834
8 2,500
8 2,500
11 1,466
11 1,466
28 5,212
28 5,212
17,634
18,012
Nov. 19
378
ABC Shop
Nov. 3 8,834
Colt Enterprises
Nov. 8
2,500
28 5,212
Bal.
Red McKenzie
Nov. 11 1,466
Bal.
Nov.
19
1,088
14,046
2. Subledger proof:
ABC Shop ...................................................................
Colt Enterprises .........................................................
Red McKenzie ............................................................
Balance of the Accounts Receivable account .........
$14,046
2,500
1,088
$17,634

a.Oct. 31
Allowance for Doubtful Accounts.....................

Accounts ReceivableGwen Rowe ..........
1,000
b. Dec. 9
Accounts ReceivableGwen Rowe .................

Allowance for Doubtful Accounts .............
200

1,000
200
324
378
325
Cash ....................................................................
Accounts ReceivableGwen Rowe ..........

200
200
325
326

Dec. 31
Bad Debt Expense .............................................

Expense = .005 $1,750,000 = $8,750.
8,750
Feb. 1

Accounts ReceivableCatherine Hicks ...
1,800
June 5
Accounts ReceivableCatherine Hicks ..........

1,800
Cash ....................................................................
Accounts ReceivableCatherine Hicks ...
1,800
8,750
1,800
1,800
1,800

a.Dec. 31
Bad Debt Expense .............................................

Allowance for Doubtful Accounts .........
Accounts Receivable
3,615
Allowance for
Doubtful Accounts
2,745
?
Bal. 159,000
4%
$ 6,360
b.Dec. 31
6,360
Bad Debt Expense .............................................

Allowance for Doubtful Accounts .........
Accounts Receivable
= 3,615 Adjustment
Required
Adjusted
Balance
10,356
10,356
3,996
?

Unadjusted
balance
Allowance for
Doubtful Accounts
Unadjusted
balance
Bal. 159,000
4%
$ 6,360
3,615
6,360
= 10,356 Adjustment
Required
Balance
326
327

a) $345,000
b)
c)
d)
e)
$356,000
$2,900
$170
$2,550

LISTEL
Partial Balance Sheet
March 31, 2011

Assets
Current assets:
Cash..........................................................................................
$ 29,000
Accounts receivable...........................................................
$102,000
Less: Allowance for doubtful accounts ..................
2,100
99,900
Notes receivable, due November 30, 2011...............
17,000
Merchandise inventory ....................................................
65,000
Supplies ..................................................................................
4,500
Total current assets ...........................................................
$215,400
Note: Bad Debt Expense is an income statement account and is therefore not listed on
the balance sheet. Notes Receivable due May 1, 2013, Building and Accumulated
Amortization, Building are asset accounts shown on the balance sheet but they
are not current assets.

327
328

a.
2011
Dec. 31 Bad Debt Expense .......................................................
7,314
Allowance for Doubtful Accounts .......................................
7,314
To record estimate for uncollectible accounts;

492,500 4,900 = 487,600 x 1.5% = 7,314.
b.
2012
Accounts Receivable ...................................................
620,000
Sales ..............................................................................................
620,000
To record credit sales during 2012.
Cost of Goods Sold ..........................................................................
406,500
Merchandise Inventory .........................................................
406,500
To record cost of sales during 2012.
Cash ......................................................................................................
491,300
Sales Discounts ................................................................................
6,200
Accounts Receivable ............................................
497,500
To record collections less sales discounts.
Allowance for Doubtful Accounts ..............................
12,450
Accounts Receivable ..............................................................
12,450
To record the write-off of uncollectible accounts.

328
329
c.
2012
Dec. 31 Bad Debt Expense ........................................................
9,207
Allowance for Doubtful Accounts ........................................
9,207

620,000 6,200 = 613,800 x 1.5% = 9,207.

329
330

d.
Assets
Current assets:
Accounts receivable1 ...................................................................................
$180,050
Less: Allowance for doubtful accounts2..............................................
4,971
$175,079
OR
$175,079
Accounts receivable (net) .................................................................................................
Calculations:
1.
2.
Accounts Receivable
Bal. Dec
31/11
70,000
620,000
497,50
0
2012 sales
Allowance for Doubtful Accounts

2012
collections
900
2012
write-offs
Unadj.Bal. Dec
31/11
Adjustment
7,314
Dec 31/11
12,450
Bal. Dec
31/12
180,050
2012
writeoffs 12,45
0
8,214 Adj. Bal. Dec

31/11
Adjustment
9,207 Dec 31/12
4,971 Adj. Bal. Dec
31/12
Analysis component:

330
331
The main advantage of the income statement approach is its simplicity.

Like the balance sheet approach, it satisfies the generally accepted
accounting principles of matching and conservatism. The main
disadvantage is that it does not compensate for over or under estimations
from year to year because it is not focused on the element that is
uncollectible, namely, the accounts receivable.

331
332

a.
2011
Dec. 31 Bad Debt Expense .....................................................
500
Allowance for Doubtful Accounts ..................................
500

70,000 x 2% = 1,400; 1,400 900 = 500.
b.
2012
Accounts Receivable ...............................................
620,000
Sales .........................................................................................
620,000
To record credit sales during 2012.
Cost of Goods Sold ..................................................
406,500
Merchandise Inventory ....................................................
406,500
To record cost of sales during 2012.
Cash ..........................................................................
491,300
Sales Discounts ...........................................................................
6,200
497,500
To record collections less sales discounts.
Allowance for Doubtful Accounts ..........................
12,450
Accounts Receivable .........................................................
12,450
To record the write-off of uncollectible

accounts.

332
333
c.
2012
Dec. 31 Bad Debt Expense ...................................................
14,651
Allowance for Doubtful Accounts ..................................
14,651

180,050 x 2% = 3,601;
3,601 1,400 + 12,450 = 14,651.

333
334

d.
Assets
Current assets:
Accounts receivable ..........................................................
$180,050
Less: Allowance for doubtful accounts ..........................................
3,601
$176,449
OR
$176,449
Accounts receivable (net) ............................................................................................
Calculations:
Accounts Receivable
Bal. Dec
31/11
70,000
620,000
2012
collection
497,50 s
0
900
2012 sales
500
2012
write-offs
Adjustment
Dec 31/11
12,450
Bal. Dec
31/12
Unadj. Bal.
Dec 31/11
180,050
1,400
2012
writeoffs 12,45
0
Adj. Bal. Dec

31/11
14,651
Adjustment
Dec 31/12
3,601
Adj. Bal. Dec

31/12
Analysis component
334
335
The main advantage of the balance sheet approach is that it adjusts the
allowance for doubtful accounts to the estimated amount of
uncollectibles. Like the income statement approach, it satisfies the
generally accepted accounting principles of matching and conservatism.
The main disadvantage is that it does require more effort in terms of
calculations.

335
336

a.
2011
Dec. 31 Bad Debt Expense ...........................................................
2,250
Allowance for Doubtful Accounts..............................
2,250

(95,000 x 1% = 950) + (35,000 x 4% = 1,400) +
(8,000 x 10% = 800) + (2,000 x 60% = 1,200) =
4,350; 4,350 2,100 = 2,250.
b.
2012
Dec. 31 Bad Debt Expense ...........................................................
39,010
Allowance for Doubtful Accounts ............................................
39,010

(215,000 x 1% = 2,150) + (95,000 x 4% = 3,800) +
(35,100 x 10% = 3,510) + (15,000 x 60% = 9,000) =
18,460; 18,460 4,350 + 24,900 = 39,010.

c.
Assets
Current assets:
Accounts receivable .................................................................. $360,100

Less: Allowance for doubtful accounts ....................................................
18,460
$341,640
OR

336
337
$341,640
Accounts receivable (net) ......................................................................................................
Calculations:
Accounts Receivable
Bal. Dec
31/11
2012 sales
140,000
1,240,0
00
995,0
00

2012
collections
2,100
2012
write-offs
2,250
Unadj.Bal. Dec
31/11
Adjustment
Dec 31/11
24,90
0
Bal. Dec
31/12
360,100
4,350 Adj. Bal. Dec

31/11
2012
write- 24,90
offs
0
39,010
Adjustment
Dec 31/12
18,460 Adj. Bal. Dec
31/12

337
338

Analysis component
One of the ways to apply the balance sheet approach is to use an aging
analysis of outstanding receivables. The main advantage of the aging
analysis is that it adjusts the allowance for doubtful accounts to the
estimated amount of uncollectible receivables based on a detailed
analysis that considers the risk associated with the age of a receivable.
Like the income statement approach, it satisfies the generally accepted
accounting principles of matching and conservatism. The main
disadvantage is that it does require more effort in terms of calculations.
However, computerization of the accounting information system has
negated that disadvantage.
May 3
Bad Debt Expense .............................................

Accounts Receivable Wilma Benz..........
To write-off an uncollectible receivable using the
direct write-off method.
1,100
1,100
Analysis component:
Using 2% of credit sales, bad debt expense would be $5,600 (280,000 2% =
5,600) for 2011 thereby decreasing net income by $4,500 more than the direct
write-off method. Using 4% of outstanding accounts receivable would result
in a bad debt expense of $2,940 (46,000 4% = 1,840 + 1,100 = 2,940) thereby
decreasing net income by $1,840 more than the direct write-off method.

Mar. 21
Notes Receivable ...............................................

Accounts ReceivableBradley Brooks ....
To record 6-month, 10% note to replace
past-due account.
6,200.00
Sept. 21
Accounts ReceivableBradley Brooks ...........

Interest Revenue.........................................
Notes Receivable ........................................
To record dishonoured note;
$6,200 0 .10 6/12 = $310.00.
6,510.00
Dec. 31

Accounts ReceivableBradley Brooks ....
To record write-off of Brooks account.
6,510.00

6,200.00
310.00
6,200.00
6,510.00
338
339

Oct. 31
Notes ReceivableLeann Grimes ....................

Accounts ReceivableLeann Grimes ......
To record 6-month, 8% note to replace
past-due account.
5,000.00
Dec. 31
Interest Receivable ............................................

To record accrued interest;
$5,000 .08 2/12 = $66.67.
66.67
Apr. 30
Cash ....................................................................
Receivable
66.67
To record collection of note and interest;
$5,000 .08 4/12 = $133.33.
5,200.00

5,000.00
66.67
339
340

2011
Dec. 16

Accounts ReceivableCarmel Karuthers ......
To record 60-day, 7% note to replace
past-due account.
17,200.00
31
Interest Receivable ............................................

To record accrued interest;
$17,200 0.07 15/365 = $49.48.
49.48
31
Interest Revenue ................................................

Income Summary........................................
To record the closing of the Interest
Revenue account.
49.48
Cash ....................................................................
Interest Receivable .....................................
To record collection of note plus interest;
$17,200 x 0 .07 x 60/365 = 197.92;
197.92 49.48 = 148.44.
17,397.92
2012
Feb. 14
Mar. 2
Notes Receivable ......................................................

Accounts ReceivableATW Company ........
past-due account.
49.48
49.48
148.44
49.48
17,200.00
8,000.00
17

Accounts ReceivableLeroy Johnson .........
past-due account.
3,200.00
May 31
Cash ....................................................................
To record collection of note plus interest;
$8,000 0.08 90/365 = $157.81.
8,157.81

17,200.00
8,000.00
3,200.00
157.81
8,000.00
340
341

Aug. 2

Sales ............................................................
To record sales on credit.
6,295.00

Merchandise Inventory .................................
3,150.00
Cash ....................................................................
Factoring Fee Expense ......................................
Accounts Receivable ....................................
To record sale of accounts receivable;
$18,770 .015.
18,488.45
281.55
15
Cash ....................................................................
Accounts Receivable ....................................
To record collection from credit customers.
3,436.00
25
Cash ....................................................................
Notes Payable .............................................
To record note; pledged $14,000 of accounts
receivable as security for the loan.
10,000.00
6,295.00
3,150.00
18,770.00
3,436.00
10,000.00
Note:
Accounts receivable in the amount of $14,000 are pledged as security for a
$10,000 note payable to Fidelity Bank.

341
342

Jan. 20
Note Receivable .................................................

Accounts Receivable Steve Soetart .......
Received note in settlement of account.
170,000.00
Feb. 19
Cash ....................................................................
Discounted a note receivable.
170,487.58
Principal of Note ................................................ $170,000.00

Add: Interest from Note ($170,000 9% 90/365)
Maturity Value .................................................... $173,772.60
Less: Bank Discount ($173,772.60 11.5% 60/365)
Proceeds............................................................. $170,487.58
170,000.00
487.58
170,000.00
3,772.60
3,285.02

Part 1
Accounts Receivable Turnover
$7,280
= 13.43 times
($598 + $486)/2
Days Sales Uncollected
$598 x 365 = 29.98 days

$7,280
Part 2
WestCon is not collecting its receivables as quickly as the industry average
which is generally unfavourable. WestCon has more days of uncollected sales
(or receivables) than the industry average, also unfavourable.

342
343
Chapter 11
EXERCISES
Payroll Liabilities

Regular pay (172 hours @ $12.50) ...........................
Overtime premium pay (12 hours @ $6.25) .............
Gross pay ..................................................................
EI deduction .............................................................
CPP deduction...........................................................
Income tax deduction ($151.00 + $201.30) ..............
Total deductions .......................................................
Net pay .......................................................................
$ 41.61
95.70
352.30
$2,150.00
75.00
$2,225.00
489.61
$1,735.39

Deductions
Employee
Gross
EI
Pay
Premium
Income
Taxes
Health
CPP*
Total
Insurance Deductions
Net Pay
Hellena Chea
720.00
13.461
133.55
32.315
24.00
203.32
516.68
Joseph Lim
610.00
11.412
104.65
26.866
24.00
166.92
443.08
Dino Patelli
830.00
15.523
169.70
37.757
36.00
258.97
571.03
Sharl Qulnata
1,700.00
31.794
486.90
80.828
24.00
623.51
1,076.49
Totals
3,860.00
72.18
894.80
177.74
108.00
1,252.72
2,607.28
*$3,500 exemption 52 weeks = $67.31 exempt per week
1. $720 1.87% = $13.46
5. ($720 $67.31) 4.95% =

$32.31
2. $610 1.87% = $11.41
6. ($610 $67.31) 4.95% =

$26.86
3. $830 1.87% = $15.52
7. ($830 $67.31) 4.95% =

$37.75
4. $1,700 1.87% = $31.79
8. ($1,700 $67.31) 4.95% = $80.82

343
344
May
Office Salaries Expense............................................

Employees Income Taxes Payable ...........
CPP Payable ...............................................
Employees Health Insurance Payable .....
EI Payable ...................................................
Salaries Payable .........................................

3,860.00
894.80
177.74
108.00
72.18
2,607.28
344
345

Deductions
Employee
Gross
Pay
EI
Pay
Income United
Premium Taxes
Total
Way
CPP
Distribution
Net Pay
Deductions
Office
Salaries
Sales
Salaries
Akerley, D.
1,900.00
35.53
421.65
80.00
87.39
624.57 1,275.43 1,900.00
Nesbitt, M.
1,260.00
23.56
218.60
50.00
55.71
347.87
912.13
1,260.00
Trent, F.
1,680.00
31.42
348.35
40.00
76.50
496.27 1,183.73
1,680.00
Vacon, M.
3,000.00
56.10
815.00 300.00 141.84
1,312.94 1,687.06
3,000.00
Totals
7,840.00
146.61 1,803.60 470.00 361.44
2,781.65 5,058.35 1,900.00 5,940.00

Deductions
Gross
EI
Distribution
Canada
Income
United
Total
Pay
Premiu
Savings
Office
Sales
m
Taxes Bonds CPP Way Deductions Net Pay Salaries Salaries
Employee
Pay
Crimson, L.
1,995.0
0
37.31 276.30 150.00 84.32 99.75
Long, M.
2,040.0
0
38.15 306.95
102.0
-0- 86.54
0
1,506.3
533.64
6
2,040.00
Morris, P.
2,000.0
0
37.40 295.70
100.0
-0- 84.56
0
1,482.3
517.66
4
2,000.00
Peterson,
B.
2,280.0
0
42.64 305.75 200.00 98.42
1,519.1
9
2,280.00
Totals
8,315.0
1,184.7
353.8 415.7
0 155.50
0 350.00
4
5
114.0
0
647.68
760.81
1,347.3
2 1,995.00
5,855.2
2,459.79
1 1,995.00 6,320.00

345
346
Deductions
Employee
Gross
Pay
EI
Premiu Income
m
Taxes
Payment
Distribution
United
Total
Office
CPP* Way Deductions Net Pay Salaries
Salaries
Crimson, L. 1,995.00
37.31
295.70 84.32
Long, M.
2,040.00
38.15
306.95 86.54 102.00
533.64 1,506.36
2,040.00
Morris, P.
2,000.00
37.40
295.70 84.56 100.00
517.66 1,482.34
2,000.00
Peterson, B. 2,350.00
43.95
380.50 101.89 117.50
843.84 1,506.16
2,350.00
Totals
99.75
Sales
8,385.00 156.81 1,278.85 357.31 419.25

667.08 1,327.92 1,995.00
2,562.22 5,822.78 1,995.00
346
6,390.00
347

Monthly salary ...........................................
CPP deducted ...........................................
EI deducted ...............................................
Income tax withheld ..................................
Salary, net of deductions .........................
....................................................................
Monthly contribution ................................
Feb. 28
$2,050.00
$ 87.04
38.34
308.80
0.02
434.18
$1,615.82
32.32
Salaries Expense ................................................................................................

2,050.00
EI Payable .......................................................................................................
38.34
CPP Payable....................................................................................................
87.04
Employees Income Taxes Payable .......................................................
308.80
United Way Payable ....................................................................................
32.32
Salaries Payable ............................................................................................ 1,583.50

Mar. 24
Salaries Expense ................................................................................................

65,950.00
EI Payable ........................................................................................................
1,233.27
CPP Payable ....................................................................................................
3,097.93
Employees Income Taxes Payable........................................................
28,439.95
Medical Insurance Payable .......................................................................
1,150.00
United Way Payable ....................................................................................
1,319.00
Salaries Payable ............................................................................................
30,709.85

Mar. 24
EI Expense (1,233.27 1.4) ..........................................................................

1,726.58
CPP Expense ........................................................................................................
3,097.93
EI Payable ........................................................................................................
1,726.58
CPP Payable ....................................................................................................
3,097.93

347
348

Apr. 15
EI Payable (1,233.27 + 1,726.58) ................................................................

2,959.85
CPP Payable (3,097.93 x 2) ............................................................................
6,195.86
Employees Income Taxes Payable .............................................................
28,439.95
Cash ...................................................................................................................

37,595.66
348
349

1. May 5
2.
EI Expense............................................................
CPP Expense ........................................................
EI Payable ($81.06 1.4) ..............................
CPP Payable .................................................
101.05
177.74
101.05
177.74
5Benefits Expense....................................................... 494.00

Employees Health Insurance Payable .......
Employees Retirement Program Payable ..
108.00
386.00

Retirement Fund
Health
CPP Contribution
Doherty
EI Contribution
Contributions Insurance
($36,000 3,500) 4.95% = $1,608.75$36,000 1.87% =
Fane ......
1,910.70
729.30
6,100.00
1,440.00
Kahan...
1,910.70
729.30
5,900.00
1,440.00
Martin .. ($37,000 3,500) 4.95% = 1,658.25$37,000 1.87% =

Poon......
1,910.70
Totals ...
$8,999.10
691.90
729.30
4,800.00
3,700.00 1,44
1,440.00
$3,553.00$24,100.00 $7,200.00
Payroll taxes and fringe benefits as a percentage of salaries:

$8,999.10 + ($3,553.00 1.4) + $24,100 + $7,200
= 18.79%
$241,000
Apr. 30 Salaries Expense ($2,080 12)...................................................
24,960.00
EI Payable ($38.90 12) ..........................................................
466.80
CPP Payable ($88.52 12) ......................................................
1,062.24
Employees Income Taxes Payable (315.70 12) ..........
3,788.40
Salaries Payable ...........................................................................
19,642.56

349
350
30
EI Expense ($466.80 1.4) ..........................................................
653.52
CPP Expense .......................................................................................
1,062.24
Benefits Expense Retirement Program ................................
1,996.80
Benefits Expense Medical Insurance ($50 12) ..............
600.00
EI Payable .......................................................................................
653.52
CPP Payable ...................................................................................
1,062.24
Retirement Program Payable .................................................
1,996.80
Medical Insurance Payable ......................................................
600.00

350
351

Jan. 31
Benefits Expense .......................................................

Estimated Vacation Payable ..............................
22,507
22,507
$ 96,000 (2/50) = $ 3,840

224,0001 (4/48) = 18,667
$320,000
$22,507
1. 320,000 x 70% = 224,00
Chapter 8
Accounting Information
Systems
Questions
1. As a purchasing agent, Greg Timko will make daily use of the purchases
journal and the inventory and accounts payable subledgers. He might
discuss with personnel from other areas of the store the other journals and
subledgers as his area impacts them or vice versa: sales journal, cash
disbursements journal, and cash receipts journal along with the accounts
receivable subledger.
2. Four types of transactions recorded in separate special journals are: (a) sales
on credit, (b) purchases on credit, (c) cash receipts, and (d) cash
disbursements.
3. Daily recording and posting of credit sales and cash receipts from customers
provides up-to-date information used in decisions about granting credit to
customers. Also, up-to-date account balances are needed if customers
inquire about the amount of their balances.
4. Both kinds of credits should not be placed in the same column because the
sum of the credits to the customer accounts must be posted to the Accounts
Receivable controlling account. Placing these credits in a separate column
makes it possible to post the column total to the controlling account.
5. The double posting does not cause the trial balance to be out of balance
because only one credit is posted to the General Ledger.
6. The initial and page number of the journal from which the amount was posted
is entered in the Posting Reference column of the ledger account.
QUICK STUDY

351
352
Quick Study 8-1

1.
2.
3.
4.
P
AR
AR
AP
Quick Study 8-2

Input (I) or
Output (O)
1.
2.
3.
4.
5.
6.
7.
8.
Quick Study 8-3

a.
Sales Journal
b.
Purchases Journal
c.
d.
e.
Purchases Journal
f.
g.

352
353
Quick Study 8-4

Nov. 12
Automobiles ...............................................
Capital, Jesse Cooke ..........................
The owner contributed an automobile
to the business.
15,000
19
Sales Returns and Allowances ...................

Accounts ReceivableR. Wyder ........
Customer returned merchandise.
150
19
Merchandise Inventory ................................

Cost of goods sold ...............................
Merchandise returned to inventory.
95
28
Accounts PayableThe Ringdol Company 170

Merchandise Inventory .......................
Returned defective merchandise.
15,000
150
95
170
Quick Study 8-5

Debit (DR),
Credit (CR), or
No Effect (NE)
1.
2.
3.
4.
5.
6.
7.
DR
NE
NE
CR
NE
CR
NE
Quick Study 8-6

Debit (DR),
Credit (CR), or
No Effect (NE)
1.
2.
3.
4.
5.
6.
7.
CR
NE
CR
NE
DR
DR
NE

353
354

Quick Study 8-7
Sales Journal
Page 1
Accounts Receivable
Dr. Sales Cr.

Cr.
1103
3,000
2,040
10 Willis Company
1104
10,800
7,344
25 Ellton Kingston
1105
7,400
5,032
Date
Account Debited
Invoice
Number
PR
2011
Mar. 3 T. Edson
Quick Study 8-8
Date
Account
Credited
PR
Explanation
Sales
Discount
Cash Dr.
Dr.
Page 1
Accounts
Receivable
Cr.
2011
Mar. 18
T. Edson
Invoice #1103
2,940
60
3,000
Sales
Cr.
Other
Accounts
Cr.
Cost of Goods
Sold Dr.
Merchandise
Inventory Cr.
639
355
30
Willis
Company
Invoice #1104
31
ABC Company
Cash sale
10,800
6,200
10,800
6,200
4,216
356

640
Quick Study 8-9

Purchases Journal
Date
Account Credited
Date of
Invoice
Terms
PR
Page 1
Accounts
Payable Cr.
Merchandise
Inventory Dr.
Office
Supplies
Dr.
Other
Accounts
Dr.
2011
Mar. 2 Tex Company
Mar
3/10,
n20
4,800
4,800
12 Littleton
12
2/15,
n30
14,000
14,000
13 Worsley
13
2/15,
n45
9,400
9,400
Quick Study 8-10


Date
Ch.
No.
Payee
Account Debited
PR
Cash Cr.
Page 1
Merchandise
Inventory Cr.
Other
Accounts Dr.
Accounts
Payable Dr.
2011
Mar. 14
101
Tex Company
Tex Company
27
102
Littleton
Littleton
4,800
13,720
4,800
280
14,000
357
31
103
Thorn Real Estate
Rent Expense
6,500
6,500
358

EXERCISES
Sales Journal
Date
Account Debited
Invoice
Number
PR
Page 1
Accounts Receivable
Dr. Sales Cr.

Cr.
2011
Feb. 7
J. Eason
5704
1,150
700
12
P. Lathan
5705
320
170
25
S. Summers
5706
550
300

SALES JOURNAL
Page 2
Invoice
Date
Account Debited
Numbe
r
A/R Dr.
PR
Sales Cr.
2011
Feb
.
7 J. Eason
5704
1,150
12 P. Lathan
5705
320
25 S. Summers
5706
550

641
359
Date
Account
Credited
PR
Explanation
Cash
Dr.
Sales
Discou
nt Dr.
Page 1
Accounts
Receivabl
e Cr.
Sales
Cr.
Other
Account
s Cr.
Cost of Goods
Sold Dr.
Merchandise
Inventory Cr.
2011
Sept. 9
Notes payable
Note to bank
5,500
5,500
13
Dale Trent,
capital
Owner
investment
7,000
7,000
18
Sales
Cash sale
27
J. Namal
Invoice, Sept. 7
460
1,764
460
36
1,800
280
360

642

Account
Date
Credited
Explanation
PR
Page 2
Sales
Accts.
Other
Cash
Disc.
Rec.
Sales
Accts.
Debit
Debit
Credit
Credit
Credit
2011
Sept
.
9 Notes payable
Note to bank
5,500
5,500
1 Dale Trent,
3 capital
Owner
investment
7,000
7,000
1 Sales
8
Cash sale
2 J. Namal
7
Invoice, Sept. 7
460
1,764
460
36
1,800
361
Purchases Journal
Date
Account Credited
Date of
Invoice
Terms
PR
Page 1
Accounts
Payable Cr.
Merchandi
se
Inventory
Dr.
8,100
Office
Supplies
Dr.
Other
Accounts
Dr.
2011
July
Angler, Inc.
Ju
l
n/30
8,100
14 Store Supplies/ Steck

Company
Ju
l
14
2/10,
n/30
240
17
Ju
l
17
n/30
2,600
Marten Company
240
2,600

PURCHASES JOURNAL
Page 2
Accounts
Date
of
Date
Account Credited
Invoic
e
Terms
PR
Office
Other
Payable
Purchases
Supplie
s
Accounts
Credit
Debit
Debit
Debit
2011
July
1 Angler, Inc.
July
1
14 Store Supplies/Steck Company July
n/30
2/10,n/30
8,100
240
8,100
240
362
14
17 Marten Company
July
17
n/30
2,600
2,600
363


Ch.
No.
Date
Payee
Account Debited
PR
Cash Cr.
Page 1
Merchandise
Inventory Cr.
Other
Accounts Dr.
Accounts
Payable Dr.
2011
Mar. 9
210
Narlin Corp.
Store Supplies
900
900
17
211
City Bank
Notes Payable
3,000
3,000
29
212
LeBaron
LeBaron
6,860
31
213
E. Brandon
Salaries
Expense
3,400
31
214
Pace, Inc.
Pace, Inc.
5,500
140
7,000
3,400
5,500

Ch.
Date
No.
Payee
Account Debited
PR
Other
Cash
Discoun
t
Accts.
Payable
Credit
Credit
Debit
Debit
2011
Mar.
Page 2
Purchas
e
9 21
0
Narlin Corp.
Store Supplies
900
900
1 21
City Bank
Notes Payable
3,000
3,000
Accts.
643
364
7 1
2 21
9 2
LeBaron
LeBaron
6,860
3 21
1 3
E. Brandon
Salaries Expense
3,400
3 21
1 4
Pace, Inc.
Pace, Inc.
5,500
140
7,000
3,400
5,500
365

644

Purchases Journal
Date
Account Credited
Date of
Invoice
Terms
PR
Page 1
Accounts
Payable Cr.
Merchandi
se
Inventory
Dr.
30,000
30,000
Office
Supplies
Dr.
Other
Accounts
Dr.
2011
May
11
Hostel Sales
May 11
3/10,
n/90

Ch.
No.
Date
Payee
Account Debited
PR
Cash Cr.
Page 1
Merchandise
Inventory Cr.
Other
Accounts Dr.
Accounts
Payable Dr.
2011
May
11
84
Express
Shipping
Merchandise
Inv.
20
85
Hostel Sales
Hostel Sales
335
27,9361
General Journal
Date
864
Page: 1
PR
Debit
2011
May
335
1,200
Credit
28,800
366

Calculations:
1. 30,000 1,200 = 28,800; 28,800 x 3% = 864; 28,800 864 = 27,936.
1,200
367


Part 2 Hostel Sales
Sales Journal
Date
Invoice
Number
Account Debited
PR
Page 1
Accounts Receivable
Dr. Sales Cr.

Cr.
30,000
20,000
2011
May
11
Wilson
Purchasing
1601
Date
Account
Credited
PR
Explanation
Cash
Dr.
Page 1
Sales
Discou
nt Dr.
Accounts
Receivabl
e Cr.
864
28,800
2011
May
21
Wilson
Purchasing
Wilson
Purchasing
27,93
61
General Journal
Date
Page: 1
PR
Debit
2011
May
1,200
Credit
Sales
Cr.
Other
Account
s Cr.
Cost of Goods
Sold Dr.
Merchandise
Inventory Cr.
645
368
1,200
12 Merchandise Inventory .............................................

Cost of Goods Sold ...................................................
To record cost of merchandise returned to
inventory.
Calculations:
1. 30,000 1,200 = 28,800; 28,800 x 3% = 864; 28,800 864 = 27,936.
800
800
369

646

PURCHASES JOURNAL
Page 2
Accounts
Date
Date
Account Credited
Invoic
o
f
Terms
PR
Office
Other
Payable
Purchases
Supplie
s
Account
s
Credit
Debit
Debit
Debit
30,000
30,000
2011
Ma
11 Hostel Sales
y
May
3/10,n/90
1
1

Ch.
Date
No.
Payee
Account Debited
PR
Page 2
Purchas
e
Other
Accts.
Cash
Discoun
t
Accts.
Payable
Credit
Credit
Debit
Debit
2011
May
1 84 Express
Transportation-In
1
Shipping
2 85 Hostel Sales
0
A/P Hostel Sales
335
27,936
335
864
28,800
370
General Journal
Date
Page: 1
PR
Debit
Credit
2011
May

Purchase Returns and Allowances ....................
To record return of merchandise purchased.
1,200
1,200
371


Part 2 Hostel Sales
SALES JOURNAL
Page 2
Invoice
Date
Account Debited
Numbe
r
A/R Dr.
PR
Sales Cr.
2011
Ma
y
11 Wilson Purchasing
30,000
1601

Account
Date
Credited
Explanation
PR
Accts.
Cash
Disc.
Rec.
Sales
Accts.
Debit
Debit
Credit
Credit
Credit
27,936
864
28,800
2011
May
2 Wilson
1 Purchasing
Sale of May 11
General Journal
Date
Page: 1
PR
Debit
2011
May
Page 2
Sales
1,200
Credit
Other
647
372

1,200
373

The June 5 purchase would have been recorded in the Purchases Journal and the June 14
payment would have been recorded in the Cash Disbursements Journal. The error in journalizing
the June 14 transaction should be discovered in the process of crossfooting the Cash
Disbursements Journal at the end of the month.
a.
b.
When crossfooting the Purchases Journal.
c.
When the trial balance is prepared.
d.
e.

373
374

Part 1
Sanders Farrell
May 17
1,700 May 20
Bal.
1,200
Don Holland
500 May 10 3,880
25 680
Brad Smithers
May 6 5,760
Bal.
4,560
Part 2
GENERAL LEDGER
Accounts Receivable
May 31
12,020 May 20
Bal.
11,520
Sales Returns
and Allowances
Sales
500
May 3112,020
ay 20
M
500
Part 3
VALUE-MART GOODS
May 31, 2011
Sanders Farrell ...................................................
$ 1,200
Dan Holland ...............................................................................
4,560
Brad Smithers .....................................................
5,760
$11,520
Accounts Receivable Controlling Account
Total debit ............................................................

Credit for return .................................................
$12,020
(500)
374
375
Balance as of May 31, 2011 ............................

$11,520
375
376
GENERAL LEDGER
Cash
38,878
Accounts Payable
23,044
1,500
23,200
Sales Discounts
472
18,300
Accounts Receivable
26,200
Notes Payable
600
Purchases
9,000
23,200
23,600
Prepaid Insurance
Purchase Returns
and Allowance
Sales
1,700
26,200
1,500
5,750
Sales Returns
and Allowances
Store Equipment
3,500
1,000
Purchase Discounts
600
456

Jack Hertz
7,400
Trudy Stone
600
16,800
Dave Waylon
16,800
2,000
6,800

Grass Corp.
1,500
McGrew Company
10,800

3,400
Sulter, Inc.
9,000
9,000
376
377
9,300

377
378

Part 1
Adrian Carr
Jan. 8
Lisa Mack
7,076
Jan. 14
Jay Newton
23,780
Kathy Olivias
Jan. 2
4,176
Jan. 10
15,544
29
8,468
20
12,992
Part 2
Jan. 31
Accounts Receivable ...........................................

Sales ............................................................
GST Payable ................................................
PST Payable ................................................
72,036
62,100
3,726
6,210
Part 3
GENERAL LEDGER
Accounts Receivable
Jan. 31
Sales
72,036
62,100 Jan. 31
Part 4
SKILLERN COMPANY
January 31, 2011
Adrian Carr .........................................
$ 7,076
Jay Newton ..................................................
12,644
Kathy Olivas ...............................................
28,536
Lisa Mack .....................................................

23,780
378
379

$72,036
379
380

652
Page X
Sales Journal
Date
Account Debited
Invoice
No.
PR
A/R Dr
PST
Payable CR
GST
Payable CR
COGS DR
Merchandise
Inventory CR
Sales Cr
2011
Aug. 5
11
Jay Smith
50
50,160
3,520
2,640
44,000
21,000
Dee Oliver
51
38,760
2,720
2,040
34,000
16,200
Date
Account
Credited
Explanatio
n
PR
Other
Account
s CR
A/R
CR
PST
Payabl
e CR
Page X
GST
Payabl
e CR
Sale
s CR
Cash DR
Sales
Disc
Dr
2011
Aug. Jay Smith

20
21 Dee Oliver
Inv. 50
50,16
0
50,160
Inv. 51
38,76
0
38,420
Purchases Journal
Date
Account Credited
Terms
PR
A/P CR
340*
Page X
Merchandise
Inventory
DR
Other
Accounts DR
GST Recble
DR
COGS/DR
Merchandise
Inventory/
CR
381
2011
Aug. 1
Arden Sheet Metal
2/10,
n/30
10,600
JayCee Equipment
n/
30
6,360
Date
Ch #
Account Debited
10,000

Other
Accounts
GST Recble
PR
DR
DR
600
6,000
360
Page X
A/P DR
Merchandis
e Inventory
CR
Cash CR
2011
Aug. 10
28
A/P Arden Sheet Metal
*Discount on sales amount only
10,600
200
10,400
382


SALES JOURNAL
Date
2011
Aug.
Invoice
Number
Account Debited
5 Jay Smith
11 Dee Oliver
PR
50
51
Date
Account Credited
Explanation
2011
Aug.20 A/R Jay Smith
Inv. 50
21 A/R Dee Oliver
Inv. 51
PR
Other
Accts.
Credit
Page X
Accts.
Rec.
Debit
PST
Payable
Credit
50,160
38,760
3,520
2,720

Accts.
PST
GST
Rec.
Payable
Payable
Credit
Credit
Credit
Date
2011
Account Credited
1 Arden Sheet Metal
7 JayCee Equipment
Ch.
No.
Aug.10 28
Payee
A/P Arden
Date of
Invoice
Aug. 1
Aug. 7
Account Debited
Arden Sheet Metal
Terms
2/10,n/30
n/30
Sales
Credit
2,640
2,040
44,000
34,000
Page X
Sales
Credit
50,160
38,760
Cash
Debit
Sales
Discount
Debit
50,160
38,420
PURCHASES JOURNAL
Date
2011
Aug.
GST
Payable
Credit
PR
340
Page X
Accts.
Payable
Credit
10,600
6,360

Other
GST
Accts.
Recble
PR
Debit
Debit
Purchases
Debit
Other
Accounts
Debit
GST
Recble
Debit
10,000
600
360
6,000
Page X
Accts.
Payable
Debit
10,600
Pur.
Disc.
Credit
200
Cash
Credit
10,400
653
383
PROBLEMS
Problem 8-1A (20 minutes)
Date
Special
Journal
Subledger
AR/MI
2 Defective merchandise sold on March 1 was returned

by the customer. It was scrapped.
AR
3 Purchased office equipment on credit.
AP
CR
AR
10 Received a credit memorandum from the supplier

regarding defective equipment purchased on March 3.
AP
14 Sold merchandise for cash.
CR
MI
AP/MI
17 Paid the balance owing regarding the March 3

transaction.
CD
AP
18 Purchased merchandise inventory for cash.
CD
MI
21 Paid for the merchandise purchased on March 16.
CD
AP/MI
22 Sold old equipment for cash.
CR
NE
30 Paid salaries for the month of March.
CD
NE
30 Accrued utilities for the month of March.
A/P
30 Closed the credit balance in the income summary to

capital.
NE
Transaction
Mar. 1 Sold merchandise on credit.
5 Received payment regarding the March 1 sale.
16 Purchased merchandise inventory on credit; terms

1/5, n/30.

383
384


Sales Journal
Date
Account Debited
Invoice
No.
Page 1
COGS Dr.
PR
A/R Dr.
Sales Cr.
Merchandise
Inventory Cr.
2011
Apr. 2 Tim Bennett
306
35,000
22,750
311
42,000
27,300
16 Wynne Walsh
312
14,000
9,100
24 Brian Kennedy
313
18,000
11,700
5 Brian Kennedy
Explanatio
n
Cash
Dr.
Inv. 307310
15,000
12 A/R Tim Bennett
Inv. 306
34,300
20 A/R
Kennedy
Brian
Inv. 311
42,000
42,000
27 A/R Wynne Walsh
Inv. 312
11,000
11,000
Date
Account Credited
PR
Sales
Disc Dr.
Page: 1
2011
Apr. 3 Sales (cash sales)
A/R Cr.
Sales Cr.
15,000
700
35,000
Other
Accounts
Cr.
COGS/Dr.
Merchandi
se
Inventory/
Cr.
9,750
655
385
Purchases Journal
Date
Account Credited
Date of
Invoice
Terms
PR
Page 1
A/P Cr.
Merchandise
Inventory
Dr.
Office
Supplies Dr.
Other
Accounts Dr.
2011
Apr. 4
Wallace Brothers
Apr. 4
1/10,
n/30
48,000
48,000
11
McKinley & Sons
Apr. 11
n/30
56,000
56,000
Zardon Co.
Apr. 23
1/15,
n/30
3,800
23
Equip.
3,800
386

656
Problem 8-2A (concluded)

Date
Ch #
Account Debited
PR
Cash Cr.
Page 1
Merchandi
se
Inventory
Cr.
Other
Accounts
Dr.
A/P Dr.
2011
Apr. 9
620
Office Supplies
230
13
621
Wallace Brothers
43,3621
26
622
McKinley & Sons
56,000
30
623
Salaries
36,000
230
438
43,800
56,000
36,000
Calculation:
1. 48,000 4,200 = 43,800 Dr to A/P; 43,800 x 1% = 438; 43,800 438 = 43,362 Cr to Cash
General Journal
Date
Page: 1
PR
Debit
Credit
2011
Apr.
6 Accounts Payable Wallace Brothers ...............

4,200
4,200
387
To record return of defective merchandise.
19 Sales Returns and Allowances .................................

Accounts Receivable Wynne Walsh ...............
To record allowance granted regarding
defective merchandise.
3,000
3,000
388

Note: Since posting to the General Ledger was not a requirement in this problem, posting references are shown for
values posted to the subledgers only.
Part 3
Sales Journal
Date
Account Debited
Page 3
Invoice
No.
PR
A/R Dr.
Sales Cr.
Merchandise
Inventory Cr.
2011
Apr. 3 Linda Hobart
760
5 Paul Abrams
761
11 Kelly Schaefer
762
13 Linda Hobart
763
3,000
1,800
8,000
4,500
9,500
5,000
4,100
2,400
Date
Account Credited
PR
Sales
Disc
Dr.
Explanation
Cash Dr.
Sale of Apr. 3
2,940
60
3,000
Sale of Apr. 5
7,840
160
8,000
2011
Apr. 13 Linda Hobart
14 Paul Abrams
Page: 3
A/R Cr.
Sales Cr.
Other
Account
s Cr.
COGS Dr.
Merchandi
se
Inventory
Cr.
657
16 Sales
Cash sales
389
50,840
50,840
28,000
390

658
Problem 8-3A (continued)

PURCHASES JOURNAL
Date
2011
Apr.
2
3
9
Account Credited
Date of
Invoice
Terms
Baskin Company
Eau Claire Inc.
Store Equip./Franks Supply
Apr 2
Apr 2
Apr 9
2/10,n/60
n/10 EOM
n/10 EOM
Page 3
Accts.
Payable
Credit
PR
Merchandise
Inventory
Debit
13,300
1,380
11,125
Office
Supplies
Debit
13,300
1,380

Ch.
No.
Date
2011
Apr.
4 587
12 588
16 589
The Record
Baskin Company
Payroll
Account Debited
PR
Advertising Expense
Baskin Company
Sales Salaries Expense
GENERAL JOURNAL
Date
2011
Apr.
Payee
Accounts PayableEau Claire Inc. ...........................

Office Supplies...................................................
Returned office supplies.
999
13,034
9,750
PR
Debit
85
266
Page 3
Credit
85
11,125
Page 3
Merchandise
Inventory
Credit
Cash
Credit
Other
Accts.
Debit
Other
Accts.
Debit
999
9,750
Accts.
Payable
Debit
13,300
391
Problem 8-3A (concluded) Parts 1, 3

Paul Abrams
Explanation
Date
PR
Debit
Credit
Balance
2011
Apr.
S3
1
4
CR3
8,000
8,000
8,000
Linda Hobart
Explanation
Date
PR
Debit
Credit
Balance
2011
Apr.
S3
1
3
CR3
1
3
S3
3,000
3,000
3,000
4,100
0
4,100
Kelly Schaefer
Explanation
Date
PR
Debit
Credit
Balance
2011
Apr.
1
1
S3
9,500
9,500
Parts 2, 3
Franks Supply
Date
Explanation
PR
Debit
Credit
Balance
2011
391
392
Apr.
P3
11,125
11,125
Baskin Company
Explanation
Date
PR
Debit
Credit
Balance
2011
Apr.
P3
1
2
CD3
13,300
13,300
13,300
0
Sprocket Company
Explanation
Date
PR
Debit
Credit
Balance
Debit
Credit
Balance
2011
Eau Claire Inc.

Explanation
Date
PR
2011
Apr.
P3
G3

1,380
85
1,380
1,295
392
393

660

Parts 2, 3, 4
Sales Journal
Page 3
Invoice
No.
PR
Apr. 3 Linda Hobart
760
3,000
1,800
5 Paul Abrams
761
8,000
4,500
11 Kelly Schaefer
762
9,500
5,000
13 Linda Hobart
763
4,100
2,400
27 Paul Abrams
764
3,070
1,600
27 Kelly Schaefer
765
5,700
3,000
33,370
18,300
(106/413)
(502/119)
Date
Account Debited
A/R Dr.
Sales Cr.
Merchandise
Inventory Cr.
2011
30 Totals
Date
2011
Account Credited
PR
Explanation
Cash Dr.
Sales
Disc
Dr.
Page: 3
A/R Cr.
Sales Cr.
Other
Account
s Cr.
COGS Dr.
Merchandi
se
Inventory
Cr.
394
Apr. 13 Linda Hobart
Sale of Apr. 3
2,940
60
3,000
14 Paul Abrams
Sale of Apr. 5
7,840
160
8,000
16 Sales
18
L.T. Notes Payable
20 Kelly Schaefer
23 Linda Hobart
30 Sales
30 Totals
25
1
Cash sales
50,840
Note to bank
50,000
50,840
50,000
Sale of Apr.
11
9,310
190
9,500
Sale of Apr.
13
4,018
82
4,100
Cash sales
70,975
195,923
(101)
28,000
70,975
492
(415)
24,600
(106)
121,815
(413)
37,000
50,000
(X)
65,000
(502/119)
395

PURCHASES JOURNAL
Date
2011
Apr.
2
3
9
17
20
25
Account Credited
Date of
Invoice
Terms
Baskin Company
Eau Claire Inc.
Store Equip./Franks Supply
Sprocket Company
Store Supplies/Franks Supply
Baskin Company
Apr 2
Apr 2
Apr 9
Apr 16
Apr 19
Apr 24
2/10,n/60
n/10 EOM
n/10 EOM
2/10,n/30
n/10 EOM
2/10,n/60
Page 3
Accts.
Payable
Credit
PR
165/
125/
30 Totals
Merchandise
Inventory
Debit
13,300
1,380
11,125
12,750
730
10,375
13,300
49,660
(201)
36,425
(119)
Office
Supplies
Debit
1,380
12,750
Date
2011
Apr.
4
12
16
26
30
30
587
588
589
590
591
Payee
The Record
Baskin Company
Payroll
Sprocket Company
Payroll
Totals
Account Debited
Advertising Expense
Baskin Company
Sprocket Company
PR
655
621
621
Cash
Credit
999
13,034
9,750
12,1031
9,750
45,636
(101)
11,125
730
10,375
1,380
(124)

Ch.
No.
Other
Accts.
Debit
11,855
(X)
Page 3
Merchandise
Inventory
Credit
266
247
513
(119)
Other
Accts.
Debit
999
9,750
9,750
20,499
(X)
Calculation:
1. $12,750 $400 credit memorandum = $12,350; $12,350 x 2% = $247; $12,350 - $247 = $12,103
Accts.
Payable
Debit
13,300
12,350*
25,650
(201)
661
396

GENERAL JOURNAL
Date
2011
Apr.
PR
Page 3
Credit
Debit

Office Supplies ...................................................
201/
124
85
23
Accounts PayableSprocket Company......................

Returned merchandise.
201/
119
400
85
400
Parts 1, 2, 3, 4
GENERAL LEDGER
Cash
Date
Explanation
Acct. No. 101
PR
Debit
Credit
Balance
2011
Mar.
3 Balance Forward
1
167,000
Apr.
3
0
CR3
3
0
CD3
195,923
45,636
Accounts Receivable
Date
Explanation
362,923
317,287
Acct. No. 106
PR
Debit
3
0
S3
33,370
3
0
CR3
Credit
Balance
2011
Apr.
24,600
Date
Explanation

33,370
8,770
Acct. No. 119
PR
Debit
Credit
Balance
396
397
2011
Mar.
3 Balance Forward
1
95,000
Apr.
2
3
G3
400
94,600
3
0
S3
18,300
76,300
3
0
CR3
65,000
11,300
3
0
P3
3
0
CD3
36,425
47,725
513
Office Supplies
Date
Explanation
47,212
Acct. No. 124

PR
Debit
Credit
Balance
2011
Apr.
P3
G3
1,380
1,380
85
1,295

Store Supplies
Explanation
Date
Acct. No. 125
PR
Debit
Credit
Balance
2011
Apr.
2
0
P3
730
730
Acct. No. 165
Store Equipment
Date
Explanation
PR
Debit
Credit
Balance
2011

397
398
Apr.
P3
11,125
11,125
Acct. No. 201
Accounts Payable
Explanation
Date
PR
Debit
Credit
Balance
2011
Apr.
G3
85
(85)
2
3
G3
400
(485)
3
0
P3
3
0
CD3
49,660
25,650
Long-Term Notes Payable

Explanation
Date
49,175
23,525
Acct. No. 251

PR
Debit
Credit
Balance
2011
Mar.
31
Apr.
18
Balance Forward
167,000
CR3
50,000
Jeff Newton, Capital

Date
Explanation
217,000
Acct. No. 301

PR
Debit
Credit
Balance
2011
Mar.
3 Balance forward
1
95,000
Acct. No. 413
Sales
Date
Explanation
PR
Debit
Credit
Balance
2011

398
399
Apr.
3
0
S3
3
0
CR3
Sales Discounts
Explanation
Date
33,370
33,370
121,815
155,185
Acct. No. 415
PR
Debit
Credit
Balance
2011
Apr.
3
0

CR3
492
492
399
400

Acct. No. 502
Cost of Goods Sold

Explanation
Date
PR
Debit
Credit
Balance
3
0
S3
18,300
18,300
3
0
CR3
65,000
83,300
2011
Apr.

Explanation
Date
Acct. No. 621
PR
Debit
Credit
Balance
2011
Apr.
1
6
CD3
9,750
9,750
3
0
CD3
9,750
19,500
Advertising Expense
Date
Explanation
Acct. No. 655

PR
Debit
Credit
Balance
2011
Apr.
CD3
999
999

Paul Abrams
Explanation
Date
PR
Debit
Credit
Balance
2011
Apr.
S3
CR3

8,000
8,000
8,000
400
401
4
2
7
S3
3,070
3,070
Linda Hobart
Explanation
Date
PR
Debit
Credit
Balance
2011
Apr.
S3
1
3
CR3
1
3
S3
2
3
CR3
3,000
3,000
3,000
4,100
0
4,100
4,100
Kelly Schaefer
Explanation
Date
PR
Debit
Credit
Balance
2011
Apr.
1
1
S3
2
0
CR3
2
7
S3
9,500
9,500
9,500
5,700
0
5,700

Franks Supply
Date
Explanation
PR
Debit
Credit
Balance
2011

401
402
Apr.
P3
11,125
11,125
20
P3
730
11,855
Baskin Company
Explanation
Date
PR
Debit
Credit
Balance
2011
Apr.
P3
1
2
CD3
2
5
P3
13,300
13,300
13,300
0
10,375
10,375
Sprocket Company
Explanation
Date
PR
Debit
Credit
Balance
2011
Apr.
1
7
P3
2
3
G3
2
6
CD3
12,750
12,750
400
12,350
12,350
Eau Claire Inc.

Explanation
Date
PR
Debit
Credit
Balance
2011
Apr.
P3
G3

1,380
85
1,380
1,295
402
403
Problem 8-4A (continued) Part 5

NEWTON COMPANY
April 30, 2011
Paul Abrams .............................................
$3,070
Kelly Schaefer...........................................
5,700
Total accounts receivable ...................
$8,770
NEWTON COMPANY
Schedule of Accounts Payable
April 30, 2011
Franks Supply ...........................................

Baskin Company ........................................
Eau Claire Inc. ...........................................
Total accounts payable ..............................
$11,855
10,375
1,295
$23,525
NEWTON COMPANY
Trial Balance
April 30, 2011
Account .................. Debit

Credit
Cash .......................................................... $317,287
8,770
Merchandise inventory ................................
47,212
Office supplies ...........................................
1,295
Store supplies ............................................
730
Store equipment ........................................
11,125
Accounts payable ......................................
Long-term notes payable ...........................
Jeff Newton, capital ....................................
Sales...........................................................
Sales discounts...........................................
492
Cost of goods sold ......................................
83,300
Sales salaries expense ..............................
19,500
Advertising expense ..................................
999
Totals ......................................................... $490,710

$ 23,525
217,000
95,000
155,185
$490,710
403
404

Analysis component:
To find the error(s),
first re-add the account balances on the schedule of accounts receivable to confirm that
the addition was correct.
trace the balances listed on the schedule of accounts receivable back to the subsidiary
accounts to confirm that they were listed correctly on the schedule.
recalculate the balance of each subsidiary account to confirm that the additions and
subtractions were correct.
trace the postings from each subsidiary account and from the controlling account back to
the appropriate journals.
Since the sales and cash receipts journals were footed and crossfooted before posting, the
previous steps should disclose the error.

404
405

668

Parts 1, 2, 3
SALES JOURNAL
Date
Invoice
Number
Account Debited
Page 3
PR
A/R. Dr.
Sales Cr.

Merchandise
Inventory Cr.
2011
Oct.
Marge Craig
913
3,300
1,600
12
Vickie Foresman
914
3,650
1,900
15
Amy Ihrig
915
3,100
1,700
16
Vickie Foresman
916
7,700
3,900
24
Bill Grigsby
917
1,200
700
31
Totals
18,950
9,800
(106/413
)
(502/119)

Date
2011
Oct.
2
Account
Credited
Bill Grigsby
Explanation
Invoice Nov
23
PR
Cash
Debit
4,116
Sales
Discoun
t
Debit
Acct.
Rec.
Credit
84
4,200
Sales
Credit
Page 3
Other Cost of Goods Sold Dr.
Accts Merchandise Inventory
.
Cr.
Credit
406
15 Sales
15 Marge Craig
22 Vickie
Foresman
25 Amy Ihrig
Cash sales
Invoice Dec 6
Invoice Dec
12
Invoice Dec
15
29 Office Supplies Sold supplies
31 Sales
Cash sales
31 Totals
38,830
2,401
3,577
49
73
2,548
52
124
50
29,600
81,122
)
(101
2,450*
3,650
2,600**
258 12,900
(415)
38,830
(106)
* $3,300 $850 return = $2,450

** $3,100 $500 allowance = $2,600
29,600
68,430
(413)
21,400
50
50
16,300
37,700
(X)
(502/119)
407

PURCHASES JOURNAL
Date
Account Credited
2011
Oct.
2 Shore Company
5 Brown Supply Co.
Date of
Invoice
Oct 2
Oct 3
15 Shore Company
Oct 15
15 Sunshine Company
Oct 15
17 Brown Supply Co.
Oct 16
21 Store Equip./Brown Supply

Co.
26 Sunshine Company
Oct 21
31 Totals
Oct 25
Terms
2/10,
n/60
n/10
EOM
2/10,
n/60
2/10,
n/60
n/10
EOM
n/10
EOM
2/10,
n/60
PR
Merchandis
Accounts
e
Payable
Inventory
Credit
Debit
3,200
3,200
1,300
1,300
3,990
3,990
2,650
2,650
615
165/
6,700
8,100
8,100
26,555
19,240
(119
)
(201)
Page 2
Office
Supplies
Debit
Other
Accts.
Debit
615
6,700
4)
615
(12
6,700
(X)
669
408

670

Date
Ch. Payee
No.
2011
Oct.
2 619 Omni Realty Co.
6 620 Fireside
Company
12 621 Shore Company
15 622 Jamie Green
23 623 Sunshine
Company
24 624 Shore Company
30 625 Ken Shaw
31 626 Jamie Green
31 627 Countrywide
Elec.
31
Totals
Merchandis
e
Inventory.
Credit
Other
Accts.
Debit
Page 4
Accts.
Payable
Debit.
Account Debited
PR
Cash
Credit
Rent Expense
Fireside Company
640
2,250
3,724
Shore Company
Sales Salaries
Expense
Sunshine Company
621
3,136
2,020
64
2,597
53
2,650
Shore Company
Ken Shaw,
Withdrawals
Sales Salaries
Expense
Utilities Expense
302
2,891
2,500
59
2,950*
621
2,020
2,020
690
710
710
21,848
(101)
* $3,990 $1,040 return = $2,950
76
252
(119)
2,250
2,020
2,500
9,500
(X)
3,800
3,200
12,600
(201
)
409

Date
201
1
Oct. 4
GENERAL JOURNAL
PR
Debit
Accounts PayableFireside Company ..................

Merchandise Inventory ...................................
Returned merchandise to supplier.
201/
119
460
Sales Returns and Allowances ..............................

Accounts ReceivableMarge Craig ...............
Merchandise Inventory...........................................
Cost of Goods Sold.........................................
Customer Marge Craig returned
merchandise that was returned to
merchandise inventory.
414
106/
119
502
850
17 Accounts PayableShore Company .....................

201/
119
1,040
18 Accounts PayableBrown Supply Co. .................

Office Supplies ...............................................
201/
124
40
20 Sales Returns and Allowances ..............................

Accounts ReceivableAmy Ihrig ....................
Customer Amy Ihrig returned defective
merchandise.
414
106/
500

430
Page 2
Credit
460
850
430
1,040
40
500
409
410

Date
2011
Oct.
6
9
15
Explanation
Date
2011
Oct. 12
16
22
Explanation
Date
2011
Sept 23
Oct.
2
24
Date
2011
Oct. 15
20
25
Marge Craig
PR
S3
G2
CR3
Vickie Foresman
PR
S3
S3
CR3
Explanation
Bill Grigsby
PR
S2
CR3
S3
Explanation
Amy Ihrig
PR
Debit
3,300
Debit
3,650
7,700
Debit
4,200
1,200
Debit
S3
G2
CR3
3,100
Credit
850
2,450
Balance
3,300
2,450
0
Credit
Balance
3,650
3,650
11,350
7,700
Credit
Balance
4,200
Credit
500
2,600
4,200
0
1,200
Balance
3,100
2,600
0
Part 2
Date
2011
Sept 28
Oct.
4
6
Fireside Company
Explanation
PR

P1
G2
CD4
Debit
460
3, 800
Credit
4,260
Balance
4,260
3,800
0
410
411
Problem 8-5A (continued) Part 2

Date
2011
Oct.
5
17
18
21
Date
2011
Oct. 15
23
26
Date
2011
Oct.
2
12
15
17
24
Brown Supply Company

Explanation
PR
Debit
P2
P2
G2
P2
Date
2011
Sept 30 Balance
Oct.
9
20
31
31
40
Sunshine Company
Explanation
PR
Debit
P2
CD4
P2
Explanation
Shore Company
PR
P2
CD4
P2
G2
CD4
Parts 2, 3
Date
2011
Sept 30 Balance
Oct.
31
31
Credit
2,650
Debit
3,200
1,040
2,950
1,300
615
6,700
Credit
2,650
8,100
Credit
3,200
3,990
Balance
1,300
1,915
1,875
8,575
Balance
2,650
0
8,100
Balance
3,200
0
3,990
2,950
0
GENERAL LEDGER
Explanation
Cash
PR
CR3
CD4
Accounts Receivable
Explanation
PR

G2
G2
S3
CR3
Debit
81,122
Debit
18,950
Acct. No. 101

Credit
Balance
21,848
5,361
86,483
64,635
Acct. No. 106

Credit
Balance
850
500
12,900
4,200
3,350
2,850
21,800
8,900
411
412

412
413
Problem 8-5A (continued) Parts 2, 3

Date
2011
Sept 30 Balance
Oct.
4
9
17
31
31
31
31
Date
2011
Sept 30 Balance
Oct.
18
29
31
Date
2011
Oct. 30 Balance
Date
2011
Sept 30 Balance
Oct.
21
Explanation
PR
G2
G2
G2
S3
P2
CR3
CD4
Office Supplies
Explanation
PR
G2
CR3
P2
Store Supplies
Explanation
PR
Debit
430
19,240
Debit
615
Debit
Acct. No. 119

Credit
Balance
460
1,040
9,800
37,700
252
66,970
66,510
66,940
65,900
56,100
75,340
37,640
37,388
Acct. No. 124

Credit
Balance
40
50
607
567
517
1,132
Acct. No. 125

Credit
Balance
346
Store Equipment
Explanation
PR
P2
Debit
6,700
Accumulated Amortization, Store Equipment

Explanation
PR
Debit
Date
2011
Oct. 30 Balance

Acct. No. 165

Credit
Balance
42,129
48,829
Acct. No. 166
Credit
Balance
9,153
413
414

Date
2011
Sept 30 Balance
Oct.
4
17
18
31
31
Date
2011
Oct. 30 Balance
Date
2011
Oct. 30
Date
2011
Oct. 31
31
Date
2011
Oct.
9
20
Date
2011
Oct. 31
Accounts Payable
Explanation
PR
G2
G2
G2
P2
CD4
Ken Shaw, Capital
Explanation
PR
Debit
460
1,040
40
12,600
Debit
Acct. No. 201

Credit
Balance
26,555
4,260
3,800
2,760
2,720
29,275
16,675
Acct. No. 301

Credit
Balance
106,200
Ken Shaw, Withdrawals

Explanation
PR
CD4
Explanation
Sales
PR
Debit
2,500
Debit
S3
CR3
Sales Discounts
Explanation
PR

CR3
2,500
Acct. No. 413
Credit
Balance
18,950
68,430
Sales Returns and Allowances

Explanation
PR
Debit
G2
G2
Acct. No. 302

Credit
Balance
850
500
Debit
258
18,950
87,380
Acct. No. 414

Credit
Balance
850
1,350
Acct. No. 415
Credit
Balance
258
414
415

Date
2011
Oct.
9
31
31
Date
2011
Oct. 15
31
Date
2011
Oct.
2
Date
2011
Oct. 31
Cost of Goods Sold

Explanation
PR
G2
S3
CR3
Explanation
PR
CD4
CD4
Rent Expense
Explanation
PR
CD4
Utilities Expense
Explanation
PR

CD4
Debit
9,800
37,700
Debit
2,020
2,020
Debit
2,250
Debit
710
Acct. No. 502

Credit
Balance
430
(430)
9,370
47,070
Acct. No. 621

Credit
Balance
2,020
4,040
Acct. No. 640
Credit
Balance
2,250
Acct. No. 690
Credit
Balance
710
415
416

Part 4
SASKAN ENTERPRISES
Trial Balance
October 31, 2011
Account
Cash ...................................................................................
Accounts receivable ............................................................
Merchandise inventory ........................................................
Office supplies ....................................................................
Store supplies .....................................................................
Store equipment..................................................................
Accumulated amortization, store
equipment........................................................................
Accounts payable................................................................
Ken Shaw, capital ...............................................................
Ken Shaw, withdrawals .......................................................
Sales ...................................................................................
Sales returns and allowances .............................................
Sales discounts ...................................................................
Cost of goods sold ..............................................................
Sales salaries expense .......................................................
Rent expense ......................................................................
Utilities expense ..................................................................
Totals ..................................................................................
Debit
$ 64,635
8,900
37,388
1,132
346
48,829
2,500
Credit
$ 9,153
16,675
106,200
87,380
1,350
258
47,070
4,040
2,250
710
$219,408 $219,408
SASKAN ENTERPRISES
October 31, 2011
Vickie Foresman .............................................
Bill Grigsby .....................................................
$7,700
1,200
$8,900
SASKAN ENTERPRISES
October 31, 2011
Brown Supply Company .................................
Sunshine Company ........................................
Total accounts payable ...................................
$ 8,575
8,100
$16,675
416
417

678

Page 1
Sales Journal
Date
Account Debited
Invoice
No.
A/R Dr.
COGS Dr.
Sales Cr.
PR
PR
Cr.
2011
Jan. 7 G. Little
103
500
160
19 B. Moore
104
375
130
24 C. Woudstra
105
375
135
29 D. Isla
106
800
302
Purchases Journal
Date
Page 1
Merchandise
Inventory
Account Credited
Date of
Invoice
Terms
Curtis & Sons
Jan. 3
n/30
450
450
Jan. 20
n/30
330
330
PR
A/P Cr.
PR
Dr.
Office
Supplies Dr.
2011
Jan. 3
20
NOTE:
Norton
Industries
An additional PR column has been added to facilitate the referencing of inventory entries into the
Other
Accounts
Dr.
418
inventory subledger.
419


Inventory Subledger Record FIFO perpetual
Date
PR
Purchases
Units
Jan. 1
Unit
Cost
Sales (at cost)

Total Unit
Cost
s
Unit
Cost
Inventory Balance
Total
Cost
Units
Unit
Cost
Total
Cost
Beginning inventory
25 @ $8.0 = $200
0
25 @ $ 8.0 = $ 20
0
0
25 @ $ 8.0 = $ 20
0
0
3 P1
7 S1
50 @ $9.0 = $450
0
50 @
20 @ $ 8.00 =
$ 160
9.00 =
450
5 @ $ 8.0 = $ 4
0
0
50 @
9.00 =
450
19 S1
5 @ $ 8.00 =
10 @
9.00 =
$ 40
90
40 @ $ 9.0 = $ 36
0
0
40 @ $ 9.0 = $ 36
0
0
679
420
20 P1
30 @ $11. = $330
00
24 S1
30 @ 11.00 =
15 @ $ 9.00 =
$ 135
25 @ $ 9.0 = $ 22
0
5
30 @ 11.00 =
29 S1
25 @
$ 225
7 @ 11.00 =
77
330
330
$ 9.00
Total
105
$980

=
82
Cost of goods sold
$727
+
23 @ $11.0 = $ 25
0
3
23
$253
Ending inventory
Note: An additional PR column has been added to the Inventory Subledger Record to facilitate referencing of
inventory entries.
421

680
*Problem 8-7A (40 minutes)
SALES JOURNAL
Page 3
Invoice
Date
Account Debited
A/R Dr.
Numbe
r
PR
Sales Cr.
3 Linda Hobart
760
3,000
5 Paul Abrams
761
8,000
11 Kelly Schaefer
762
9,500
13 Linda Hobart
763
4,100
2011
Apr
.

Account
Date
Credited
Accts.
Cash
Disc.
Rec.
Sales
Accts.
Credit
Credit
Explanation
PR
Debit
Debit
Credit
Sale of Apr. 3
2,940
60
3,000
2011
Apr.
1 Linda Hobart
Page 3
Sales
Other
422
3
1 Paul Abrams
4
Sale of Apr. 5
1 Sales
6
Cash sales
7,840
160
8,000
50,840
50,840
PURCHASES JOURNAL
Page 3
Accounts
Date
of
Date
Account Credited
Invoic
e
Terms
Office
Other
Payable
Purchases
Supplie
s
Accounts
PR
Credit
Debit
Debit
Debit
13,300
2011
Apr.
2 Baskin Company
Apr.
2
2/10,n/60
13,300
3 Eau Claire Inc.
Apr.
2
n/10
EOM
1,380
9 Store Equip./Franks Supply
Apr.
9
n/10
EOM
11,125
1,380
11,125
423
*Problem 8-7A (continued)

Ch.
Date
No.
Payee
Account Debited
PR
Page 3
Purchas
e
Other
Accts.
Cash
Discoun
t
Accts.
Payable
Credit
Credit
Debit
Debit
2011
Apr.
4 587
The Record
Advertising Expense
1 588
2
Baskin
Company
Baskin Company
1 589
6
Payroll
999
13,034
9,750
999
266
13,300
9,750
681
424
Date
2011
Apr.
GENERAL JOURNAL
6
PR
Accounts Payable Eau Claire Inc. ..................

Office Supplies ............................................
Debit
85
Page 3
Credit
85

Paul Abrams
Explanation
Date
PR
Debit
Credit
Balance
2011
Apr.
S3
1
4
CR3
8,000
8,000
8,000
Linda Hobart
Explanation
Date
PR
Debit
Credit
Balance
2011
Apr.
S3
1
3
CR3
1
3
S3
3,000
3,000
3,000
4,100
0
4,100
Kelly Schaefer
Explanation
Date
PR
Debit
Credit
Balance
2011
Apr.
1
1

S3
9,500
9,500
424
425

425
426
*Problem 8-7A (concluded) Parts 2, 3

Franks Supply
Date
Explanation
PR
Debit
Credit
Balance
2011
Apr.
P3
11,125
11,125
Baskin Company
Explanation
Date
PR
Debit
Credit
Balance
2011
Apr.
P3
1
2
CD3
13,300
13,300
13,300
0
Sprocket Company
Explanation
Date
PR
Debit
Credit
Balance
Debit
Credit
Balance
2011
Eau Claire Inc.

Explanation
Date
PR
2011
Apr.
P3
G3

1,380
85
1,380
1,295
426
427

684

SALES JOURNAL
Page 3
Invoice
Date
Account Debited
A/R Dr.
Numbe
r
PR
Sales Cr.
3 Linda Hobart
760
3,000
5 Paul Abrams
761
8,000
11 Kelly Schaefer
762
9,500
13 Linda Hobart
763
4,100
27 Paul Abrams
764
3,070
27 Kelly Schaefer
765
5,700
2011
Apr
.
33,370
30 Totals
(106/413)

Account
Date
2011
Credited
Explanation
PR
Page 3
Sales
Accts.
Other
Cash
Disc.
Rec.
Sales
Accts.
Debit
Debit
Credit
Credit
Credit
428
Apr.
1 Linda Hobart
3
Sale of Apr. 3
2,940
60
3,000
1 Paul Abrams
4
Sale of Apr. 5
7,840
160
8,000
1 Sales
6
Cash sales
1 L.T. Notes
8 Payable
Note to bank
2 Kelly Schaefer
0
50,840
50,840
25
1
50,000
Sale of Apr. 11
9,310
190
9,500
2 Linda Hobart
3
Sale of Apr. 13
4,018
82
4,100
3 Sales
0
Cash sales
3 Totals
0
50,000
70,975
70,975
195,92
3
492
24,600
121,81
5
50,000
(101)
(415)
(106)
(413)
(X)
429


PURCHASES JOURNAL
Page 3
Accounts
Date
of
Date
Account Credited
Invoic
e
Terms
Office
Other
Payable
Purchases
Supplie
s
Accounts
PR
Credit
Debit
Debit
Debit
13,300
2011
Apr.
2 Baskin Company
Apr.
2
2/10,n/60
13,300
3 Eau Claire Inc.
Apr.
2
n/10
EOM
1,380
9 Store Equip./Franks Supply
Apr.
9
n/10
EOM
165/
11,125
17 Sprocket Company
Apr.
16
2/10,n30
12,750
20 Store Supplies/Franks Supply
Apr.
19
n/10
EOM
25 Baskin Company
Apr.
24
2/10,n/6
0
30 Totals
125/
1,380
11,125
12,750
730
730
10,375
10,375
49,660
36,425
1,380
11,855
(201)
(505)
(124)
(X)
685
CASH DISBURSEMENTS
430
JOURNAL
Ch.
Date
No.
Payee
Account Debited
Purchas
e
Page 3
Other
Accts.
Cash
Discoun
t
Accts.
Payable
PR
Credit
Credit
Debit
Debit
655
999
2011
Apr.
4 587
The Record
Advertising Expense
1 588
2
Baskin
Company
Baskin Company
1 589
6
Payroll
2 590
6
Sprocket
Company
Sprocket Company
3 591
0
Payroll
3
0
Totals
13,034
621
9,750
12,103
621
9,750
45,636
(101)
*$12,750 - $400 credit memorandum = $12,350.
999
266
13,300
9,750
247
12,350*
9,750
513
(506)
20,499
25,650
(X)
(201)
431

GENERAL JOURNAL
Date
2011
Apr.
PR
Page 3
Credit
Debit

Office Supplies ...................................................
201/
124
85
23
Accounts PayableSprocket Company .....................

Purchase Returns and Allowances .....................
201/
507
400
85
400
Parts 1, 2, 3, 4
GENERAL LEDGER
Cash
Date
Explanation
Acct. No. 101
PR
Debit
Credit
Balance
2011
Mar.
3 Balance Forward
1
167,000
Apr.
3
0
CR3
3
0
CD3
195,923
45,636
Accounts Receivable
Date
Explanation
362,923
317,287
Acct. No. 106
PR
Debit
3
0
S3
33,370
3
0
CR3
Credit
Balance
2011
Apr.
24,600
Date
Explanation

33,370
8,770
Acct. No. 119
PR
Debit
Credit
Balance
431
432
2011
Mar.
3 Balance Forward
1
95,000
Office Supplies
Date
Explanation
Acct. No. 124

PR
Debit
Credit
Balance
2011
Apr.
P3
G3

1,380
1,380
85
1,295
432
433

Store Supplies
Explanation
Date
Acct. No. 125
PR
Debit
Credit
Balance
2011
Apr.
2
0
P3
730
730
Acct. No. 165
Store Equipment
Explanation
Date
PR
Debit
P3
11,125
Credit
Balance
2011
9
Apr.
11,125
Acct. No. 201
Accounts Payable
Explanation
Date
PR
Debit
Credit
Balance
2011
Apr.
G3
85
(85)
2
3
G3
400
(485)
3
0
P3
3
0
CD3
49,660
25,650

Explanation
Date
49,175
23,525
Acct. No. 251

PR
Debit
Credit
Balance
2011
Mar.
31
Apr.
18
Balance Forward

167,000
CR3
50,000
217,000
433
434
Jeff Newton, Capital

Explanation
Date
Acct. No. 301

PR
Debit
Credit
Balance
2011
Mar.
3 Balance forward
1
95,000
Acct. No. 413
Sales
Explanation
Date
PR
Debit
Credit
Balance
2011
Apr.
3
0
S3
3
0
CR3
Sales Discounts
Explanation
Date
33,370
33,370
121,815
155,185
Acct. No. 415
PR
Debit
Credit
Balance
2011
Apr.
3
0

CR3
492
492
434
435

Acct. No. 505
Purchases
Explanation
Date
PR
Debit
P3
36,425
Credit
Balance
2011
Apr.
3
0
Acct. No. 506
Purchase Discounts
Explanation
Date
36,425
PR
Debit
Credit
Balance
2011
Apr.
3
0
CD3
513
Acct. No. 507
Purchase Returns and Allowances

Explanation
Date
PR
513
Debit
Credit
Balance
2011
Apr.
3
0
G3

Explanation
Date
400
400
Acct. No. 621
PR
Debit
Credit
Balance
2011
Apr.
1
6
CD3
9,750
9,750
3
0
CD3
9,750
19,500
Advertising Expense
Date
Explanation

Acct. No. 655

PR
Debit
Credit
Balance
435
436
2011
Apr.

CD3
999
999
436
437

Paul Abrams
Explanation
Date
PR
Debit
Credit
Balance
2011
Apr.
S3
1
4
CR3
2
7
S3
8,000
8,000
8,000
3,070
0
3,070
Linda Hobart
Explanation
Date
PR
Debit
Credit
Balance
2011
Apr.
S3
1
3
CR3
1
3
S3
2
3
CR3
3,000
3,000
3,000
4,100
0
4,100
4,100
Kelly Schaefer
Explanation
Date
PR
Debit
Credit
Balance
2011
Apr.
1
1
S3
2
0
CR3

9,500
9,500
9,500
437
438
2
7

S3
5,700
5,700
438
439

Franks Supply
Date
Explanation
PR
Debit
Credit
Balance
2011
Apr.
P3
11,125
11,125
20
P3
730
11,855
Baskin Company
Explanation
Date
PR
Debit
Credit
Balance
2011
Apr.
P3
1
2
CD3
2
5
P3
13,300
13,300
13,300
0
10,375
10,375
Sprocket Company
Explanation
Date
PR
Debit
Credit
Balance
2011
Apr.
1
7
P3
2
3
G3
2
6
CD3
12,750
12,750
400
12,350
12,350
Eau Claire Inc.

Date
Explanation

PR
Debit
Credit
Balance
439
440
2011
Apr.
P3
G3

1,380
85
1,380
1,295
440
441
*Problem 8-8A (concluded) Part 5

NEWTON COMPANY

April 30, 2011
Paul Abrams .................................................................................
$3,070
Kelly Schaefer ...............................................................................
5,700
Total accounts receivable ........................................................
$8,770
NEWTON COMPANY
April 30, 2011
Franks Supply ...........................................

Baskin Company ........................................
Eau Claire Inc. ...........................................
$11,855
10,375
1,295
$23,525
NEWTON COMPANY
Trial Balance
April 30, 2011
Account .................. Debit

Credit
Cash .......................................................... $317,287
Accounts receivable....................................
8,770
Merchandise inventory ................................
95,000
Office supplies ...........................................
1,295
Store supplies ............................................
730
Store equipment ........................................
11,125
Long-term notes payable ...........................
Jeff Newton, capital ....................................
Sales ..........................................................
Sales discounts ..........................................
492
Purchases...................................................
36,425
Purchase discounts ....................................
Purchase returns and allowances ...............
Sales salaries expense ..............................
19,500
Advertising expense ..................................
999
Totals ......................................................... $491,623
$ 23,525
217,000
95,000
155,185
513
400
$491,623
441
442

442
443

692
*Problem 8-9A - Perpetual (100 minutes) Part 4

SALES JOURNAL
Date
201
1
Mar.
Account Debited
2
3
10
27
28
31
Leroy Hackett
Sam Snickers
Marjorie Coble
Marjorie Coble
Sam Snickers
Totals
Invoice
Number
PR
854
855
856
857
858
Accts.
Rec.
Debit
PST
Payable
Credit
18,328.00
10,672.00
5,336.00
16,135.60
6,165.40
56,637.00
(106)
Page 2
GST
Payable
Credit
1,580.00
920.00
460.00
1,391.00
531.50
4,882.50
(224)
948.00
552.00
276.00
834.60
318.90
2,929.50
(225)
Sales
Credit
15,800.00
1,027
9,200.00
5,980
4,600.00
2,990
13,910.00
9,040
5,315.00
3,455
48,825.00
22,492
(413)
(502/119)

Date
2011
Mar 6
12
13
15
20
31
31
Account Credited
L.T. Notes Pay.
Leroy Hackett
Sam Snickers
Sales
Marjorie Coble
Sales
Totals
Explanation
Note to bank
Invoice, Mar 2
Invoice, Mar 3
Cash sales
Invoice, Mar 10
Cash sales
PR
Cash
Debit
251 72,000.00
18,012.00
10,488.00
191,028.80
5,244.00
202,524.40
499,297.20
(101)
Sales
Discount
Debit
Accts.
Rec.
Credit
COGS
Dr./
MI Cr.
Page 2
Sales
Credit
Other
Accts.
Credit
PST
Payable
Credit
GST
Payable
Credit
COGS
Dr./
MI Cr.
72,000.00
316.00 18,328.00
184.00 10,672.00
164,680.00
92.00
16,468.00
9,880.80
107,042
5,336.00
174,590.00
17,459.00 10,475.40
113,480
592.00 34,336.00 339,270.00 72,000.00 33,927.00 20,356.20
220,522
(415)
(106)
(413)
()
(224)
(225) (502/119)
444

*Problem 8-9A - Perpetual (continued)
PURCHASES JOURNAL
Date
2011
Mar.
Date of
Invoice
Account Credited
3
5
9
14
16
31
Office Supplies/Arndt Company

Defore Industries
Office Equip./Jett Supply
The Welch Company
Store Supplies/Arndt Company
Totals
Mar 3
Mar 3
Mar 9
Mar 13
Mar 16
Terms
PR
Accts.
Payable
Credit
n/10 EOM 124/ 1,187.20

2/10, n/30
45,156.00
n/10 EOM 163/ 22,101.00
2/10, n/30
33,522.50
n/10 EOM 125/ 1,770.20
103,736.90
(201)
Merch.
Inventory
Debit
42,600.00
31,625.00
74,225.00
(119)
Page 2
Other
GST
Accounts Recble
Debit
Debit
1,120.00
20,850.00
1,670.00
23,640.00
(X)

Date
2011
Ch.
No.
Cash
Credit
Account Debited
PR
Defore
Industries1
Defore Industries
44,304.0
0
15 41
7
Payroll
Sales Salaries
Expense
621
15,900.0
0
23 41
8
The Welch Co. 2
The Welch Company
30,368.0
0
31 41
9
Payroll
Sales Salaries
Expense
Mar. 41
13 6
Payee
621
15,900.0
0
67.20
2,556.00
1,251.00
1,897.50
100.20
5,871.90
(108)
Page 2
Merch.
Inv.
Credit
Other
Accts.
Debit
852.00
GST
Recble
Debit
Accts.
Payable
Debit
45,156.0
0
15,900.0
0
584.00
30,952.0
0
15,900.0
0
693
445
31
Totals
106,472.
00
(101)
1. 42,600 x 2% = 852 discount

2. 31,625 2,425 = 29,200; 29,200 x 2% = 584 discount
1,436.00 31,800.0
0
(119)
(X)
76,108.0
0
(201)
446

GENERAL JOURNAL
Account Title and Explanations
Date
PR
Debit
Mar. 17 Accounts PayableThe Welch Company .......

GST Payable .............................................
201/
225
119
2,570.50
19 Accounts PayableJett Supply ........................

GST Payable .............................................
Office Equipment .......................................
Returned office equipment.
201/
225
163
667.80
2011
Page 2
Credit
145.50
2,425.00
37.80
630.00
Parts 2 and 4
Marjorie Coble
Date
Explanation
PR
Debit
10
S2
5,336.00
20
CR2
27
S2
Credit
Balance
2011
Mar.
5,336.00
5,336.00
16,135.60
0.00
16,135.6
0
Leroy Hackett
Date
Explanation
PR
Debit
Credit
Balance
2011
Mar.
S2
12
CR2
18,328.00
18,328.0
0
18,328.00
0.00
Sam Snickers

446
447
Date
Explanation
PR
Debit
Credit
Balance
2011
Mar.
S2
13
CR2
28
S2
10,672.00
10,672.0
0
10,672.00
6,165.40
0.00
6,165.40
Parts 3 and 4
Arndt Company
Date
Explanation
PR
Debit
Credit
Balance
2011
Mar.
P2
1,187.20
1,187.20
16
P2
1,770.20
2,957.40

Defore Industries
Date
Explanation
PR
Debit
Credit
Balance
45,156.00
45,156.00
2011
Mar.
P2
13
CD3
45,156.00
0.00
Jett Supply
Date
Explanation
PR
Debit
Credit
Balance
2011
Mar.
P2
19
G2

22,101.00
667.80
22,101.00
21,433.20
447
448
The Welch Company

Date
Explanation
PR
Debit
Credit
Balance
2011
Mar.
14
P2
17
G2
23
CD3
33,522.50
33,522.50
2,570.50
30,952.00
30,952.00
0.00
Parts 1 and 4
GENERAL LEDGER
Cash
Explanation
Date
Acct. No. 101

PR
Debit
31
CR2
499,297.20
31
CD3
Credit
Balance
2011
Mar.
499,297.2
0
106,472.0
0
Accounts Receivable
Explanation
Date
PR
392,825.2
0
Acct. No. 106

Debit
Credit
Balance
2011
Mar.
31
S2
31
CR2
56,637.00
56,637.00
34,336.00
GST Receivable
Explanation
Date
22,301.00
Acct. No. 108
PR
Debit
P2
5,871.90
Credit
Balance
2011
Mar.
31

5,871.90
448
449

449
450

Explanation
Date
PR
Acct. No. 119

Debit
Credit
Balance
2011
Mar.
1 Beginning balance
250,000.0
0
17
G2
2,425.00
247,575.0
0
31
S2
22,492.00
225,083.0
0
31
CR2
220,522.0
0
4,561.00
31
P2
31
CD3
74,225.00
78,786.00
1,436.00
Acct. No. 124
Office Supplies
Date
Explanation
77,350.00
PR
Debit
P2
1,120.00
Credit
Balance
2011
Mar.
31
1,120.00
Store Supplies
Date
Explanation
Acct. No. 125
PR
Debit
P2
1,670.00
Credit
Balance
2011
Mar.
16
Acct. No. 163
Office Equipment
Date
Explanation
1,670.00
PR
Debit
Credit
Balance
2011

450
451
Mar.
P2
19
G2

20,850.00
20,850.00
630.00
20,220.00
451
452

Accounts Payable
Date
Explanation
Acct. No. 201

PR
Debit
Credit
Balance
2011
Mar.
17
G2
2,570.50
(2,570.50)
19
G2
667.80
(3,238.30)
31
P2
31
CD3
103,736.9
0
76,108.00
Explanation
24,390.60
Acct. No. 224
PST Payable
Date
100,498.6
0
PR
Debit
Credit
Balance
2011
Mar.
31
S2
31
CR2
Explanation
4,882.50
33,927.00
38,809.50
Acct. No. 225
GST Payable
Date
4,882.50
PR
Debit
Credit
Balance
2011
Mar.
17
G2
145.50
145.50
19
G2
37.80
183.30
31
S2
2,929.50
3,112.80
31
CR2
20,356.20
23,469.00
Acct. No. 251

Date
Explanation
PR
Debit
Credit
Balance
2011

452
453
Mar.
CR2
72,000.00
Acct. No. 301
George Bledsoe, Capital

Date
Explanation
PR
72,000.00
Debit
Credit
Balance
2011
Mar.
1 Beginning balance
250,000.0
0
Acct. No. 413
Sales
Date
Explanation
PR
Debit
Credit
Balance
2011
Mar.
31
S2
48,825.00
48,825.00
31
CR2
339,270.0
0
388,095.0
0
Acct. No. 415
Sales Discounts
Date
Explanation
PR
Debit
Credit
Balance
2011
Mar.
31
CR2
592.00
592.00

Acct. No. 502
Cost of Goods Sold

Date
Explanation
PR
Debit
Credit
Balance
31
S2
22,492.00
22,492.00
31
CR2
220,522.0
0
243,014.0
0
2011
Mar.

Acct. No. 621
453
454
Date
Explanation
PR
Debit
Credit
Balance
15
CD3
15,900.00
15,900.00
31
CD3
15,900.00
31,800.00
2011
Mar.
Part 5
THE BLEDSOE COMPANY

Trial Balance
March 31, 2011
Account
Debit
Cash .............................................................
$392,825.20
Accounts receivable ..............................
22,301.00
GST receivable .........................................
5,871.90
Merchandise inventory.........................
77,350.00
Office supplies..........................................
1,120.00
Store supplies ..........................................
1,670.00
Office equipment ....................................
20,220.00
Credit
Accounts payable ...................................
$ 24,390.60
PST payable ..............................................
38,809.50
GST payable .............................................
23,469.00
Long-term notes payable ....................
72,000.00
George Bledsoe, capital .......................
250,000.00
Sales ............................................................
388,095.00
Sales discounts ........................................
592.00
Cost of goods sold ..................................
243,014.00
Sales salaries expense ...........................
31,800.00
Totals ..........................................................
$796,764.10 $796,764.10
454
455

455
456
*Problem 8-9A - Perpetual (concluded)
THE BLEDSOE COMPANY

March 31, 2011
Marjorie Coble ......................................
$16,135.60
Sam Snickers. .........................................
6,165.40
Total accounts receivable ................
$22,301.00
THE BLEDSOE COMPANY

March 31, 2011
Arndt Company ....................................
$ 2,957.40
Jett Supply...............................................
21,433.20
Total accounts payable .....................
$24,390.60

456
457

700
*Problem 8-9A - Periodic (100 minutes) Part 4

SALES JOURNAL
Date
2011
Mar.
Account Debited
2
3
10
27
28
31
Leroy Hackett
Sam Snickers
Marjorie Coble
Marjorie Coble
Sam Snickers
Totals
Invoice
Number
PR
854
855
856
857
858
Accts.
Rec.
Debit
18,328.00
10,672.00
5,336.00
16,135.60
6,165.40
56,637.00
(106)
PST
Payable
Credit
1,580.00
920.00
460.00
1,391.00
531.50
4,882.50
(224)
GST
Payable
Credit
948.00
552.00
276.00
834.60
318.90
2,929.50
(225)
Page 2
Sales
Credit
15,800.00
9,200.00
4,600.00
13,910.00
5,315.00
48,825.00
(413)
Date
2011
Mar. 6
12
13
15
20
31
31
Account Credited
L.T. Notes Pay.
Leroy Hackett
Sam Snickers
Sales
Marjorie Coble
Sales
Totals
Explanation
PR
Cash
Debit
Note to bank
251 72,000.00
Invoice, Mar 2
18,012.00
Invoice, Mar 3
10,488.00
Cash sales
191,028.80
Invoice, Mar 10
5,244.00
Cash sales
202,524.40
499,297.20
(101)
Sales
Discount
Debit
Accts.
Rec.
Credit
Page 2
Sales
Credit
Other
Accts.
Credit
PST
Payable
Credit
GST
Payable
Credit
72,000.00
316.00
184.00
18,328.00
10,672.00
92.00
5,336.00
592.00
(415)
164,680.00
16,468.00
9,880.80
174,590.00
34,336.00 339,270.00
(106)
(413)
17,459.00
33,927.00
(224)
10,475.40
20,356.20
(225)
72,000.00
()
458

*Problem 8-9A - Periodic (continued)
PURCHASES JOURNAL
Date
2011
Mar.
Date of
Invoice
Account
3
5
9
14
16
31
Office Supplies/Arndt Company

Defore Industries
Office Equip./Jett Supply
The Welch Company
Store Supplies/Arndt Company
Totals
Mar 3
Mar 3
Mar 9
Mar 13
Mar 16
Terms
PR
Accts.
Payable
Credit
Purchases
Debit
n/10 EOM 124/ 1,187.20

2/10, n/30
45,156.00
n/10 EOM 163/ 22,101.00
2/10, n/30
33,522.50
n/10 EOM 125/ 1,770.20
103,736.90
(201)
Page 2
Other
GST
Accounts Recble
Debit
Debit
42,600.00
31,625.00
74,225.00
(505)
1,120.00
20,850.00
1,670.00
23,640.00
(X)

Ch.
No.
Payee
Mar. 41
13 6
Defore
Industries
Defore Industries
15 41
7
Payroll
Sales Salaries
Expense
23 41
8
The Welch Co.
The Welch
Company
31 41
9
Payroll
Sales Salaries
Expense
31
Totals
Date
2011
Account Debited
PR
Cash
Credit
44,304.00
621
15,900.00
30,368.00
621
Page 3
Pur.
Disc.
Credit
Other
Accts.
Debit
852.00
GST
Recble
Debit
Accts.
Payable
Debit
45,156.
00
15,900.00
584.00
30,952.
00
15,900.00
15,900.00
106,472.0
67.20
2,556.00
1,251.00
1,897.50
100.20
5,871.90
(108)
1,436.00
31,800.00
76,108.
701
459
0
(101)
00
(507)
(X)
(201)
460

GENERAL JOURNAL
Date
PR
Debit
Mar. 17 Accounts PayableThe Welch Company .......

GST Payable .............................................
Purchases Returns and Allowances ..........
201/
225
506
2,570.50
19 Accounts PayableJett Supply ........................

GST Payable .............................................
Office Equipment .......................................
201/
225
163
667.80
2011
Page 2
Credit
145.50
2,425.00
37.80
630.00
Parts 2 and 4
Marjorie Coble
Date
Explanation
PR
Debit
10
S2
5,336.00
20
CR2
27
S2
Credit
Balance
2011
Mar.
5,336.00
5,336.00
16,135.60
0.00
16,135.6
0
Leroy Hackett
Date
Explanation
PR
Debit
Credit
Balance
2011
Mar.
S2
12
CR2
18,328.00
18,328.0
0
18,328.00
0.00
Sam Snickers

460
461
Date
Explanation
PR
Debit
Credit
Balance
2011
Mar.
S2
13
CR2
28
S2

10,672.00
10,672.0
0
10,672.00
6,165.40
0.00
6,165.40
461
462

Parts 3 and 4
Arndt Company
Date
Explanation
PR
Debit
Credit
Balance
2011
Mar.
P2
1,187.20
1,187.20
16
P2
1,770.20
2,957.40
Defore Industries
Date
Explanation
PR
Debit
Credit
Balance
45,156.00
45,156.00
2011
Mar.
P2
13
CD3
45,156.00
0.00
Jett Supply
Date
Explanation
PR
Debit
Credit
Balance
2011
Mar.
P2
19
G2
22,101.00
667.80
22,101.00
21,433.20
The Welch Company

Date
Explanation
PR
Debit
Credit
Balance
2011
Mar.
14
P2
17
G2

33,522.50
2,570.50
33,522.50
30,952.00
462
463
23

CD3
30,952.00
0.00
463
464

Parts 1 and 4
GENERAL LEDGER
Cash
Explanation
Date
Acct. No. 101

PR
Debit
31
CR2
499,297.20
31
CD3
Credit
Balance
2011
Mar.
499,297.2
0
106,472.0
0
Accounts Receivable
Explanation
Date
PR
392,825.2
0
Acct. No. 106

Debit
Credit
Balance
2011
Mar.
31
S2
31
CR2
56,637.00
56,637.00
34,336.00
GST Receivable
Explanation
Date
22,301.00
Acct. No. 108
PR
Debit
P2
5,871.90
Credit
Balance
2011
Mar.
31
5,871.90
Date
Explanation
PR
Acct. No. 119

Debit
Credit
Balance
2011
Mar.
1 Beginning balance
Office Supplies
250,000.0
0
Acct. No. 124
464
465
Date
Explanation
PR
Debit
P2
1,120.00
Credit
Balance
2011
Mar.
31
1,120.00
Store Supplies
Date
Explanation
Acct. No. 125
PR
Debit
P2
1,670.00
Credit
Balance
2011
Mar.
16

1,670.00
465
466

Acct. No. 163
Office Equipment
Date
Explanation
PR
Debit
Credit
Balance
2011
Mar.
P2
19
G2
20,850.00
630.00
Accounts Payable
Date
Explanation
20,850.00
20,220.00
Acct. No. 201

PR
Debit
Credit
Balance
2011
Mar.
17
G2
2,570.50
(2,570.50)
19
G2
667.80
(3,238.30)
31
P2
31
CD3
103,736.9
0
76,108.00
Explanation
24,390.60
Acct. No. 224
PST Payable
Date
100,498.6
0
PR
Debit
Credit
Balance
2011
Mar.
31
S2
31
CR2
Explanation
4,882.50
33,927.00
38,809.50
Acct. No. 225
GST Payable
Date
4,882.50
PR
Debit
Credit
Balance
2011
Mar.
17
G2
145.50
145.50
19
G2
37.80
183.30

466
467
31
S2
31
CR2
Explanation
PR
3,112.80
20,356.20
23,469.00
Acct. No. 251

Date
2,929.50
Debit
Credit
Balance
72,000.00
72,000.00
2011
Mar.
CR2
Acct. No. 301
George Bledsoe, Capital

Date
Explanation
PR
Debit
Credit
Balance
2011
Mar.
1 Beginning balance
250,000.0
0
Acct. No. 413
Sales
Date
Explanation
PR
Debit
Credit
Balance
2011
Mar.
31
S2
48,825.00
48,825.00
31
CR2
339,270.0
0
388,095.0
0

Acct. No. 415
Sales Discounts
Date
Explanation
PR
Debit
Credit
Balance
2011
Mar.
31

CR2
592.00
592.00
467
468
Acct. No. 505
Purchases
Date
Explanation
PR
Debit
P2
74,225.00
Credit
Balance
2011
Mar.
31
74,225.00
Acct. No. 506
Purchases Returns and Allowances

Date
Explanation
PR
Debit
Credit
Balance
2011
Mar.
17
G2
2,425.00
Acct. No. 507
Purchases Discounts
Date
Explanation
PR
2,425.00
Debit
Credit
Balance
2011
Mar.
31
CD2
1,436.00
Acct. No. 621

Date
Explanation
1,436.00
PR
Debit
Credit
Balance
15
CD2
15,900.00
15,900.00
31
CD2
15,900.00
31,800.00
2011
Mar.

468
469
*Problem 8-9A - Periodic (concluded)

Part 5
THE BLEDSOE COMPANY

Trial Balance
March 31, 2011
Account
Debit
Cash .............................................................
$392,825.20
Accounts receivable ..............................
22,301.00
GST receivable ........................................
5,871.90
Merchandise inventory ........................
250,000.00
Office supplies..........................................
1,120.00
Store supplies ..........................................
1,670.00
Office equipment ....................................
20,220.00
Credit
Accounts payable ...................................
$ 24,390.60
PST payable ..............................................
38,809.50
GST payable .............................................
23,469.00
Long-term notes payable ....................
72,000.00
George Bledsoe, capital .......................
250,000.00
Sales ............................................................
388,095.00
Sales discounts ........................................
592.00
Purchases .................................................
74,225.00
Purchases returns and allowances...
2,425.00
Purchases discounts ..............................
1,436.00
Sales salaries expense ...........................

Totals ..........................................................

31,800.00
$800,625.10 $800,625.10
469
470
THE BLEDSOE COMPANY

March 31, 2011
Marjorie Coble ......................................
$16,135.60
Sam Snickers. .........................................
6,165.40
Total accounts receivable ................
$22,301.00
THE BLEDSOE COMPANY

March 31, 2011
Arndt Company ....................................
$ 2,957.40
Jett Supply...............................................
21,433.20
Total accounts payable .....................
$24,390.60

470
471

708

Page X
Sales Journal
Date
Account Debited
Invoice
No.
PR
A/R Dr.
PST
Payable
Cr.
GST
Payable
Cr.
COGS Dr.
Sales
Cr
Cr.
2011
Oct K-Company
12
106
6,840
480
360
6,000
4,200
17 CanCor
107
7,980
560
420
7,000
4,600
30 Delton Hardware
108
4,560
320
240
4,000
2,900
Page X

Date
Account
Credited
Explanatio
n
PR
Cash
Dr.
Sales
Disc
Dr
A/R Cr.
COGS/Dr.
Merchandis
Other
PST
GST
e
Accounts Payable Payabl Inventory/
Sales Cr.
Cr.
Cr.
e Cr.
Cr.
2011
Oct 9 Sales
Inv #105
1,368
24 CanCor
7,910
26 K-Company
6,840
1,200
70
7,980
6,840
96
72
740
472
Purchases Journal
Date
Account Credited
Terms
PR
Merchandi
Other
se
Accounts Dr.
Inventory
Dr.
A/P Cr.
Page X
GST Recble
Dr.
2011
Oct 1
Lexor Suppliers
2/10,n
/30
4,240
4,000
240
27
Milton Suppliers
n/30
8,480
8,000
480
Page X

Date
Ch #
Account Debited
PR
Cash Cr.
Merchandise
Inventory Cr.
Other
Accounts Dr.
GST
Recble Dr.
A/P Dr.
2011
Oct 5
13
Merchandise
inventory
2,120
10
14
Lexor Suppliers
4,160
2,000
80
120
4,240
473
SALES JOURNAL
Date
2011
Oct.
Date
PR
PST
Payable
Credit
GST
Payable
Credit
Sales
Credit
12 K-Company
106
6,840
480
360
6,000
17 CanCor
107
7,980
560
420
7,000
30 Delton Hardware
108
4,560
320
240
4,000
Date
Account Credited
2011
Oct. 9 Sales
24 CanCor
26 K-Company
Date
2011
Oct.
Invoice
Number
Account Debited
Page X
Accts.
Rec.
Debit
Explanation
Inv #105
Page X
GST
Payable
Credit
96
Sales
Credit
72
1,200
7,980
6,840
Account Credited
1 Lexor Suppliers
27 Milton Suppliers
Ch.
No.
PR
Other
Accts.
Credit

Accts.
PST
Rec.
Payable
Credit
Credit
Payee
Date of
Invoice
Oct. 1
Oct. 27
PURCHASES JOURNAL
Accts.
Payable
Terms
PR
Credit
2/10,n/30
n/30
4,240
8,480

Pur.
Cash
Disc.
Account Debited
PR
Credit
Credit
Cash
Debit
Sales
Discount
Debit
1,368
7,910
6,840
70
Page X
Purchases
Debit
Other
Accounts
Debit
4,000
8,000
Page X
Other
Accts.
Debit
GST
Recble
Debit
240
480
GST
Recble
Debit
Accts.
Payable
Debit
709
474
2011
Oct. 5 13
10 14
Cash purchase
Purchases
2,120
Lexor Suppliers
Lexor Suppliers
4,160
2,000
80
120
4,240
475
ALTERNATE PROBLEMS
Problem 8-1B (20 minutes)
Date
Transaction
May 1 The owner invested an automobile into the business.
Special
Journal
Subledger
NE
CR
MI
3 Purchased merchandise inventory on credit, 1/5,

n/30.
AP/MI
4 Sold merchandise on credit; terms 2/15, n30.
AR/MI
5 The customer of May 4 returned defective

merchandise; the merchandise was scrapped.
AR
6 Regarding the May 3 purchase, received a credit memorandum from the supplier
AP/MI
CD
NE
17 Purchased office supplies on credit; terms n/30.
AP
19 Paid for the balance owing regarding the May 3

purchase.
CD
AP
22 Received payment regarding the May 4 sale.
CR
AR
25 Borrowed money from bank.
CR
NE
29 Purchased merchandise inventory paying cash.
CD
MI
30 Accrued interest revenue.
NE
30 Closed all revenue accounts to the income summary.
NE
2 Sold merchandise and received cash.
granting an allowance.
15 Paid mid-month salaries.

475
476


Sales Journal
Date
Account Debited
Invoice
No.
Page: S1
PR
A/R Dr.
COGS Dr.
Sales Cr.
Cr.
2011
347
102,000
51,000
348
8,200
5,700
18 Lars Wilson
349
6,000
4,900
25 Nathan Blythe
350
28,000
14,500
June 5 Martha Stohart

6 Carol Larson
Date
Account Credited
PR
Explanatio
n
Cash Dr.
Sales
Disc
Dr
Page: CR1
A/R Cr.
2011
June A/R
12 Larson
24 A/R
Stohart
Carol
Inv. 348
8,036
Martha
Inv. 347
102,000
164
8,200
102,000
Sales Cr.
Other
Accounts
Cr.
COGS/Dr.
Merchandi
se
Inventory/
Cr.
711
477
27 A/R Lars Wilson
Inv. 349
120
5,880
6,000
Purchases Journal
Date
Account Credited
Date of
Invoice
Terms
P
R
Page: P1
A/P Cr.
Merchandise
Inventory Dr.
Office
Supplies
Dr.
Other
Accounts Dr.
2011
Exeter
Equip./Equipment
Whitby Co.
4
June 1
Suppliers
Unlimited
June 1
n30
45,000
June 4
1/5, n15
85,000
June 8
2/10,
n30
1,800
45,000
85,000
1,800
478

712
Problem 8-2B (concluded)
Cash Disbursements
Date
Ch #
Account Debited
PR
Page: CD1
Cash Cr.
Merchandis
e
Inventory
Cr.
Other
Accounts Dr.
A/P Dr.
2011
June 11
101
Whitby Co.*
80,200
14
102
Salaries Expense
15,000
28
103
Exeter Equipment
45,000
29
104
Salaries Expense
15,000
80,200
15,000
45,000
15,000
*85,000 4,800 = 80,200
General Journal
Date
Page: G1
PR
Debit
Credit
2011
June
7 Accounts Payable Whitby Co. .........................
4,800
Merchandise Inventory ...............................
4,800
To record allowance received for

damages that occurred during delivery.
2,800
479
Accounts Receivable Nathan Blythe....
2,800
To record unsatisfactory goods

returned by customer.
26 Merchandise Inventory .......................................

Cost of Goods Sold.........................................
Goods returned to inventory.
2,200
2,200
480


Part 3
Date
2011
July
5
6
13
14
Date
Account Debited
SALES JOURNAL
Invoice
Number
PR
Karen Harden
Paul Kane
Kelly Grody
Karen Harden
Account
Credited
2011
Jul 15 Karen
y
Harden
15 Sales
918
919
920
921
A/R Dr.
Sales. Cr.
18,400
7,500
8,350
4,100

Sales
Cash
Discoun
Explanation
Debit
t Debit
PR
Sale of Jul 5
Cash sales
Date
Account Credited
2011
July
1 Beech Company
18,032
Page 3
Merchandise Inventory Cr.
368
10,200
4,100
4,600
2,300
Accts.
Rec.
Credit
Other
Accts.
Credit
Sales
Credit
121,370
PURCHASES JOURNAL
Accounts Merchandis
Date of
Payable e Inventory
Invoice Terms
PR
Credit
Debit
2/10,
n/60

Cr.
18,400
121,370
Jun 30
Page 3
6,300
6,300
66,700
Office
Supplie
s Debit
Page 3
Other
Accts.
Debit
713
481
7 Blackwater Inc. /Store

Supp.
9 Poppes Supply /Store
Equip.
Jul 7
Jul 8
n/10
EOM
n/10
EOM
1,050
1,050
37,710
37,710
482

714
Problem 8-3B (continued)

Ch.
No. Payee
Date
201
1
Jul
y
Date
2011
July
3 300 The Weekly

Journal
10 301 Beech Company
15 302 Payroll
Account Debited
Cash
Credit
Advertising Expense
Beech Company
Sales Salaries Expens
GENERAL JOURNAL
8
PR
Accounts PayableBlackwater Inc. ............

Store Supplies ........................................
Returned supplies to supplier.
Merchandis
e Inventory
Credit
575
201/
125
Page 3
Accts.
Payable
Debit
575
6,174
30,620
PR
Other
Accts.
Debit
126
Debit
150
30,620
Page 3
Credit
150
6,300
483

Parts 1, 2, 3
Date
2011
July
5
14
15
Date
2011
July
13
Date
2011
July
6
Explanation
Karen Harden
PR
S3
S3
CR3
Explanation
Kelly Grody
PR
S3
Explanation
Paul Kane
PR

S3
Debit
18,400
4,100
Debit
Credit
18,400
Credit
8,350
Debit
7,500
Balance
18,400
22,500
4,100
Balance
8,350
Credit
Balance
7,500
483
484

Date
Explanation
Beech Company
PR
Debit
Credit
Balance
2011
July
1
10
Date
P3
CD3
Explanation
Blackwater Inc.
PR
6,300
Debit
6,300
Credit
6,300
0
Balance
2011
July
7
8
Date
2011
July
9
Date
2011
P3
G3
Poppes Supply
Explanation
PR
150
Debit
P3
Sprague Company
Explanation
PR

1,050
Credit
37,710
Debit
Credit
1,050
900
Balance
37,710
Balance
484
485


Parts 2, 3, 4
Date
2011
July
5
6
13
14
29
30
31
Date
Account Debited
SALES JOURNAL
Invoice
P
Number
R
Karen Harden
Paul Kane
Kelly Grody
Karen Harden
Paul Kane
Kelly Grody
Totals
Account
Credited
2011
Jul 15
y
15
16
21
Karen
Harden
Sales
Paul Kane
L.T. Notes
Pay
23 Kelly Grody
24 Karen
Harden
31 Sales
918
919
920
921
922
923
A/R Dr.
Sales. Cr.
18,400
7,500
8,350
4,100
28,090
15,750
82,190
(106/413)

Sales
Cash
Discoun
Explanation
Debit
t Debit
PR
Sale of Jul 5
Cash sales
Sale of Jul 6
Note to bank 251
Sale of Jul
13
Sale of Jul
14
Cash sales
18,032
Page 3
Merchandise Inventory Cr.
368
10,200
4,100
4,600
2,300
15,500
8,700
45,400
(502/119)
Accts.
Rec.
Credit
Page 3
Cr.
18,400
121,370
7,350
20,000
150
7,500
8,183
167
8,350
4,018
82
4,100
79,020
Sales
Credit
Other
Accts.
Credit
121,370
66,700
20,000
79,020
43,500
717
486
31 Totals
257,973
(101)
767
(415)
38,350
(106)
200,390 20,000
(413)
(X)
110,200
(502/119)
487

718
Date
2011
July
Account Credited
1 Beech Company
PURCHASES JOURNAL
Accounts Merchandis
Date of
Payable e Inventory
Invoice Terms
PR
Credit
Debit
Jun 30
7 Blackwater Inc. /Store

Supp.
9 Poppes Supply /Store
Equip.
17 Sprague Company
Jul 7
20 Poppes Supply
Jul 19
26 Beech Company
Jul 26
31 Totals
Jul 8
Jul 17
2/10,
n/60
n/10
EOM
n/10
EOM
2/10,
n/60
n/10
EOM
2/10,
n/30
6,300
125/
1,050
1,050
165/
37,710
37,710
8,200
750
9,770
9,770
63,780
24,270
201
1
Jul
y
Ch.
No. Payee
3 300 The Weekly

Journal
10 301 Beech Company
15 302 Payroll
Page 3
Other
Accts.
Debit
(201)
Date
Office
Supplie
s Debit
Cash
Credit
Account Debited
PR
Advertising Expense
655
575
Beech Company
Sales Salaries Expens 621
6,174
30,620
6,300
8,200
750
(119)
Merchandis
e Inventory
Credit
750
(124)
Other
Accts.
Debit
38,760
(X)
Page 3
Accts.
Payable
Debit
575
126
30,620
6,300
27 303 Sprague
Company
31 304 Payroll
31
Totals
Sprague Company
Sales Salaries
Expense
488
5,684
621
30,620
73,673
(101)
* $8,200 $2,400 return = $5,800
116
5,800*
30,620
242
(119)
61,815
(X)
12,100
(201)
489

Date
2011
July
GENERAL JOURNAL
8
PR
Debit

Store Supplies .......................................
201/
125
150
24 Accounts PayableSprague Company ........

Merchandise Inventory...........................
Returned defective inventory to
merchandise supplier.
201/
119
2,400
Page 3
Credit
150
2,400
Parts 1, 2, 3, 4
GENERAL LEDGER
Cash
Explanation
Date
Acct. No. 101

PR
Debit
Credit
Balance
2011
Balance Forward
June
3
0
95,000
July
3
1
CR3
3
1
CD3
257,973
352,973
73,673
Accounts Receivable
Date
Explanation
PR
279,300
Acct. No. 106

Debit
Credit
Balance
2011
July
3
1
S3
3
1
CR3

82,190
82,190
38,350
43,840
489
490
Date
Explanation
PR
Acct. No. 119

Debit
Credit
Balance
2011
Jun.
3
0
Balance Forward
167,000
Jul.
2
4
G3
2,400
164,600
3
1
S3
45,400
119,200
3
1
CR3
110,200
9,000
3
1
P3
3
1
CD3
24,270
33,270
242
Acct. No. 124
Office Supplies
Explanation
Date
PR
33,028
Debit
Credit
Balance
2011
July
3
1
P3
750
750

Acct. No. 125
Store Supplies
Explanation
Date
PR
Debit
Credit
Balance
2011
July
P3
G3

1,050
1,050
150
900
490
491
Acct. No. 165
Store Equipment
Explanation
Date
PR
Debit
Credit
Balance
2011
July
P3
37,710
37,710
Accounts Payable
Date
Explanation
PR
Acct. No. 201

Debit
Credit
Balance
2011
July
G3
24
G3
31
P3
31
CD3
150
(150)
2,400
(2,550)
63,780
12,100
49,130
Acct. No. 251

Explanation
Date
PR
61,230
Debit
Credit
Balance
2011
June
3
0
July
2
1
Balance Forward
167,000
CR3
20,000
Gene Eldridge, Capital

Explanation
Date
PR
187,000
Acct. No. 301
Debit
Credit
Balance
2011
Jun.
3
0
Balance Forward
95,000
Sales

Acct. No. 413
491
492
Explanation
Date
PR
Debit
Credit
Balance
2011
July
3
1
S3
3
1
CR3
82,190
82,190
200,390
282,580
Acct. No. 415
Sales Discounts
Date
Explanation
PR
Debit
Credit
Balance
2011
July
3
1

CR3
767
767
492
493

Cost of Goods Sold
Explanation
Date
Acct. No. 502
PR
Debit
Credit
Balance
2011
July
3
1
S3
3
1
CR3

Explanation
PR
Date
45,400
45,400
110,200
155,600
Debit
Acct. No. 621

Credit
Balance
2011
July
15
31
CD3
CD3
Advertising Expense
Explanation
PR
Date
30,620
30,620
Debit
30,620
61,240
Acct. No. 655
Credit
Balance
2011
July
CD3
575
575
Date
2011
July
5
14
15
24
Explanation
Karen Harden
PR
S3
S3
CR3
CR3
Date
2011
July
13
23
30
Explanation
Date
2011
Explanation
Kelly Grody
PR
S3
CR3
S3
Paul Kane
PR

Debit
18,400
4,100
Debit
8,350
15,750
Debit
Credit
18,400
4,100
Credit
8,350
Credit
Balance
18,400
22,500
4,100
0
Balance
8,350
0
15,750
Balance
493
494
July
6
16
29
S3
CR3
S3
7,500
28,090
7,500
7,500
0
28,090

Date
Explanation
Beech Company
PR
Debit
Credit
Balance
2011
July
1
10
26
P3
CD3
P3
Blackwater Inc.
Explanation
PR
Date
6,300
Debit
6,300
9,770
Credit
6,300
0
9,770
Balance
2011
July
7
8
Date
2011
July
9
20
Date
2011
July
17
24
27
P3
G3
Poppes Supply
Explanation
PR
150
Debit
P3
P3
Sprague Company
Explanation
PR

P3
G3
CD3
1,050
Credit
37,710
750
Debit
2,400
5,800
Credit
8,200
1,050
900
Balance
37,710
38,460
Balance
8,200
5,800
0
494
495

Part 5
ELDRIDGE INDUSTRIES
Trial Balance
July 31, 2011
Account
Debit
Credit
Cash ....................................................................................... $279,300

Accounts receivable ........................................................................
43,840
Merchandise inventory ..................................................................
33,028
Office supplies ...................................................................................
750
Store supplies ....................................................................................
900
Store equipment ...............................................................................
37,710
Accounts payable .............................................................................
$ 49,130
Long-term notes payable ..............................................................
187,000
Gene Eldridge, capital.....................................................................
95,000
Sales ......................................................................................................
282,580
Sales discounts ..................................................................................
767
Cost of goods sold.............................................................................
155,600
Sales salaries expense ....................................................................
61,240
Advertising expense .......................................................................
575
Totals ..................................................................................... $613,710 $613,710

ELDRIDGE INDUSTRIES
July 31, 2011
Kelly Grody..............................................................................
Paul Kane................................................................................
Total accounts receivable ........................................................
$15,750
28,090
$43,840
495
496
ELDRIDGE INDUSTRIES
July 31, 2011
Beech Company ....................................................................
$ 9,770
Blackwater Inc. ................................................................................
900
Poppes Supply ..................................................................................
38,460
Total accounts payable ..................................................................
$49,130

496
497

Analysis component:
To find the error(s),
re-add the account balances on the schedule of accounts payable to confirm that
the addition was correct.
trace the balances listed on the schedule of accounts payable back to the
subsidiary accounts to confirm that they were listed correctly on the schedule.
recalculate the balance of each subsidiary account to confirm that the additions
and subtractions were correct.
trace the postings from each subsidiary account and from the controlling account
back to the appropriate journals.
Since the purchases and cash disbursements journals were footed and crossfooted before
posting, the previous steps should disclose the error.

497
498


Parts 1, 2, 3
Date
Account Debited
2011
Oct.
6
12
15
16
21
31
Marge Craig
Heather Flatt
Amy Izon
Heather Flatt
Jan Wildman
Totals
Account
Credited
Date
2011
Oct. 2 Jan Wildman
15 Sales
15 Marge Craig
22 Heather Flatt
25 Amy Izon
28 Store
Supplies
31 Sales
Explanation
SALES JOURNAL
Invoice
P
Number R
913
914
915
916
917
Page 3
Cr.
3,300
3,650
3,100
4,290
5,520
19,860
(106/413)
1,800
2,000
1,700
2,460
3,000
10,960
(502/119)

Sales
Discoun
Acct.
Cash
t
Rec.
PR
Debit
Debit
Credit
Invoice Nov
23
Cash sales
Invoice, Dec 6
Invoice, Dec
12
Invoice, Dec
15
Sold supplies 125
Cash sales
A/R Dr.
Sales. Cr.
4,116
84
Page 3
Sales
Credit
4,200*
38,830
2,401
3,577
49
73
2,450*
3,650**
2,842
58
2,900**
38,830
58
66,128
Other Cost of Goods Sold Dr.

Acct. Merchandise Inventory
Credit
Cr.
21,400
58
66,128
36,400
725
499
31 Totals
117,952
(101)
264 13,200*
*
(415) (106)
* $3,300 $850 return = $2,450

** $3,100 $200 return = $2,900
104,958
58
57,800
(413)
(X)
(502/119)
500

726
Date
Account Credited
2011
Oct.
2 Walters Company
PURCHASES JOURNAL
Accounts Merchandis
Date of
Payable
e
Invoice Terms
PR
Credit
Inventory
Debit
Oct 2
5 Green Supply Co.
Oct 3
15 Walters Company
Oct 15
15 Sunshine Company
Oct 15
16 Green Supply Co.
Oct 16
20 Green Supply Co. /Store

Equip.
28 Sunshine Company
Oct 19
31 Totals
Oct 28
2/10,
n/60
n/10
EOM
2/10,
n/60
2/10,
n/60
n/10
EOM
n/10
EOM
2/10,
n/60
3,200
3,200
1,300
1,300
3,990
3,990
2,650
2,650
765
Page 2
Other
Accts.
Debit
765
165/
7,475
6,030
6,030
25,410
17,170
(201)
Office
Supplie
s Debit
7,475
(119)
765
(124)
7,475
(X)
501


Date
201
1
Oct.
Ch.
No. Payee
2 619 Omni Realty Co.

6 620 Fireside
Company
12 621 Walters
Company
15 622 Jamie Ford
25 623 Walters
Company*
25 624 Sunshine
Company
29 625 Marlee Levin
30 626 Midwest Elec.
Co.
30 627 Jamie Ford.
31
Totals
*3,990 640 return = 3,350
Merchandis
e
Inventory
Credit
Other
Accts.
Debit
Page 4
Accts.
Payable
Debit
Account Debited
PR
Cash
Credit
Rent Expense
Fireside Company
640
2,250
3,724
76
Walters Company
3,136
64
Sales Salaries
Expense
Walters Company
621
2,620
3,283
67
3,350
2,597
53
2,650
302
4,000
4,000
690
990
990
Sunshine Company
Marlee Levin,
Withdrawals
Utilities Expense
2,250
3,800
3,200
2,620
Sales Salaries Expense .....................................................

621 2,620
25,220
260
(101)
(507)
2,620
12,480
(X)
13,000
(201)
727
502

GENERAL JOURNAL
Date
201
1
Oct.
PR
Page 2
Credit
Debit
4 Accounts PayableFireside Company .........

Merchandise Inventory ..........................
Defective merchandise returned.
201/
119
460
9 Sales Returns and Allowances .....................

Accounts ReceivableMarge Craig .....
Returned merchandise was scrapped.
414
106/
850
18 Sales Returns and Allowances .....................

Accounts ReceivableAmy Izon ...........
Returned merchandise was scrapped.
414
106/
200
19 Accounts PayableWalters Company .........

Merchandise Inventory ..........................
201/
119
640
20 Accounts PayableGreen Supply Co. ........

Office Supplies ......................................
201/
124
143
460
850
200
640
143

Marge Craig
Date
Explanation
PR
Debit
Credit
Balance
2011
Oct.
S3
G2
1
5
CR3
3,300
3,300
850
2,450
2,450
Heather Flatt
Date
Explanation
PR
Debit
Credit
Balance
2011

502
503
Oct.
1
2
S3
3,650
3,650
1
6
S3
4,290
7,940
2
2
CR3

3,650
4,290
503
504

Amy Izon
Date
Explanation
PR
Debit
Credit
Balance
2011
Oct.
1
5
S3
1
8
G2
2
5
CR3
Date
2011
Sept 23
Oct.
2
21
Part 2
Date
2011
Sept 28
Oct.
4
6
Date
2011
Oct.
5
16
20
20
Date
2011
Oct. 15
25
Explanation
Jan Wildman
PR
S2
CR3
S3
3,100
Debit
4,200
5,520
3,100
200
2,900
2,900
Credit
4,200
Balance
4,200
0
5,520

Explanation
Fireside Company
PR
P1
G2
CD4
Debit
460
3,800
Green Supply Company

Explanation
PR
Debit
P2
P2
P2
G2
Explanation
Sunshine Company
PR

P2
CD4
143
Debit
2,650
Credit
4,260
Credit
1,300
765
7,475
Credit
2,650
Balance
4,260
3,800
0
Balance
1,300
2,065
9,540
9,397
Balance
2,650
0
504
505
28

P2
6,030
6,030
505
506

Date
2011
Oct.
2
12
15
19
25
Explanation
P2
CD4
P2
G2
CD4
Parts 2, 3
Date
2011
Sept 30 Balance
Oct. 31
31
Date
2011
Sept 30 Balance
Oct.
9
18
31
31
Date
2011
Sept 30 Balance
Oct.
4
19
31
31
31
31
Date
2011
Sept 30 Balance
Oct. 20
Walters Company
PR
Debit
3,200
640
3,350
Credit
3,200
3,990
Balance
3,200
0
3,990
3,350
0
GENERAL LEDGER
Explanation
Cash
PR
CR3
CD4
Accounts Receivable
Explanation
PR
G2
G2
S3
CR3
Explanation
PR
G2
G2
S3
P2
CD4
CR3
Office Supplies
Explanation
PR

G2
Debit
117,952
Debit
19,860
Debit
17,170
Debit
Acct. No. 101

Credit
Balance
25,220
5,361
123,313
98,093
Acct. No. 106

Credit
Balance
850
200
13,200
4,200
3,350
3,150
23,010
9,810
Acct. No. 119

Credit
Balance
460
640
10,960
260
57,800
66,970
66,510
65,870
54,910
72,080
71,820
14,020
Acct. No. 124

Credit Balance
143
607
464
506
507
31
Date
2011
Sept 30 Balance
Oct. 28
Date
2011
Sept 30 Balance
Oct. 20
Date
2011
Sept 30 Balance
Date
2011
Sept 30 Balance
Oct.
4
19
20
31
31
Date
2011
Sept 30 Balance
Date
2011
Oct. 29
Date
2011
Oct. 31
31
P2
Store Supplies
Explanation
PR
765
Debit
CR3
Store Equipment
Explanation
PR
P2
1,229
Acct. No. 125
Credit
Balance
58
Debit
Acct. No. 165

Credit
Balance
42,129
49,604
7,475

Explanation
PR
Debit
346
288
Acct. No. 166

Credit
Balance
9,153
Accounts Payable
Explanation
PR
G2
G2
G2
P2
CD4
Marlee Levin, Capital
Explanation
PR
Debit
460
640
143
13,000
Debit
Acct. No. 201

Credit
Balance
25,410
4,260
3,800
3,160
3,017
28,427
15,427
Acct. No. 301

Credit
Balance
106,200
Marlee Levin, Withdrawals

Explanation
PR
CD4
Explanation
Sales

PR
S3
CR3
Debit
Acct. No. 302

Credit
Balance
4,000
Debit
4,000
Acct. No. 413
Credit
Balance
19,860
104,958
19,860
124,818
507
508

Date
2011
Oct.
9
18
Date
2011
Oct. 31
Date
2011
Oct. 31
31
Date
2011
Oct. 15
30
Date
2011
Oct.
2
Date
2011
Oct. 30

Explanation
PR
Debit
G2
G2
Sales Discounts
Explanation
PR
CR3
Cost of Goods Sold
Explanation
PR
S3
CR3
Explanation
PR
CD4
CD4
Rent Expense
Explanation
PR
CD4
Utilities Expense
Explanation
PR

CD4
850
200
Debit
264
Debit
10,960
57,800
Debit
2,620
2,620
Debit
2,250
Debit
990
Acct. No. 414

Credit
Balance
850
1,050
Acct. No. 415
Credit Balance
264
Acct. No. 502
Credit
Balance
10,960
68,760
Acct. No. 621
Credit Balance
2,620
5,240
Acct. No. 640
Credit
Balance
2,250
Acct. No. 690
Credit
Balance
990
508
509

Part 4
STARSHINE PRODUCTS
Trial Balance
October 31, 2011
Account
Cash .......................................................................
Accounts receivable ...............................................
Merchandise inventory ...........................................
Office supplies ........................................................
Store supplies ........................................................
Store equipment .....................................................
Accumulated amortization, store equipment ...........
Accounts payable ...................................................
Marlee Levin, capital ..............................................
Marlee Levin, withdrawals ......................................
Sales ......................................................................
Sales returns and allowances.................................
Sales discounts ......................................................
Cost of goods sold..................................................
Sales salaries expense ..........................................
Rent expense .........................................................
Utilities expense .....................................................
Totals .....................................................................
Debit
$ 98,093
9,810
14,020
1,229
288
49,604
4,000
Credit
$ 9,153
15,427
106,200
124,818
1,050
264
68,760
5,240
2,250
990
$255,598 $255,598
STARSHINE PRODUCTS

October 31, 2011
Heather Flatt ............................................
$4,290
Jan Wildman. ...........................
5,520
Total accounts payable ........
$9,810
STARSHINE PRODUCTS
October 31, 2011

509
510
Green Supply Company ........

Sunshine Company. .............
Total accounts payable .........

$ 9,397
6,030
$15,427
510
511

734
Page 1
Sales Journal
Date
Account Debited
Invoice
No.
PR
A/R Dr.
Sales Cr.
COGS Dr.
PR Merchandise Inventory
Cr.
2011
213
300.00
108.00
15 J. Samuelson
214
750.00
270.00
22 V. Nels
215
600.00
200.60
30 M. Bains
216
810.00
270.81
July 9 W. Tilden
Purchases Journal
Date
Page 1
Merchandis
e
Inventory
Date of
Invoice
Terms
Tulsco Supply
July 4
n/30
450.00
450.00
Gentry Holdings
July 18
n/30
270.00
270.00
Account Credited
PR
A/P Cr.
PR
Dr.
2011
July 4
18
NOTE: An additional PR column has been added to facilitate the referencing of inventory entries into the
Office
Supplies
Dr.
Other
Accounts
Dr.
512
inventory subsidiary ledger.
513

Inventory Subledger Record Weighted-Average Perpetual
Inventory Balance
Date
PR
Purchases
Units
Unit
Cost
Sales (at cost)
Total Cost
Unit
s
Unit
Cost
Total
Cost
(a)
(b)
(a)
Tota
l
Average
Unit Cost/Un
s
it
(b)
Total
Cost
July 31
Beginning inventory
30
@ $12.0 = $
0
360.0
0
30 $12.00 $ 360.0
0
30
4 P1
45
@ $10.0 = $
0
450.0
0
45 @ 10.0 =
0
450.00
75 $10.80 $ 810.0
0
10 @ $10.8 = $ 108.00
0
9 S1
25 @ $10.8 = $ 270.00
0
30
@ $9.00 = $
270.0
0
75
$ 810.0
0
65
$ 702.0
0
65
$ 702.0
0
40
$ 432.0
0
40
$ 432.0
0
30 @ 9.00 =
270.00
70 $10.03 $ 702.0
0
22 S1
$ 810.0
0
@ 10.8 =
25
0
270.00
40 $10.80 $ 432.0
0
18 P1
75
@ 10.8 =
10
0
108.00
65 $10.80 $ 702.0
0
15 S1
$ 360.0
0
20 @ $10.0 = $ 200.60
3

70
$ 702.0
0
70
$ 702.0
0
@ 10.0 =
20
3
200.60
513
514
50 $10.03 $ 501.4
0
27 @ $10.0 = $ 270.81
3
30 S1
105
$1,080.00 82
Cost of goods available for sale Cost of goods sold

= +
$849.41
$ 501.4
0
50
$ 501.4
0
@ 10.0 =
27
3
270.81
23 $10.03 $ 230.5
9
Total
50
23
23
$ 230.5
9
$230.59
Ending inventory
Note: An additional PR column has been added to the Inventory Subledger Record to facilitate referencing of inventory
entries.

514
515
726
*Problem 8-7B (40 minutes)
SALES JOURNAL
Page 3
A/R Dr.
Invoice
Date
Account Debited
Numbe
r
PR
Sales Cr.
5 Karen Harden
918
18,400
6 Paul Kane
919
7,500
13 Kelly Grody
920
8,350
14 Karen Harden
921
4,100
2011
July

Account
Date
Credited
Accts.
Cash
Disc.
Rec.
Sales
Accts.
Credit
Credit
Explanation
PR
Debit
Debit
Credit
Sale of July 5
18,032
368
18,400
2011
July
1 Karen Harden
5
Page 3
Other
Sales
1 Sales
5
516
Cash sales
121,370
121,370
PURCHASES JOURNAL
Accounts
Date
of
Date
Account Credited
Invoic
e
Terms
Office
Page 3
Other
Payable
Purchases
Supplies
Accounts
PR
Credit
Debit
Debit
Debit
2011
July
1 Beech Company
Jun.
30
2/10,n/60
6,300
7 Blackwater Inc./Store Supplies
July 7
n/10 EOM
1,050
1,050
9 Poppes Supply/Store Equipment
July 8
n/10 EOM
37,710
37,710
6,300
517

*Problem 8-7B (continued)

Ch.
Date
No.
Payee
Account Debited
PR
Purchas
e
Other
Page 3
Accts.
Cash
Discoun
t
Accts.
Payable
Credit
Credit
Debit
Debit
2011
July
Date
2011
July
3 300
The Weekly
Journal
Advertising Expense
1 301
0
Beech Company
Beech Company
1 302
5
Payroll
Sales Salaries
Expense
GENERAL JOURNAL
8

Store Supplies ........................................
575
6,174
575
126
30,620
PR
201/
125
Debit
150
6,300
30,620
Page 3
Credit
150
737
518
*Problem 8-7B (concluded)

Date
2011
July
5
14
15
Explanation
Karen Harden
PR
S3
S3
CR3
Date
2011
July
13
Explanation
Date
2011
July
6
Explanation
Kelly Grody
PR
S3
Paul Kane
PR
S3
Debit
Credit
18,400
4,100
Debit
18,400
Credit
8,350
Debit
Balance
18,400
22,500
4,100
Balance
8,350
Credit
7,500
Balance
7,500
Beech Company
Explanation
PR
Date
Debit
Credit
Balance
2011
July
1
10
Date
P3
CD3
Explanation
Blackwater Inc.
PR
6,300
Debit
6,300
Credit
6,300
0
Balance
2011
July
7
8
Date
2011
July
9
Date
2011
P3
G3
Explanation
Poppes Supply
PR
150
Debit
P3
Sprague Company
Explanation
PR

1,050
Credit
37,710
Debit
Credit
1,050
900
Balance
37,710
Balance
518
519

519
520

SALES JOURNAL
Page 3
Invoice
Date
Account Debited
A/R Dr.
Numbe
r
PR
Sales Cr.
5 Karen Harden
918
18,400
6 Paul Kane
919
7,500
13 Kelly Grody
920
8,350
14 Karen Harden
921
4,100
29 Paul Kane
922
28,090
30 Kelly Grody
923
15,750
2011
July
82,190
Totals
(106/413)

Account
Date
2011
Credited
Explanation
PR
Page 3
Sales
Accts.
Other
Cash
Disc.
Rec.
Sales
Accts.
Debit
Debit
Credit
Credit
Credit
739
July
521
1 Karen
5 Harden
Sale of July 5
1 Sales
5
Cash sales
1 Paul Kane
6
Sale of July 6
7,350
2 L.T. Notes P.
1
Note to bank
25
1
20,000
2 Kelly Grody
3
Sale of July 13
8,183
167
8,350
2 Karen
4 Harden
Sale of July 14
4,018
82
4,100
3 Sales
1
Cash sales
Totals
18,032
368
18,400
121,37
0
121,37
0
150
7,500
20,000
79,020
79,020
257,97
3
767
38,350
200,39
0
20,000
(101)
(415)
(106)
(413)
(X)
522

740
PURCHASES JOURNAL
Page 3
Accounts
Date
of
Date
Account Credited
Invoic
e
Terms
Office
Other
Payable
Purchase
s
Supplie
s
Account
s
Credit
Debit
Debit
Debit
6,300
6,300
PR
2011
July
1 Beech Company
Jun.
30
2/10,n/60
7 Blackwater Inc./Store
Supplies
July 7
n/10
EOM
125/
1,050
1,050
9 Poppes Supply/Store
Equipment
July 8
n/10
EOM
165/
37,710
37,710
17 Sprague Company
July
17
2/10,n/6
0
8,200
20 Poppes Supply
July
19
n/10
EOM
750
26 Beech Company
July
26
2/10,n/3
0
9,770
9,770
63,780
24,270
750
38,760
(201)
(505)
(124)
(X)
Totals
8,200
750
523
Purchas
e
Other
Cash
Discoun
t
Accts.
Payable
PR
Credit
Credit
Debit
Debit
655
575
Ch.
Date
No.
Payee
Account Debited
Page 3
Accts.
2011
July
3 300
The Weekly
Journal
Advertising Expense
1 301
0
Beech Company
Beech Company
1 302
5
Payroll
Sales Salaries
Expense
2 303
7
Sprague
Company
Sprague Company
3 304
1
Payroll
Sales Salaries
Expense
Totals
6,174
621
30,620
5,684
621
30,620
73,673
(101)
*$8,200 - $2,400 return = $5,800
575
126
6,300
30,620
116
5,800*
30,620
242
(506)
61,815
12,100
(X)
(201)
524

Date
2011
July
GENERAL JOURNAL
8
PR
Debit

Store Supplies .......................................
201/
125
150
24 Accounts PayableSprague Company ........

Purchase Returns and Allowances ........
Returned defective inventory to
merchandise supplier.
201/
507
2,400
Page 3
Credit
150
2,400
Parts 1, 2, 3, 4
GENERAL LEDGER
Cash
Explanation
Date
Acct. No. 101

PR
Debit
Credit
Balance
2011
Balance Forward
June
3
0
95,000
July
3
1
CR3
3
1
CD3
257,973
352,973
73,673
Accounts Receivable
Date
Explanation
PR
279,300
Acct. No. 106

Debit
Credit
Balance
2011
July
3
1
S3
3
1
CR3

82,190
82,190
38,350
43,840
524
525
Date
Explanation
PR
Acct. No. 119

Debit
Credit
Balance
2011
Jun.
3
0
Balance Forward
167,000
Acct. No. 124
Office Supplies
Explanation
Date
PR
Debit
Credit
Balance
2011
July
3
1

P3
750
750
525
526

Acct. No. 125
Store Supplies
Explanation
Date
PR
Debit
Credit
Balance
2011
July
P3
G3
1,050
1,050
150
Acct. No. 165
Store Equipment
Explanation
Date
900
PR
Debit
Credit
Balance
2011
July
P3
37,710
37,710
Accounts Payable
Date
Explanation
PR
Acct. No. 201

Debit
Credit
Balance
2011
July
G3
24
G3
31
P3
31
CD3
150
(150)
2,400
(2,550)
63,780
12,100
49,130
Acct. No. 251

Explanation
Date
PR
61,230
Debit
Credit
Balance
2011
June
3
0
July
2
1
Balance Forward

167,000
CR3
20,000
187,000
526
527
Gene Eldridge, Capital

Explanation
Date
PR
Acct. No. 301
Debit
Credit
Balance
2011
Jun.
3
0
Balance Forward
95,000
Sales
Explanation
Date
Acct. No. 413

PR
Debit
Credit
Balance
2011
July
3
1
S3
3
1
CR3
82,190
82,190
200,390
282,580
Acct. No. 415
Sales Discounts
Date
Explanation
PR
Debit
Credit
Balance
2011
July
3
1

CR3
767
767
527
528

Purchases
Explanation
Date
Acct. No. 505

PR
Debit
Credit
Balance
2011
July
3
1
P3
24,270
24,270
Purchase Discounts
Explanation
Date
PR
Acct. No. 506

Debit
Credit
Balance
2011
July
3
1
CD3
242

Explanation
Date
PR
242
Acct. No. 507

Debit
Credit
Balance
2011
July
2
4
G3

Explanation
PR
Date
2,400
Debit
2,400
Acct. No. 621

Credit
Balance
2011
July
15
31
CD3
CD3
Advertising Expense
Explanation
PR
Date
30,620
30,620
Debit
30,620
61,240
Acct. No. 655
Credit
Balance
2011
July
CD3
575
575
Date
2011
Explanation
Karen Harden
PR

Debit
Credit
Balance
528
529
July
5
14
15
24
Date
2011
July
13
23
30
S3
S3
CR3
CR3
Explanation
Kelly Grody
PR

S3
CR3
S3
18,400
4,100
Debit
8,350
15,750
18,400
4,100
Credit
8,350
18,400
22,500
4,100
0
Balance
8,350
0
15,750
529
530

Date
2011
July
6
16
29
Explanation
Paul Kane
PR
S3
CR3
S3
Debit
Credit
7,500
28,090
7,500
Balance
7,500
0
28,090
Date
Explanation
Beech Company
PR
Debit
Credit
Balance
2011
July
1
10
26
Date
P3
CD3
P3
Explanation
Blackwater Inc.
PR
6,300
Debit
6,300
9,770
Credit
6,300
0
9,770
Balance
2011
July
7
8
Date
2011
July
9
20
Date
2011
July
17
24
27
P3
G3
Explanation
Poppes Supply
PR
150
Debit
P3
P3
Sprague Company
Explanation
PR

P3
G3
CD3
1,050
Credit
37,710
750
Debit
2,400
5,800
Credit
8,200
1,050
900
Balance
37,710
38,460
Balance
8,200
5,800
0
530
531
*Problem 8-8B (concluded)

Part 5
ELDRIDGE INDUSTRIES
Trial Balance
July 31, 2011
Account
Debit
Cash .................................................................................
$279,300
Accounts receivable ..................................................................
43,840
Merchandise inventory ............................................................
167,000
Office supplies .............................................................................
750
Store supplies ..............................................................................
900
Store equipment .........................................................................
37,710
Credit
Accounts payable .......................................................................
$ 49,130
Long-term notes payable ........................................................
187,000
Gene Eldridge, capital ..............................................................
95,000
Sales ................................................................................................
282,580
Sales discounts............................................................................
767
Purchases......................................................................................
24,270
Purchase discounts ...................................................................
242
Purchase returns and allowances ........................................
2,400
Sales salaries expense ..............................................................
61,240
Advertising expense .................................................................
575
Totals..............................................................................................
$616,352

$616,352
531
532
ELDRIDGE INDUSTRIES
July 31, 2011
Kelly Grody........................................................................
Paul Kane .........................................................................
Total accounts receivable ..................................................
$15,750
28,090
$43,840
ELDRIDGE INDUSTRIES
July 31, 2011
Beech Company ..............................................................
$ 9,770
Blackwater Inc. ..........................................................................
900
Poppes Supply ............................................................................
38,460
Total accounts payable ............................................................
$49,130

532

746
*Problem 8-9B - Perpetual (100 minutes) Part 4

SALES JOURNAL
Invoice
Date
Account Debited
Page 2
COGS
Accts.
PST
GST
Rec.
Payable
Payable
Sales
Dr./
Debit
Credit
Credit
Credit
MI Cr.
7,366.00
635.00
381.00
6,350.00
4,445.00
14,500.00 1,250.00
750.00
12,500.0
0
8,750.00
Number
PR
8 Leroy Holmes
439
10 Sam Spear
440
15 Marjorie Cook
441
4,930.00
425.00
255.00
4,250.00
2,975.00
22 Sam Spear
442
3,010.20
259.50
155.70
2,595.00
1,800.00
24 Marjorie Cook
443
3,758.40
324.00
194.40
3,240.00
2,260.00
33,564.60 2,893.50 1,736.10
28,935.0
0
20,230.0
0
(413)
(502/119)
2011
Nov.
31 Totals
(106)
(224)
(225)

Account
Date
Credited
Explanation
PR
Page 3
Other
PST
GST
Sales
Accts.
Cash
Disc.
Rec.
Sales
Accts
Payabl Payabl
e
e
Debit
Debit
Credit
Credit
Credit
Credit
Credit
COGS
Dr./
MI Cr.
534
2011
Nov 2 L.T. Notes
.
Pay
Note to bank
25
1
86,250.0
0
86,250.0
0
1 Sales
5
Cash sales
31,517.2
0
1 Leroy
8 Holmes
Invoice, Nov 8
7,239.00 127.0 7,366.00

0
1 Sam Spear
9
Invoice, Nov
10
14,250.0 250.0 14,500.0

0
0
0
2 Marjorie
5 Cook
Invoice, Nov
15
4,845.00 85.00 4,930.00
3 Sales
0
Cash sales
3 Totals
0
41,415.4
8
27,170.0
0
2,717.0 1,630.2 19,000.0

0
0
0
35,703.0
0
3,570.3 2,142.1 25,000.0

0
8
0
185,516. 462.0 26,796.0 62,873.0 86,250.0 6,287.3 3,772.3 44,000.0

68
0
0
0
0
0
8
0
(101)
(415)
(106)
(413)
(X)
(224)
(225)
(502/11
9)

*Problem 8-9B - Perpetual (continued)
PURCHASES JOURNAL
Date
2011
Nov.
1
4
5
11
16
30
Date of
Invoice
Account Credited
Jett Supply/Office Equip.
Defore Industries
Atlas Company/Store Supplies
The Welch Company
Atlas Company/Office Supplies
Totals
Nov 1
Nov 3
Nov 5
Nov 10
Nov 16
Terms
PR
Page 2
Accts. Merchandise Other
GST
Payable
Inventory Accounts Recble
Credit
Debit
Debit
Debit
n/10 EOM 163/ 5,365.72

2/10, n/30
12,084.00
n/10 EOM 125/ 1,081.20
2/10, n/30
3,060.22
n/10 EOM 124/
592.54
22,183.68
(201)
11,400.00
2,887.00
14,287.00
(119)
5,062.00
303.72
684.00
1,020.00
61.20
173.22
559.00
33.54
6,641.00 1,255.68
(X)
(108)

Ch.
Date
Page 3
Merch.
Other
GST
Accts.
Cash
Inventor
y
Accts.
Recble
Payable
Credit
Debit
Debit
Debit
No.
Payee
Account Debited
PR
Credit
1
2
633
Defore
Industries
Defore Industries
11,856.0
0
1
5
634
Payroll
Sales Salaries
Expense
621
8,435.00
635
The Welch Co.*
The Welch Company
2011
Nov.
2,496.00
228.00
12,084.0
0
8,435.00
48.00
2,544.00
747
536
9
3
0
3
0
636
Payroll
Sales Salaries
Expense
Totals
621
8,435.0
0
8,435.0
0
31,222.0
0
276.00 16,870.0
0
(101)
(119)
(X)
14,628.0
0
(201)
*2,887 487 = 2,400; 2,400 x 2% = 48 discount

536
537

GENERAL JOURNAL
Date
2011
Nov. 17
26
PR
Page 2
Credit
Debit
Accounts PayableThe Welch Company ........

GST Payable.................................................
Merchandise Inventory ...............................
201/
225
119
516.22
Accounts PayableJett Supply ........................

Office Equipment .........................................
GST Payable.................................................
201/
163
225
977.32
29.22
487.00
922.00
55.32
Marjorie Cook
Explanation
Date
PR
Debit
Credit
Balance
15
S2
4,930.50
4,930.50
24
S2
3,758.40
8,688.40
25
CR2
2011
Nov.
4,930.00
3,758.40
Credit
Balance
Leroy Holmes
Date
Explanation
PR
Debit
S2
7,366.00
2011
Nov.
8
18
CR2
7,366.00
7,366.00
0.00
Sam Spear
Date
Explanation
PR
Debit
Credit
Balance
2011

537
538
Nov.
10
S2
19
CR2
22
S2
Parts 3 and 4
14,500.00
14,500.0
0
14,500.0
0
3,010.20
0.00
3,010.20
Atlas Company
Explanation
Date
PR
Debit
Credit
Balance
2011
Nov.
P2
1,081.20
1,081.20
16
P2
592.54
1,673.74

538
539

Defore Industries
Explanation
Date
PR
Debit
Credit
Balance
12,084.0
0
12,084.00
2011
Nov.
P2
12
CD2
12,084.00
PR
Debit
0.00
Jett Supply
Explanation
Date
Credit
Balance
2011
Nov.
P2
26
G2
5,365.72
977.32
5,365.72
4,388.40
The Welch Company

Explanation
Date
PR
Debit
Credit
Balance
2011
Nov.
11
P2
3,060.22
3,060.22
17
G2
516.22
2,544.00
19
CD2
2,544.00
0.00
Parts 1 and 4
GENERAL LEDGER
Acct. No. 101
Cash
Date
Explanation
PR
Debit
CR2
185,516.6
Credit
Balance
2011
Nov.
30

185,516.6
539
540
8
30
CD2
8
31,222.0
0
Acct. No. 106
Accounts Receivable
Date
Explanation
154,294.6
8
PR
Debit
30
S2
33,564.60
30
CR2
Credit
Balance
2011
Nov.
GST Receivable
Date
Explanation
33,564.60
26,796.0
0
6,768.60
Acct. No. 108
PR
Debit
P2
1,255.68
Credit
Balance
2011
Nov.
30

1,255.68
540
541

Acct. No. 119
Date
Explanation
PR
Debit
Credit
Balance
2011
Oct.
31
210,000.0
0
Nov.
17
G2
487.00
209,513.0
0
30
S2
20,230.0
0
189,283.0
0
30
CR3
44,000.0
0
145,283.0
0
30
P2
30
CD3
14,287.00
159,570.0
0
276.00
Acct. No. 124
Office Supplies
Date
Explanation
159,294.0
0
PR
Debit
Credit
Balance
2011
Nov.
30
P2
559.00
559.00
Acct. No. 125
Store Supplies
Date
Explanation
PR
Debit
P2
1,020.00
Credit
Balance
2011
Nov.
1,020.00
Acct. No. 163
Office Equipment
Date
Explanation

PR
Debit
Credit
Balance
541
542
2011
Nov.
P2
26
G2
5,062.00
5,062.00
922.00
Acct. No. 201
Accounts Payable
Date
Explanation
PR
4,140.00
Debit
Credit
Balance
2011
Nov.
17
G2
516.22
(516.22)
26
G2
977.32
(1,493.54)
30
P2
30
CD2
22,183.6
8
14,628.00
6,062.14
PST Payable
Date
Explanation
20,690.14
Acct. No. 224

PR
Debit
Credit
Balance
2011
Nov.
30
S2
2,893.50
2,893.50
30
CR2
6,287.30
9,180.80

542
543

Acct. No. 225
GST Payable
Date
Explanation
PR
Debit
Credit
Balance
2011
Nov.
17
G2
29.22
29.22
26
G2
55.32
84.54
30
S2
1,736.10
1,820.64
30
CR2
3,772.38
5,593.02
Acct. No. 251

Date
Explanation
PR
Debit
Credit
Balance
86,250.0
0
86,250.00
2011
Nov.
CR2
Acct. No. 301
Asha Crystal, Capital

Date
Explanation
PR
Debit
Credit
Balance
2011
Oct.
31
210,000.0
0
Acct. No. 413
Sales
Date
Explanation
PR
Debit
Credit
Balance
28,935.0
0
28,935.00
2011
Nov.
30

S2
543
544
30
CR2
62,873.0
0
Acct. No. 415
Sales Discounts
Date
Explanation
91,808.00
PR
Debit
Credit
Balance
2011
Nov.
30
CR2
462.00
462.00
Acct. No. 502
Cost of Goods Sold

Date
Explanation
PR
Debit
Credit
Balance
30
S2
20,230.00
20,230.00
30
CR3
44,000.00
64,230.00
PR
Debit
15
CD2
8,435.00
8,435.00
30
CD2
8,435.00
16,870.00
2011
Nov.
Date
Explanation
Acct. No. 621
Credit
Balance
2011
Nov.
*Problem 8-9B - Perpetual (concluded)

Part 5
CRYSTAL COMPANY
Trial Balance
November 30, 2011
Account ............................................... Debit Credit

Cash ........................................................... $154,294.68
Accounts receivable .................................... 6,768.60
GST receivable ........................................... 1,255.68
Merchandise inventory ................................ 159,294.00
Office supplies ............................................
559.00
Store supplies ............................................. 1,020.00
Office equipment......................................... 4,140.00
544
545
Accounts payable .......................................

PST payable ...............................................
GST payable ...............................................
Long-term notes payable ............................
Asha Crystal, capital ...................................
Sales...........................................................
Sales discounts...........................................
462.00
Cost of goods sold ...................................... 64,230.00
Sales salaries expense ............................... 16,870.00
Totals .......................................................... $408,893.96
$ 6,062.14
9,180.80
5,593.02
86,250.00
210,000.00
91,808.00
$408,893.96
CRYSTAL COMPANY
November 30, 2011
Marjorie Cook ............................................
$3,758.40
Sam Spear ....................................................
3,010.20
$6,768.60
CRYSTAL COMPANY
November 30, 2011
Atlas Company ...........................................
$1,673.74
Jett Supply ...................................................
4,388.40
Total accounts payable ...........................
$6,062.14

545
546

*Problem 8-9B - Periodic (100 minutes)
Part 4
SALES JOURNAL
Invoice
Date
Account Debited
Page 2
Accts.
PST
GST
Rec.
Payable
Payable
Sales
Credit
Credit
Credit
Number
PR
Debit
8 Leroy Holmes
439
7,366.00
635.00
381.00
6,350.00
10 Sam Spear
440
14,500.0 1,250.00
0
750.00
12,500.0
0
15 Marjorie Cook
441
4,930.00
425.00
255.00
4,250.00
22 Sam Spear
442
3,010.20
259.50
155.70
2,595.00
24 Marjorie Cook
443
3,758.40
324.00
194.40
3,240.00
33,564.6 2,893.50 1,736.10

0
28,935.0
0
2011
Nov.
31 Totals
(106)
(224)
(225)
(413)

Account
Date
Credited
Explanation
PR
Page 3
Sales
Accts.
Cash
Discoun
t
Rec.
Debit
Debit
Credit
Other
PST
GST
Sales
Accts
Payable
Payabl
e
Credit
Credit
Credit
Credit
753
547
2011
Nov.
2 L.T. Notes
Pay
Note to bank
1 Sales
5
Cash sales
1 Leroy
8 Holmes
Invoice, Nov
8
7,239.00
127.00
7,366.0
0
1 Sam Spear
9
Invoice, Nov
10
14,250.0
0
250.00
14,500.
00
2 Marjorie
5 Cook
Invoice, Nov
15
4,845.00
85.00
4,930.0
0
3 Sales
0
Cash sales
3 Totals
0
25
1
86,250.0
0
86,250.
00
31,517.2
0
41,415.4
8
27,170.
00
2,717.0
0
1,630.
20
35,703.
00
3,570.3
0
2,142.
18
185,516.
68
462.00
26,796.
00
62,873.
00
86,250.
00
6,287.3
0
3,772.
38
(101)
(415)
(106)
(413)
(X)
(224)
(225)
548
754
*Problem 8-9B - Periodic (continued)
PURCHASES JOURNAL
Date
2011
Nov.
1
4
5
11
16
30
Date of
Invoice
Account Credited
Jett Supply/Office Equip.
Defore Industries
Atlas Company/Store Supplies
The Welch Company
Atlas Company/Office Supplies
Totals
Nov 1
Nov 3
Nov 5
Nov 10
Nov 16
Terms
PR
Accts.
Payable
Credit
n/10 EOM 163/ 5,365.72

2/10, n/30
12,084.00
n/10 EOM 125/ 1,081.20
2/10, n/30
3,060.22
n/10 EOM 124/
592.54
22,183.68
(201)
Page 2
Other
GST
Purchases Accounts Recble
Debit
Debit
Debit
11,400.00
2,887.00
14,287.00
(505)
5,062.00
303.72
684.00
1,020.00
61.20
173.22
559.00
33.54
6,641.00 1,255.68
(X)
(108)

Ch.
Date
Page 3
Pur.
Other
GST
Accts.
Cash
Disc.
Accts.
Recble
Payable
Debit
Debit
Debit
No.
Payee
Account Debited
PR
Credit
Credit
1
2
633
Defore
Industries
Defore Industries
11,856.0
0
228.0
0
1
5
634
Payroll
Sales Salaries
Expense
621
8,435.00
635
The Welch Co.
The Welch Company
2011
Nov.
2,496.00
12,084.0
0
8,435.00
48.00
2,544.00
549
9
3
0
3
0
636
Payroll
Totals
Sales Salaries
Expense
621
8,435.0
0
8,435.0
0
31,222.0
0
276.0
0
16,870.0
0
14,628.0
0
(101)
(507)
(X)
(201)
550

GENERAL JOURNAL
Date
2011
Nov. 17
26
PR
Page 2
Credit
Debit
Accounts PayableThe Welch Company ........

GST Payable.................................................
Purchases Returns and Allowances .........
201/
225
506
516.22
Accounts PayableJett Supply ........................

Office Equipment .........................................
GST Payable.................................................
201/
163
225
977.32
29.22
487.00
922.00
55.32
Parts 2 and 4
Marjorie Cook
Explanation
Date
PR
Debit
Credit
Balance
15
S2
4,930.00
4,930.00
24
S2
3,758.40
8,688.40
25
CR3
2011
Nov.
4,930.00
3,758.40
Credit
Balance
Leroy Holmes
Date
Explanation
PR
Debit
S2
7,366.00
2011
Nov.
8
18

CR3
7,366.00
7,366.00
0.00
550
551
Sam Spear
Explanation
Date
PR
Debit
10
S2
14,500.00
19
CR3
22
S2
Credit
Balance
2011
Nov.

14,500.0
0
14,500.0
0
3,010.20
0.00
3,010.20
551
552

Parts 3 and 4
Atlas Company
Explanation
Date
PR
Debit
Credit
Balance
2011
Nov.
P2
1,081.20
1,081.20
16
P2
592.54
1,673.74
Defore Industries
Explanation
Date
PR
Debit
Credit
Balance
12,084.0
0
12,084.0
0
2011
Nov.
P2
12
CD3
12,084.00
0.00
Jett Supply
Explanation
Date
PR
Debit
Credit
Balance
5,365.72
5,365.72
2011
Nov.
P2
26
G2
977.32
4,388.40
The Welch Company

Explanation
Date
PR
Debit
Credit
Balance
3,060.22
3,060.22
2011
Nov.
11

P2
552
553
17
G2
516.22
2,544.00
19
CD3
2,544.00
0.00

553
554

Parts 1 and 4
GENERAL LEDGER
Acct. No. 101
Cash
Date
Explanation
PR
Debit
30
CR3
185,516.6
8
30
CD3
Credit
Balance
2011
Nov.
185,516.6
8
31,222.0
0
Acct. No. 106
Accounts Receivable
Date
Explanation
154,294.6
8
PR
Debit
30
S2
33,564.60
30
CR3
Credit
Balance
2011
Nov.
33,564.60
26,796.0
0
Acct. No. 108
GST Receivable
Date
Explanation
6,768.60
PR
Debit
P2
1,255.68
Credit
Balance
2011
Nov.
30
1,255.68
Acct. No. 119
Date
Explanation
PR
Debit
Credit
Balance
2011
Oct.
31 Beginning balance

210,000.0
554
555
Acct. No. 124
Office Supplies
Date
Explanation
PR
Debit
Credit
Balance
2011
Nov.
30
P2
559.00
559.00
Acct. No. 125
Store Supplies
Date
Explanation
PR
Debit
P2
1,020.00
Credit
Balance
2011
Nov.

1,020.00
555
556

Acct. No. 163
Office Equipment
Date
Explanation
PR
Debit
P2
5,062.00
26
G2
Credit
Balance
2011
Nov.
5,062.00
922.00
Acct. No. 201
Accounts Payable
Date
Explanation
PR
4,140.00
Debit
Credit
Balance
2011
Nov.
17
G2
516.22
(516.22)
26
G2
977.32
(1,493.54)
30
P2
30
CD3
22,183.6
8
14,628.00
6,062.14
PST Payable
Date
Explanation
20,690.14
Acct. No. 224

PR
Debit
Credit
Balance
2011
Nov.
30
S2
2,893.50
2,893.50
30
CR3
6,287.30
9,180.80
Acct. No. 225
GST Payable
Date
Explanation
PR
Debit
Credit
Balance
2011
Nov.
17
G2
29.22
29.22
26
G2
55.32
84.54

556
557
30
S2
1,736.10
1,820.64
30
CR3
3,772.38
5,593.02
Acct. No. 251

Date
Explanation
PR
Debit
Credit
Balance
86,250.0
0
86,250.00
2011
Nov.
CR3
Acct. No. 301
Asha Crystal, Capital

Date
Explanation
PR
Debit
Credit
Balance
2011
Oct.
31 Beginning balance

210,000.0
0
557
558

Acct. No. 413
Sales
Date
Explanation
PR
Debit
Credit
Balance
2011
Nov.
30
S2
28,935.0
0
28,935.00
30
CR3
62,873.0
0
91,808.00
Acct. No. 415
Sales Discounts
Date
Explanation
PR
Debit
Credit
Balance
2011
Nov.
30
CR3
462.00
462.00
Acct. No. 505
Purchases
Date
Explanation
PR
Debit
P2
14,287.00
Credit
Balance
2011
Nov.
30
14,287.00
Acct. No. 506
Purchases Returns and Allowances

Date
Explanation
PR
Debit
Credit
Balance
2011
Nov.
17
G2
487.00
Acct. No. 507
Purchases Discounts
Date
Explanation
PR
487.00
Debit
Credit
Balance
2011

558
559
Nov.
30
CD3
276.00
Date
Explanation
276.00
Acct. No. 621
PR
Debit
Credit
Balance
15
CD3
8,435.00
8,435.00
30
CD3
8,435.00
16,870.00
2011
Nov.

559
560
*Problem 8-9B - Periodic (concluded)

Part 5
CRYSTAL COMPANY
Trial Balance
November 30, 2011
Account ............................................... Debit Credit

Cash ........................................................... $154,294.68
Accounts receivable .................................... 6,768.60
GST receivable ........................................... 1,255.68
Merchandise inventory ................................ 210,000.00
Office supplies ............................................
559.00
Store supplies ............................................. 1,020.00
Office equipment......................................... 4,140.00
PST Payable ...............................................
GST Payable ..............................................
Long-term notes payable ............................
Asha Crystal, capital ...................................
Sales...........................................................
Sales discounts...........................................
462.00
Purchases................................................... 14,287.00
Purchases returns and allowances .............
Purchases discounts ...................................
Sales salaries expense ............................... 16,870.00
Totals .......................................................... $409,656.96
$ 6,062.14
9,180.80
5,593.02
86,250.00
210,000.00
91,808.00
487.00
276.00
$409,656.96
CRYSTAL COMPANY
November 30, 2011
Marjorie Cook ............................................
$3,758.40
Sam Spear ....................................................
3,010.20
$6,768.60
CRYSTAL COMPANY
November 30, 2011
Atlas Company ...........................................
$1,673.74
Jett Supply ...................................................
4,388.40
Total accounts payable ...........................
$6,062.14

560
561


Page X
Sales Journal
Date
Account Debited
Invoic
e No.
PR
A/R
Dr
PST
Payable
CR
GST
Payable
COGS DR
Sales Cr
CR
CR
2011
May 3 Ajax Holdings
30 Allendale Arena
361
6,840
480
360
6,000
3,200
363
4,218
296
222
3,700
1,900
Date Account Credited Explanatio PR

n
Cash
DR
Sales
Disc
Dr
Page X
Other
A/R CR
Account
Sales
s CR
CR
PST
GST
COGS/DR
Payable Payabl Merchandise
CR
e CR Inventory/CR
2011
May John
1 Capital
Trenton,
9,000
12 A/R Ajax
6,780
13 Sales
15 Bank
Payable
Inv #362
Loan
2,052
5,000
9,000
60 6,840
1,800
144
5,000
108
1,100
761
562
Purchases Journal
Date
Account Credited
Terms
PR
Page X
Merchandise
Inventory
DR
A/P CR
Other
Accounts
DR
GST
Recble DR
2011
Moore Corporation/Off.
Supplies
London Company
16
May 7
n/30
3,392
1/15,n
/30
7,632
3,200
7,200
192
432

Date
Ch #
Account Debited
PR
Cash CR
May 5
83
1,696
30
84
A/P
Corporation
3,392
Merchandis
e
Inventory
CR
Page X
Other
Accounts DR
GST
Recble DR
1,600
96
A/P DR
2011
Moore
3,392
563

762
SALES JOURNAL
Date
2011
May
Date
2011
May 1
12
13
15
Date
2011
May
3 Ajax Holdings
30 Allendale Arena
Account Credited
John Trenton, Capital
A/R Ajax
Sales
Bank Loan Payable
Explanation
Inv #362
7 Moore Corporation/Off. Supplies
Ch.
No.
Payee
PR
361
363
Account Credited
16 London Company
Date
Invoice
Number
Account Debited
PR
Cash
Debit
9,000
6,780
2,052
5,000
Date of
Invoice
Page X
Accts.
Rec.
Debit
PST
Payable
Credit
6,840
4,218
GST
Payable
Credit
480
296

Sales
Accts.
Discount
Rec.
Sales
Debit
Credit
Credit
Sales
Credit
360
222
6,000
3,700
Page X
Other
PST
Accts.
Payable
Credit
Credit
GST
Payable
Credit
9,000
60
6,840
1,800
144
108
5,000
PURCHASES JOURNAL
Accts.
Payable
Terms
PR
Credit
Page X
Purchases
Debit
May 7
N/30
3,392
May 16
1/15,n/30
7,632
7,200

Cash
Pur. Disc.
Account Debited
PR
Credit
Credit
PageX
Other Accts.
Debit
Other
Accounts
Debit
3,200
GST
Recble
Debit
192
432
GST Recble
Debit
Accts. Payable
Debit
564
2011
May 5 83
30 84
Purchases
1,696
A/P Moore
Corporation
Lexor Suppliers
3,424
1,600
96
3,424
565

ANALYTICAL & REVIEW PROBLEMS

A&R Problem 8-1
Sales Journal
Page 1
COGS Dr.
Date
Account Debited
Invoice
No.
A/R Dr.
PR
Sales Cr.
PR
Cr.
2011
210
1,125.00
465.75
18 Thorhild Co-op
211
2,250.00
1,090.50
24 Boyle Grocery
212
750.00
353.00
Oct. 9 Kitchen Club
Purchases Journal
Date
Account
Credited
Date of
Invoice
Page 1
Merchandise
Inventory
Terms
PR
A/P CR
PR
DR
2011
Oct. 3 Arnold Brothers Oct. 3
2/10,
n/30
750.00
750.00
15 Arnold Brothers Oct. 15
2/10,
n/30
1,550.00
1,550.00
Office
Supplies
Dr.
Other
Accounts
DR
763
566
31 Arnold Brothers Oct. 31
2/10,
n/30
600.00
600.00

Date
Ch #
Payee
Account Debited
PR
Cash Cr.
Page 1
Merchandise
Other
Inventory Accounts Dr.
PR
A/P Dr.
Cr.
2011
Oct. 19 101 Arnold Brothers A/P Arnold Brothers
600.00
23 102 Arnold Brothers A/P Arnold Brothers
1,519.00
NOTE: An additional PR column has been added to the Sales and Purchases Journals
to facilitate the referencing of inventory entries into the inventory subledger.
600.00
31.00
1,550.0
0
567
A&R Problem 8-1 (concluded)

General Journal
Date
Page: G1
PR
Debit
Credit
2011
Oct.
150.00
Accounts Payable Arnold Brothers ......................................
Merchandise Inventory .......................
150.00
To record the return of 20 units.
Inventory Subledger Record Weighted-Average Perpetual
Inventory Balance
Date
PR
Purchases
Units
Unit
Cost
Sales (at cost)
Unit
Total Cost
s
Unit
Cost
(a)
Total
Cost
(b)
(a)
Averag
Total e Cost/
Units Unit
(b)
Total
Cost
Oct.
1
Beginning inventory
85 @ $5.0 = $
0
85 $5.00 $
25.00
425.0
0
85
3 P1 100 @ $7.5 = $
0
100 @ 7.5 =
0
50.00
185 $6.35 $ 1,175.0
0
4 G1
20 @ $7.5 =
0
$
150.00
9 S1
75 @ $6.21 = $

465.7
5
425.
00
750.00
185
$ 1,175.
00
185
$ 1,175.
00
20 @ 7.5 =
0
165 $6.21 $ 1,025.0
0
150.00
165
$ 1,025.
00
165
$ 1,025.
00
75 @ 6.2 =
1
465.75
567
568
90 $6.21 $
559.2
5
15 P1 200 @ $7.7 = $ 1,550.0

5
0
15 @ $7.27 = $ 1,090.5
0
0
31.00
140 $7.06 $
50 @ $7.06 = $
24 S1
75 @ $8.0 = $
0
987.7
5
353.0
0
634.7
5
600.0
0
440
559.
25
$3,144.00 27
5
Cost of goods available for sale Cost of goods sold

=
@ 7.7 =
5
1,550.00
290
$ 2,109.
25
290
$ 2,109.
25
140
$ 1,018.
75
140
$ 1,018.
75
31.00
140
987.
75
140
987.
75
$1,909.25 165
+
353.00
90
634.
75
90
634.
75
75 @ 8.0 =
0
165 $7.48 $ 1,234.7
5
Total
90
50 @ 7.0 =
6
90 $7.06 $
31 P1
559.
25
@ 7.2 =
150
7
1,090.50
140 $7.28 $ 1,018.7
5
23 G1
200
290 $7.27 $ 2,109.2
5
18 S1
90
165
600.00
$ 1,234.
75
$1,234.75
Ending inventory
Note: An additional PR column has been added to the Inventory Subledger Record to facilitate referencing of inventory
entries.

568
569

569
570
Ethics Challenge
EC 81
1. Independence in fact means that the auditor maintains an objective point of view
of the client. Independence in appearance means that a third party viewing the
relationship between the auditor/client would have no reason to believe that the
auditor is not independent of the client.
2. While auditors are hired by their clients to perform audits, auditors also have a
responsibility to the public. In our society auditors provide credibility to financial
reporting situations by offering professional audit opinions about companies
financial statements. While it is sometimes difficult to be responsible to clients as
well as the public, auditors must maintain their independence to keep the public
trust.
3. Since John Harris is a sole practitioner it is questionable whether he can consult on
the clients accounting system and then remain objective in subsequent years
when he performs the audit of the company. Large firms often separate consulting
and auditing engagements for the same client by having staff stationed in two
different geographic branches of the firm do the work. Or a large local firm might
be able to perform consulting and auditing for the same client by assigning
different personnel to the two jobs. In this scenario John would need to do both
jobs himself, making it difficult to maintain independence in fact and appearance.

570
571
Focus on Financial Statements

FFS 8-1
Single-step income statement:
MANGO DESIGNS
Income Statement
For Month Ended June 30, 2011
Revenues:
Net sales ............................................................

Expenses:
Cost of goods sold ............................................
Sales salaries expense .....................................
Office supplies expense ...................................
Advertising expense ..........................................
Amortization expense, store equipment ...........
Interest expense ................................................
Total expenses ...................................................
Net income ...............................................................

$211,404
$134,750
42,000
13,400
600
500
200
191,450
$ 19,954
571
572
FFS 8-1 (concluded)

MANGO DESIGNS
For Month Ended June 30, 2011
Tom Mandalay, capital, June 1 .........

Add: Owner investment .....................
-0-
75,000
Net income ...................................
19,954
Tom Mandalay, capital, June 30 ........
$94,954
MANGO DESIGNS
Balance Sheet
June 30, 2011
Assets
Current assets:
Cash .............................................................................
Accounts receivable....................................................
Merchandise inventory ...............................................
Office supplies ............................................................
Total current assets ...................................................
Store equipment ..........................................................
Less: Accumulated amortization .........................
Total assets .......................................................................
$156,304
64,000
36,750
4,600
$32,000
500
$261,654
31,500
$293,154
Liabilities
Interest payable ...........................................................
Total current liabilities ................................................
Long-term liabilities:
Notes payable ..............................................................
Total liabilities ................................................................
Owners Equity
Tom Mandalay, capital ...............................................

Total liabilities and owners equity ..................................
$148,000
200
$148,200
50,000
$198,200
94,954
$293,154
Analysis Component
Mango Designs operates under a perpetual inventory system because the special
journals include the Cost of Goods Sold account.

572
573
FFS 8-2
Danier Leathers June 25, 2005, balance sheet includes Accounts receivable of $594
(thousand), about 0.7% of total assets (calculated as $594/$83,365 x 100). Although
these accounts receivable are not significant in total, they represent amounts owed by
various customers to Danier so it would help decision makers better monitor collection if
the details of individual balances owed, by whom, and dates due were maintained in an
accounts receivable subledger.
The same logic would apply regarding the June 25, 2005, Accounts payable and accrued
liabilities balance of $8,170 (thousand), about 10% of total assets (calculated as
$8,170/$83,365 x 100). Since these accounts payable are significant in total and
represent amounts owed to various creditors, it would help decision makers better
manage payments if the details of individual balances owed, by whom, credit terms, and
dates due were maintained in an accounts payable subledger.
The June 25, 2005, balance sheet shows inventories of $29,031 (thousand), about 34.82%
of total assets (calculated as $29,031/$83,365 x 100). Because Danier sells clothing and
accessories, the inventory balance is significant and represents a large variety of items. It
would help decision makers better manage inventory if the details of unit costs, units
sold, units purchased, and units on hand along with any returns and/or allowances were
detailed in an inventory subledger.

573
574
Critical Thinking Question

CT 8-1
Note to instructor: Student responses will vary therefore the answer here is only suggested
and not inclusive of all possibilities; it is presented in point form for brevity.
Problem(s):
Detailed information regarding mining assets is required but is not readily available
given the current accounting information system
Goal(s)*:
To ensure the accounting information system is maintained in such a way that

reasonable internal requests for information can be fulfilled efficiently and
effectively
Assumption(s)/Principle(s):
That the computer system in place at Northern Outposts can accommodate special
purpose reports
The disclosure principle requires that anything of significance be reported
Facts:
as presented
Conclusion(s)/Consequence(s):
Internal/external reporting requirements need to be identified and matched against what

is currently being provided by the accounting information system gaps need to be
identified and resolved to ensure that decisions dependent on such reports can be done
efficiently and effectively
*The goal is highly dependent on perspective.

574
575

770
COMPREHENSIVE PROBLEMS
Comprehensive Problem 8.1Alpine Company (150 minutes)
SALES JOURNAL
Page 2
Invoice
Date
Account Debited
A/R Dr.
COGS Dr.
Sales Cr.
Merch. Inv.
Cr
Numbe
r
PR
2 Essex Company
8785
6,100
3,660
16 Essex Company
8786
3,990
2,394
22 Oscar Services
8787
6,850
4,110
26 Deaver Corp.
8788
2011
Ma
y
31 Totals
14,210
31,150
(106/4
13)

Account
Date
Credited
Explanation
PR
8,526
18,690
(502/119)
Other
Page 2
Sales
Accts.
COGS Dr.
Cash
Disc.
Rec.
Sales
Accts.
Merch.
Inv.
Debit
Debit
Credit
Credit
Credit
Credit
576
2011
May
5 Nabors, Inc.*
Sale of Apr. 28
9 Store
Supplies
Sold store supplies
1 Essex
1 Company
Sale of May 2
1 Sales
5
Cash sales, May 115
3 Oscar
0 Services
Sale of May 22
3 Sales
1
Cash sales, May 1631
3 Totals
1
*4,725 175 = 4,550; 4,550 x 2% = 91 discount
12
5
4,459
91
4,550
350
5,978
350
122
6,100
59,220
6,713
137
59,220
35,532
66,052
39,630
6,850
66,05
2
142,77
2
350
17,500
125,272
350
75,162
(101)
(414)
(106)
(413)
(X)
(502/11
9)
577
Comprehensive Problem 8.1Alpine Company
(continued)
PURCHASES JOURNAL
Page 2
Date of
Date
Account Credited
Invoic
e
Accounts
Merchandi
se
Payable
Inventory Supplies Account

s
Terms
PR
Credit
Debit
May
04
n/10
EOM
125/
37,729
37,072
10 Off. Equip./Thompson Supp.
May
10
n/10
EOM
163/
4,074
11 Gale, Inc.
May
10
2/10,
n/30
8,800
8,800
17 Chandler Corp.
May
14
2/10,
n/60
13,650
13,650
24 Store Supp./Thompson Supp.
May
24
n/10
EOM
125/
9,030
8,120
25 Parkay Products
May
23
2/10,
n/30
3,080
3,080
76,363
(201)
Office
Other
Debit
Debit
83
574
2011
May
31 Totals
4,074
280
630
70,722
363
5,278
(119)
(124)
(X)
771
CASH DISBURSEMENTS
578
JOURNAL
Ch.
Date
No.
Payee
Account Debited
PR
Page 2
Merchandis Other
e
Accts.
Cash
Inventory
Accts.
Payable
Credit
Credit
Debit
Debit
2011
May
1 3410 S&M Mgmt. Co.
8 3411 Parkay
Products
15 3412 Payroll
Rent Expense, Selling

Space
642
Rent Expense, Office

Space
641
3,710
6,174
Parkay Products
2,968
621
Office Salaries Expense
620
8,470
742
126
6,300
5,320
3,150
19 3413 Gale, Inc.
Gale, Inc.
8,624
176
8,800
23 3414 Chandler Corp.
Chandler Corp.
13,37
7
273
13,650
26 3415 Trinity Power
Utilities Expense
690
1,283
1,283
29 3416 Clint Barry
C. Barry, Withdrawal
302
7,000
7,000
30 3417 Payroll
621
620
31
Totals
5,320
3,150
8,470
57,10
8
575
28,933
(119)
(X)
28,750
579
(101)
(201)
580
Comprehensive Problem 8.1Alpine Company (continued)

Date
2011
May
GENERAL JOURNAL
PR
Debit
Sales Returns and Allowances ......................... 415

Accounts ReceivableNabors, Inc........... 106/
175
Accounts PayableParkay Products .............. 201/

Merchandise Inventory .............................. 119
798
12
Accounts PayableThompson Supply Co. ..... 201/

Office Equipment........................................ 163
854
Page 3
Credit
175
798
854
Adjusting entries:
May 31
Insurance Expense ............................................

Prepaid Insurance ......................................
637
128
553
31
Store Supplies Expense ....................................

Store Supplies ............................................
651
125
669
31
Office Supplies Expense ...................................

Office Supplies ...........................................
650
124
289
31
Amortization Expense, Store Equipment .........

Accumulated Amort., Store Equipment ....
613
166
567
31
Amortization Expense, Office Equipment ........

Accumulated Amort., Office Equipment ...
612
164
329
31

502
119
4,577

553
669
289
567
329
4,577
580
581

Closing entries:
Page 4
2011
May 31
Sales ................................................................
Income Summary ................................
413
901
156,422
31
Income Summary ............................................

Sales Discounts.......................................
Sales Returns and Allowances...............
Cost of Goods Sold .................................
Amort. Expense, Office Equipment ........
Amort. Expense, Store Equipment .........
Office Salaries Expense ..........................
Sales Salaries Expense...........................
Insurance Expense ..................................
Rent Expense, Office Space ...................
Rent Expense, Selling Space..................
Office Supplies Expense .........................
Store Supplies Expense..........................
Utilities Expense......................................
901
414
415
502
612
613
620
621
637
641
642
650
651
690
123,294
31
Income Summary ............................................

Clint Barry, Capital ..................................
901
301
33,128
31
Clint Barry, Capital .........................................

Clint Barry, Withdrawals .........................
301
302
7,000

156,422
350
175
98,429
329
567
6,300
10,640
553
742
2,968
289
669
1,283
33,128
7,000
581
582

GENERAL LEDGER
Cash
Explanation
Date
Acct. No. 101
PR
Debit
Credit
Balance
2011
Apr.
30 Balance
50,247
May
31
R2
31
CD2
142,772
193,019
57,108
Accounts Receivable
Explanation
Date
135,911
Acct. No. 106

PR
Debit
Credit
Balance
2011
Apr.
May
30 Balance
4,725
G3
31
S2
31
CR2
Explanation
Date
175
31,150
4,550
35,700
17,500
18,200
Acct. No. 119
PR
Debit
Credit
Balance
2011
Apr.
May
30 Balance
220,080
G3
798
219,282
31
S2
18,690
200,592
31
P2
31
CR2
75,162
196,152
31
CD2
575
195,577

70,722
271,314
582
583
31
G3
4,577
Acct. No. 124
Office Supplies
Explanation
Date
191,000
PR
Debit
Credit
Balance
2011
Apr.
30 Balance
430
May
31
P2
31
G3
363
793
289
Acct. No. 125
Store Supplies
Date
Explanation
504
PR
Debit
Credit
Balance
2011
Apr.
May
30 Balance
2,447
P2
CR2
24
P2
31
G3
574
3,021
350
630
2,671
3,301
669
2,632
Comprehensive Problem 8-1Alpine Company (continued)

Prepaid Insurance
Date
Explanation
Acct. No. 128
PR
Debit
Credit
Balance
2011
Apr.
30 Balance
May
31
Date
3,318
G3
Office Equipment
Explanation

553
2,765
Acct. No. 163
PR
Debit
Credit
Balance
583
584
2011
Apr.
30 Balance
22,470
May
10
P2
12
G3
Accumulated Amortization, Office Equipment

Explanation
PR
Date
4,074
26,544
854
25,690
Acct. No. 164
Debit
Credit
Balance
2011
Apr.
30 Balance
May
31
9,898
G3
Store Equipment
Explanation
Date
329
10,227
Acct. No. 165
PR
Debit
Credit
Balance
2011
Apr.
30 Balance
38,920

Explanation
Date
PR
Acct. No. 166

Debit
Credit
Balance
2011
Apr.
30 Balance
May
31
17,556
G3
567
Acct. No. 201
Accounts Payable
Explanation
Date
18,123
PR
Debit
Credit
Balance
2011
Apr.
May
30 Balance
3

7,098
G3
798
6,300
584
585
12
G3
31
P2
31
CD2

854
5,446
76,363
28,750
81,809
53,059
585
586

Clint Barry, Capital
Explanation
Date
Acct. No. 301
PR
Debit
Credit
Balance
2011
Apr.
30 Balance
308,085
May
31
G4
31
G4
Clint Barry, Withdrawals

Explanation
Date
33,128
7,000
341,213
334,213
Acct. No. 302
PR
Debit
Credit
Balance
2011
May
29
CD2
31
G4
7,000
7,000
7,000
Acct. No. 413
Sales
Explanation
Date
PR
Debit
Credit
Balance
2011
May
31
S2
31
CR2
31
G4
156,422
PR
Debit
Sales Discounts
Explanation
Date
31,150
31,150
125,272
156,422
0
Acct. No. 414
Credit
Balance
2011
May
Date
31
CR2
31
G4

Explanation

350
350
350
Acct. No. 415
PR
Debit
Credit
Balance
586
587
2011
May
G3
31
G4
Date
Cost of Goods Sold

Explanation
175
175
175
Acct. No. 502
PR
Debit
Credit
Balance
2011
May
31
S2
18,690
18,690
31
CR2
75,162
93,852
31
G3
4,577
98,429
31
G4

98,429
587
588

Amortization Expense, Office Equipment
Explanation
PR
Date
Acct. No. 612
Debit
Credit
Balance
2011
May
31
G3
31
G4
329
329
329
Amortization Expense, Store Equipment
Date
Explanation
PR
0
Acct. No. 613
Debit
Credit
Balance
2011
May
31
G3
31
G4

Explanation
Date
567
567
567
Acct. No. 620
PR
Debit
Credit
Balance
2011
May
15
CD2
3,150
3,150
30
CD2
3,150
6,300
31
G4

Explanation
Date
6,300
Acct. No. 621
PR
Debit
Credit
Balance
2011
May
Date
15
CD2
5,320
5,320
30
CD2
5,320
10,640
31
G4
Insurance Expense
Explanation

10,640
Acct. No. 637
PR
Debit
Credit
Balance
588
589
2011
May
31
G3
31
G4
553
553
553
Rent Expense, Office Space
Date
Explanation
Acct. No. 641
PR
Debit
Credit
Balance
2011
May
CD2
31
742
G4
742
742
Rent Expense, Selling Space
Date
Explanation
Acct. No. 642
PR
Debit
CD2
2,968
Credit
Balance
2011
May
1
31
G4
2,968
2,968

Office Supplies Expense
Date
Explanation
Acct. No. 650
PR
Debit
31
G3
289
31
G4
Credit
Balance
2011
May
289
289
Acct. No. 651
Store Supplies Expense

Explanation
Date
PR
Debit
Credit
Balance
2011
May
31
G3
31
G4

669
669
669
589
590
Utilities Expense
Explanation
Date
Acct. No. 690
PR
Debit
Credit
Balance
2011
May
26
CD2
31
G4
1,283
1,283
1,283
Acct. No. 901
Income Summary
Explanation
Date
PR
Debit
Credit
Balance
2011
May
31
G4
156,422
156,422
31
G4
123,294
33,128
31
G4
33,128
Deaver Corp.
Explanation
Date
PR
Debit
S2
14,210
PR
Debit
Credit
Balance
2011
May
26
14,210
Essex Company
Explanation
Date
Credit
Balance
2011
May
S2
11
CR2
16
S2

6,100
6,100
6,100
3,990
0
3,990
590
591

591
592

Nabors, Inc.
Explanation
Date
PR
Debit
Credit
Balance
2011
Apr.
28
S1
May
G3
CR2
4,725
4,725
175
4,550
4,550
Oscar Services
Explanation
Date
PR
Debit
Credit
Balance
2011
May
22
S2
30
CR2
6,850
6,850
6,850
Chandler Corp.
Date
Explanation
PR
Debit
Credit
Balance
2011
May
17
P2
13,650
23
CD2
13,650
PR
Debit
13,650
0
Gale, Inc.
Date
Explanation
Credit
Balance
2011
May
11

P2
8,800
8,800
592
593
19
CD2
8,800
Parkay Products
Explanation
Date
PR
Debit
Credit
Balance
2011
Apr.
29
P2
May
G3
CD2
25
7,098
7,098
798
6,300
6,300
P2
3,080
3,080
Thompson Supply Co.
Date
Explanation
PR
Debit
Credit
Balance
2011
May
P2
37,729
37,729
10
P2
4,074
41,803
12
G3
24
P2

854
40,949
9,030
49,979
593
594

ALPINE COMPANY
Work Sheet
For Month Ended May 31, 2011
Balance Sheet
and
Trial Balance Adjustments
Income
Statement of
Statement
Owners Equity
Debit Credit Debit Credit Debit Credit Debit Credit

Cash .............................................. 135,91
1
135,91
1
Accounts receivable ............... 18,200
18,200
Merchandise inventory ......... 195,57

7
(f)
4,577
191,00
0
Office supplies ..........................
793
(c)
289
504
Store supplies ...........................
3,301
(b)
669
2,632
Prepaid insurance ..................
3,318
(a)
553
2,765
Office equipment
25,690
Accumulated Amort., office

equip.
25,690
9,898
(e)
329
Store equipment ...................... 38,920
10,227
38,920
Accumulated Amort., store

equip.
17,556
Accounts payable ....................
53,059
53,059
Clint Barry, Capital .................
308,08
5
308,08
5

(d)
567
18,123
594
595
Clint Barry, Withdrawals .....
7,000
Sales .............................................
7,000
156,42
2
156,42
2
Sales discounts.........................
350
350

.......................................................
175
175
Cost of goods sold.................... 93,852
(f)
4,577
Amort. expense, office

equipment
(e)
Amort. expense, store

equipment
(d)
Office salaries expense..........
98,429
329
329
567
567
6,300
6,300
Sales salaries expense ........... 10,640
10,640
Insurance expense ..................
(a)
553
553
Rent expense, office space ...
742
742
Rent expense, selling space .
2,968
2,968
Office supplies expense ...... .
(c)
Store supplies expense .........
(b)
Utilities expense ......................
289
669
1,283
Totals ...................................... 545,02 545,02 6,984

0
0
Net income.................................
Totals ......................................

289
669
1,283
6,984 123,29 156,42 422,62 389,49
4
2
2
4
33,12
8
33,128
156,42 156,42 422,62 422,62

2
2
2
2
595
596
ALPINE COMPANY
Income Statement
Revenue:
Sales ...................................................................
Less: Sales discounts .................................
Sales returns and allowances ...........
Net sales ............................................................
Cost of goods sold...................................................
Gross profit on sales ..............................................
Operating expenses:
Selling expenses:
Sales salaries expense ................................
Rent expense, selling space .......................
Store supplies expense ...............................
Total selling expenses .................................
Office salaries expense ................................
Rent expense, office space .........................
Insurance expense .......................................
Amortization expense, office equipment ....
Office supplies expense ..............................
Total operating expenses ..................................
Net income ...............................................................

$10,640
2,968
669
567
$6,300
1,283
742
553
329
289
350
175
$156,422
525
$155,897
98,429
$ 57,468
$ 14,844
9,496
24,340
$ 33,128
596
597
Comprehensive Problem 8.1 Alpine Company (continued)

ALPINE COMPANY
Clint Barry, Capital, April 30 ..............
$308,085
Add: Net income .....................................
33,128
Total ...........................................................
$341,213
Less: Withdrawals..................................
7,000
Clint Barry, Capital, May 31 ................
$334,213
ALPINE COMPANY
Balance Sheet
May 31, 2011
Assets
Current assets:
Cash .............................................................................
Accounts receivable....................................................
Merchandise inventory ...............................................
Office supplies ............................................................
Store supplies .............................................................
Prepaid insurance ......................................................
Total current assets ...................................................
Office equipment....................................................
Less: Accumulated amortization .....................
Store equipment.....................................................
Less: Accumulated amortization .....................
Total property, plant and equipment .........................
Total assets .......................................................................
$135,911
18,200
191,000
504
2,632
2,765
$25,690
10,227
$38,920
18,123
$351,012
$15,463
20,797
36,260
$387,272
Liabilities
Owners Equity
Clint Barry, Capital .....................................................


$ 53,059
334,213
$387,272
597
Comprehensive Problem 8.1Alpine Company (concluded)

ALPINE COMPANY
May 31, 2011
Account............................. Debit Credit

Cash ........................................................... $135,911
18,200
Merchandise inventory ................................ 191,000
Office supplies ............................................
504
Store supplies .............................................
2,632
Prepaid insurance .......................................
2,765
Office equipment.........................................
25,690
Accumulated amortization, office equipment
Store equipment .........................................
38,920
Accumulated amortization, store equipment
Clint Barry, Capital ......................................
Totals .......................................................... $415,622
$ 10,227
53,059
334,213
$415,622
18,123
ALPINE COMPANY
May 31, 2011
Deaver Corp. ...................................................
$14,210
Essex Company ..............................................
3,990
Total accounts receivable ..........................
$18,200
ALPINE COMPANY
May 31, 2011
Parkay Products ...........................................
$ 3,080
Thompson Supply Co. .................................
49,979

598

$53,059
599

784
*Comprehensive Problem 8.2Alpine Company (150 minutes)

SALES JOURNAL
Page 2
Invoice
Date
Account Debited
A/R Dr.
Numbe
r
PR
Sales Cr.
2 Essex Company
8785
6,100
16 Essex Company
8786
3,990
22 Oscar Services
8787
6,850
26 Deaver Corp.
8788
14,210
2011
Ma
y
31
31,150
(106/41
3)
Accts.
Cash
Disc.
Rec.
Sales
Accts.
PR
Debit
Debit
Credit
Credit
Credit
4,459
91
4,550
Account
Date
Credited
Explanation
2011
May
5 Nabors, Inc.
Sale of Apr. 28
Page 2
Sales
Other
9 Store
Supplies
Sold store supplies
1 Essex
1 Company
Sale of May 2
5,978
1 Sales
5
Cash sales, May 115
59,220
3 Oscar
0 Services
Sale of May 22
6,713
3 Sales
1
Cash sales, May 1631
66,05
2
3 Totals
1
12
5
350
142,77
2
(101)
350
122
6,100
59,220
137
6,850
66,052
350
17,500
125,27
2
350
(414)
(106)
(413)
(X)

*Comprehensive Problem 8.2Alpine Company (continued)
PURCHASES JOURNAL
Page 2
Accounts
Date
of
Date
Account Credited
Invoic
e
Office
Other
Payable
Purchases
Supplie
s
Accounts
Debit
Debit
83
574
Terms
PR
Credit
Debit
May
04
n/10 eom
125/
37,729
37,072
10 Off. Equip./Thompson Supp.
May
10
n/10
eom
163/
4,074
11 Gale, Inc.
May
10
2/10,
n/30
8,800
8,800
17 Chandler Corp.
May
14
2/10,
n/60
13,650
13,650
May
24
n/10
eom
125/
9,030
8,120
25 Parkay Products
May
23
2/10,
n/30
3,080
3,080
76,363
70,722
(201)
(505)
2011
May
31 Totals
4,074
280
630
363
5,278
(X)
(124)
785

Ch.
Date
No.
Payee
Page 2
Purchas
e
Other
Cash
Discoun
t
Accts.
Payable
Credit
Credit
Debit
Debit
Account Debited
PR
Rent Expense, Selling

Space
642
Rent Expense, Office

Space
641
3,710
6,174
Accts.
2011
May
1 341
0
S&M Mgmt.
Co.
2,968
8 341
1
Parkay
Products
Parkay Products
1 341
5 2
Payroll
621
620
8,470
742
126
6,300
5,320
3,150
1 341
9 3
Gale, Inc.
Gale, Inc.
8,624
176
8,800
2 341
3 4
Chandler
Corp.
Chandler Corp.
13,377
273
13,650
2 341
6 5
Trinity Power
Utilities Expense
690
1,283
1,283
2 341
9 6
Clint Barry
C. Barry, Withdrawal
302
7,000
7,000
3 341
0 7
Payroll
621
5,320

3
1
Totals
620
8,470
57,108
(101)
3,150
575
28,933
28,750
(119)
(X)
(201)

Date
2011
May
GENERAL JOURNAL
PR
Debit
Sales Returns and Allowances ......................... 415

Accounts ReceivableNabors, Inc........... 106/
175
Accounts PayableParkay Products .............. 201/

Purchase Returns and Allowances ........... 507
798
12
Accounts PayableThompson Supply Co. ..... 201/

Office Equipment........................................ 163
854
Page 3
Credit
175
798
854
Adjusting entries:
May 31
Insurance Expense ............................................

Prepaid Insurance ......................................
637
128
553
31
Store Supplies Expense ....................................

Store Supplies ............................................
651
125
669
31
Office Supplies Expense ...................................

Office Supplies ...........................................
650
124
289
31
Amortization Expense, Store Equipment .........

Accumulated Amort., Store Equipment ....
613
166
567
31
Amortization Expense, Office Equipment ........

Accumulated Amort., Office Equipment ...
612
164
329

553
669
289
567
329
605

Closing entries:
2011
May 31
Page 4

Sales ................................................................
Purchase Discounts .......................................
Purchase Returns and Allowances ...............
Income Summary.....................................
119
413
506
507
901
191,000
156,422
575
798
31
Income Summary ............................................

Merchandise Inventory............................
Sales Discounts .......................................
Sales Returns and Allowances ...............
Purchases ................................................
Amort. Expense, Office Equipment ........
Amort. Expense, Store Equipment .........
Office Salaries Expense ..........................
Sales Salaries Expense ...........................
Insurance Expense ..................................
Rent Expense, Office Space ...................
Rent Expense, Selling Space ..................
Office Supplies Expense .........................
Store Supplies Expense ..........................
Utilities Expense ......................................
901
119
414
415
505
612
613
620
621
637
641
642
650
651
690
315,667
31
Income Summary ............................................

Clint Barry, Capital ..................................
901
301
33,128
31
Clint Barry, Capital..........................................

Clint Barry, Withdrawals .........................
301
302
7,000

348,795
220,080
350
175
70,722
329
567
6,300
10,640
553
742
2,968
289
669
1,283
33,128
7,000
606

GENERAL LEDGER
Cash
Explanation
Date
Acct. No. 101
PR
Debit
Credit
Balance
2011
Apr.
30 Balance
50,247
May
31
R2
31
CD2
142,772
193,019
57,108
Accounts Receivable
Explanation
Date
135,911
Acct. No. 106

PR
Debit
Credit
Balance
2011
Apr.
May
30 Balance
4,725
G3
31
S2
31
CR2
Explanation
Date
175
31,150
4,550
35,700
17,500
18,200
Acct. No. 119
PR
Debit
Credit
Balance
2011
Apr.
30 Balance
220,080
May
31
G4
31
G4
220,080
191,000
191,000
Acct. No. 124
Office Supplies
Date
Explanation

PR
Debit
Credit
Balance
607
2011
Apr.
30 Balance
430
May
31
P2
31
G3
363
793
289
Acct. No. 125
Store Supplies
Date
Explanation
504
PR
Debit
Credit
Balance
2011
Apr.
May
30 Balance
2,447
P2
CR2
24
P2
31
G3

574
3,021
350
630
2,671
3,301
669
2,632
608

Prepaid Insurance
Date
Explanation
Acct. No. 128
PR
Debit
Credit
Balance
2011
Apr.
30 Balance
May
31
3,318
G3
Office Equipment
Explanation
Date
553
2,765
Acct. No. 163
PR
Debit
Credit
Balance
2011
Apr.
30 Balance
22,470
May
10
P2
12
G3
Accumulated Amortization, Office Equipment

Explanation
PR
Date
4,074
26,544
854
25,690
Acct. No. 164
Debit
Credit
Balance
2011
Apr.
30 Balance
May
31
9,898
G3
Store Equipment
Explanation
Date
329
10,227
Acct. No. 165
PR
Debit
Credit
Balance
2011
Apr.
30 Balance
38,920
Date
Explanation
PR
Acct. No. 166

Debit
Credit
Balance
2011

609
Apr.
30 Balance
May
31
17,556
G3
567
Acct. No. 201
Accounts Payable
Explanation
Date
18,123
PR
Debit
Credit
Balance
2011
Apr.
May
30 Balance
7,098
G3
798
6,300
12
G3
854
5,446
31
P2
31
CD2

76,363
28,750
81,809
53,059
610

Clint Barry, Capital
Explanation
Date
Acct. No. 301
PR
Debit
Credit
Balance
2011
Apr.
30 Balance
308,085
May
31
G4
31
G4
Clint Barry, Withdrawals

Explanation
Date
33,128
7,000
341,213
334,213
Acct. No. 302
PR
Debit
Credit
Balance
2011
May
29
CD2
31
G4
Sales
Explanation
Date
7,000
7,000
7,000
Acct. No. 413

PR
Debit
Credit
Balance
2011
May
31
S2
31
CR2
31
G4
156,422
PR
Debit
Sales Discounts
Explanation
Date
31,150
31,150
125,272
156,422
0
Acct. No. 414
Credit
Balance
2011
May
Date
31
CR2
31
G4

Explanation

350
350
350
Acct. No. 415
PR
Debit
Credit
Balance
611
2011
May
G3
31
G4
Date
Purchases
Explanation
175
175
175
Acct. No. 505
PR
Debit
Credit
Balance
2011
May
31
P2
31
G4

70,722
70,722
70,722
612

Purchase Discounts
Explanation
Date
Acct. No. 506
PR
Debit
Credit
Balance
2011
May
31
CD2
31
G4

Explanation
PR
Date
575
575
575
Acct. No. 507
Debit
Credit
Balance
2011
May
CD2
31
G4
Amortization Expense, Office Equipment

Explanation
PR
Date
798
798
798
Acct. No. 612
Debit
Credit
Balance
2011
May
31
G3
31
G4
329
329
329
Amortization Expense, Store Equipment
Date
Explanation
PR
0
Acct. No. 613
Debit
Credit
Balance
2011
May
31
G3
31
G4

Explanation
Date
567
567
567
Acct. No. 620
PR
Debit
Credit
Balance
2011
May
15

CD2
3,150
3,150
613
30
CD2
31
G4

Explanation
Date
3,150
6,300
6,300
Acct. No. 621
PR
Debit
Credit
Balance
2011
May
15
CD2
5,320
5,320
30
CD2
5,320
10,640
31
G4
Insurance Expense
Explanation
Date
10,640
Acct. No. 637
PR
Debit
31
G3
553
31
G4
Credit
Balance
2011
May
553
553

Rent Expense, Office Space
Date
Explanation
Acct. No. 641
PR
Debit
Credit
Balance
2011
May
CD2
31
742
G4
742
742
Rent Expense, Selling Space
Date
Explanation
Acct. No. 642
PR
Debit
CD2
2,968
Credit
Balance
2011
May
1
31

G4
2,968
2,968
614
Office Supplies Expense
Date
Explanation
Acct. No. 650
PR
Debit
31
G3
289
31
G4
Credit
Balance
2011
May
289
289
Acct. No. 651
Store Supplies Expense

Explanation
Date
PR
Debit
Credit
Balance
2011
May
31
G3
31
G4
Utilities Expense
Explanation
Date
669
669
669
Acct. No. 690
PR
Debit
Credit
Balance
2011
May
26
CD2
31
G4
1,283
1,283
1,283
Acct. No. 901
Income Summary
Explanation
Date
PR
Debit
Credit
Balance
2011
May
31
G4
31
G4
315,667
33,128
31
G4
33,128

348,795
348,795
615

Deaver Corp.
Explanation
Date
PR
Debit
S2
14,210
PR
Debit
Credit
Balance
2011
May
26
14,210
Essex Company
Explanation
Date
Credit
Balance
2011
May
S2
11
CR2
16
S2
6,100
6,100
6,100
3,990
0
3,990
Nabors, Inc.
Explanation
Date
PR
Debit
Credit
Balance
2011
Apr.
28
S2
May
G3
CR2
4,725
4,725
175
4,550
4,550
Oscar Services
Explanation
Date
PR
Debit
Credit
Balance
2011
May
22

S2
6,850
6,850
616
30

CR2
6,850
617

Chandler Corp.
Date
Explanation
PR
Debit
Credit
Balance
2011
May
17
P2
13,650
23
CD2
13,650
PR
Debit
13,650
0
Gale, Inc.
Date
Explanation
Credit
Balance
2011
May
11
P2
19
CD2
8,800
8,800
8,800
0
Parkay Products
Explanation
Date
PR
Debit
Credit
Balance
2011
Apr.
29
P2
May
G3
CD2
25
7,098
7,098
798
6,300
6,300
P2
3,080
3,080
Thompson Supply Co.
Date
Explanation
PR
Debit
Credit
Balance
2011

618
May
P2
37,729
37,729
10
P2
4,074
41,803
12
G3
24
P2

854
40,949
9,030
49,979
619

ALPINE COMPANY
Work Sheet
Balance Sheet
and
Trial Balance Adjustments
Income
Statement of
Statement
Owners Equity
Debit Credit Debit Credit Debit Credit Debit Credit

Cash................................................. 135,91
1
135,91
1
Accounts receivable .................. 18,200
18,200
Merchandise inventory............ 220,08

0
220,08 191,00 191,00

0
0
0
Office supplies.............................
793
(c)
289
504
Store supplies..............................
3,301
(b)
669
2,632
Prepaid insurance .....................
3,318
(a)
553
2,765
Office equipment........................ 25,690

Accumulated Amort., office
equip.
25,690
9,898
(e)
329
Store equipment......................... 38,920
10,227
38,920
Accumulated Amort., store

equip.
17,556
Accounts payable .......................
53,059
53,059
Clint Barry, Capital ....................
308,08
5
308,08
5
Clint Barry, Withdrawals ........
7,000

(d)
567
18,123
7,000
620
Sales ................................................
156,42
2
156,42
2
Sales discounts ...........................
350
350
175
175
Purchases ..................................... 70,722
70,722
Purchase discounts ...................
575
575
Purchase returns and

allowances ....................................
798
798
Amort. expense, office

equipment ....................................
(e)
329
329
Amort. expense, store

equipment ....................................
(d)
567
567
Office salaries expense ............
6,300
6,300
Sales salaries expense .............. 10,640
10,640
Insurance expense ....................
(a)
553
553
Rent expense, office space ......
742
742
Rent expense, selling space ....
2,968
2,968
Office supplies expense ...... ....
(c)
289
289
Store supplies expense ............
(b)
669
669
Utilities expense .........................
1,283
1,283
Totals ......................................... 546,39 546,39 2,407 2,407 315,66 348,79 422,62 389,49
3
3
7
5
2
4
Net income ...................................
Totals .........................................

33,12
8
33,128
348,79 348,79 422,62 422,62

5
5
2
2
621
ALPINE COMPANY
Income Statement
Revenue:
Sales ...................................................................
Less: Sales discounts .................................
Sales returns and allowances ...........
Net sales .............................................................
Cost of goods sold:
Merchandise inventory, April 30........................
Purchases ...........................................................
Less: Purchase discounts ...........................
Purchase returns and allowances ....
Cost of goods purchased ..................................
Goods available for sale ....................................
Merchandise inventory, May 31 .........................
Cost of goods sold .............................................
Gross profit on sales ..............................................
Operating expenses:
Selling expenses:
Sales salaries expense ................................
Rent expense, selling space .......................
Store supplies expense ...............................
Total selling expenses .................................
Office salaries expense ................................
Rent expense, office space .........................
Insurance expense .......................................
Amortization expense, office equipment ....
Office supplies expense ..............................
Total operating expenses ..................................
Net income................................................................

$575
798
$70,722
1,373
$10,640
2,968
669
567
$6,300
1,283
742
553
329
289
350
175
$156,422
525
$155,897
220,080
69,349
$289,429
191,000
98,429
$ 57,468
$ 14,844
9,496
24,340
$ 33,128
622

ALPINE COMPANY
Clint Barry, Capital, April 30. ..............
$308,085
Add: Net income .....................................
33,128
Total ............................................................
$341,213
Less: Withdrawals ..................................
7,000
Clint Barry, Capital, May 31 .................
$334,213
ALPINE COMPANY
Balance Sheet
May 31, 2011
Assets
Current assets:
Cash..............................................................................
Accounts receivable ....................................................
Merchandise inventory................................................
Office supplies ............................................................
Store supplies .............................................................
Prepaid insurance ......................................................
Total current assets ....................................................
Office equipment .........................................................
Store equipment ..........................................................
Total property, plant and equipment .........................
Total assets .....................................................................
$135,911
18,200
191,000
504
2,632
2,765
$25,690
10,227 $ 15,463
$38,920
18,123
20,797
$351,012
36,260
$387,272
Liabilities
Accounts payable .................................................
Owners Equity
Clint Barry, Capital .........................................................


$ 53,059
334,213
$387,272
623
*Comprehensive Problem 8.2Alpine Company (concluded)

ALPINE COMPANY
May 31, 2011
Account ............................................. Debit Credit

Cash ........................................................... $135,911
18,200
Merchandise inventory ................................ 191,000
Office supplies ............................................
504
Store supplies .............................................
2,632
Prepaid insurance .......................................
2,765
Office equipment .........................................
25,690
Accumulated amortization, office equipment
Store equipment..........................................
38,920
Accumulated amortization, store equipment
Clint Barry, Capital ......................................
Totals .......................................................... $415,622
$ 10,227
53,059
334,213
$415,622
18,123
ALPINE COMPANY
May 31, 2011
Deaver Corp. ...................................................
$14,210
Essex Company .............................................
3,990
Total accounts receivable ..........................
$18,200
ALPINE COMPANY
May 31, 2011
Parkay Products ...........................................

$ 3,080
624
Thompson Supply Co. .................................
49,979
Total accounts payable ...............................
$53,059

625

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1

d) $25,000 + $40,000 0 + x = $52,000

Exercise 2-2 (15 minutes)

$ (24,750) $36,000 $12,000 $21,500 $92,000

Copyright 2007 by McGraw-Hill Ryerson Limited. All rights reserved.

Net income (loss) for the

Copyright 2007 by McGraw-Hill Ryerson Limited. All rights reserved.

Exercise 2-3 (15 minutes)

Exercise 2-4 (15 minutes)

Copyright 2007 by McGraw-Hill Ryerson Limited. All rights reserved.

Exercise 2-5 (15 minutes)

$87,750 (or 92.13% calculated as $87,750/$95,250 100) of the total $95,250

Copyright 2007 by McGraw-Hill Ryerson Limited. All rights reserved.

Exercise 2-7 (15 minutes)

Total assets ...................................................

Copyright 2007 by McGraw-Hill Ryerson Limited. All rights reserved.

Exercise 2-9 (10 minutes)

1. Requires every business to be accounted for separately from its owner

3. Requires financial statement information to be based on costs incurred

4. Requires financial statements to reflect the assumption that the

Exercise 2-10 (20 minutes)

Assets Liabilities = Owners Equity

b. Net increase in owners equity ...................................

Net increase in owners equity ...................................

Liabilities + Owners Equity

Copyright 2007 by McGraw-Hill Ryerson Limited. All rights reserved.

*Note: For (d), since no exchange has occurred, no entry is required.

Copyright 2007 by McGraw-Hill Ryerson Limited. All rights reserved.

Exercise 2-13 (20 minutes)

Liabilities + Owners Equity

*Note: For (f), since no exchange has occurred, no entry is required.

Completed work for a client on credit; $1,000.

Copyright 2007 by McGraw-Hill Ryerson Limited. All rights reserved.

Exercise 2-15 (10 minutes)

The business purchased land paying $3,000.

Exercise 2-16 (30 minutes)

Accounts + Ellen Manson, Explanation

Copyright 2007 by McGraw-Hill Ryerson Limited. All rights reserved.

Copyright 2007 by McGraw-Hill Ryerson Limited. All rights reserved.

Exercise 2-17 (15 minutes) (Answers may vary.)

The business incurs an expense on credit.

d. The business purchases equipment (or some other asset) on credit.

Exercise 2-18 (20 minutes)

+ Accounts + Supplies + Equipmen = Accounts + Annie Explanation

Copyright 2007 by McGraw-Hill Ryerson Limited. All rights reserved.

*Note: For (e), since no exchange has occurred, no entry is required.

Copyright 2007 by McGraw-Hill Ryerson Limited. All rights reserved.

Exercise 2-19 (25 minutes)

Total operating expenses

Annie Deweerd Freelance Writing

Annie Deweerd, capital, March 1

Copyright 2007 by McGraw-Hill Ryerson Limited. All rights reserved.

Annie Deweerd Freelance Writing

Total liabilities and owners $6,80

Copyright 2007 by McGraw-Hill Ryerson Limited. All rights reserved.

Exercise 2-19 (concluded)

+ Accounts + Supplies + Equipmen = Accounts + Pete Jong, Explanation

Copyright 2007 by McGraw-Hill Ryerson Limited. All rights reserved.

*Note: For (d), since no exchange has occurred, no entry is required.

Copyright 2007 by McGraw-Hill Ryerson Limited. All rights reserved.

Exercise 2-21 (25 minutes)

Pete Jong, capital, March 1

Add: Investment by owner

Pete Jong, capital, March 31