HWChap007

Chapter 07 - Accounting Information Systems

7-1

Chapter 7 Accounting Information Systems

QUESTIONS

1. The five fundamental principles of accounting information systems are: (a) control principle, (b) relevance principle, (c) compatibility principle, (d) flexibility principle, and (e) cost-benefit principle.

2. The five components of an accounting system are: source documents, input devices, information processors, information storage, and output devices.

3. Source documents contain data about business transactions or events that are put into the accounting system and processed. Examples of source documents are invoices from suppliers, checks received from customers, and payroll forms filled out by employees.

4. An input device is used to transfer data from source documents to the information processor(s). Examples of input devices for computer systems include keyboards, scanners, and bar-code readers.

5. Data stored "off-line" are not immediately available to the information processor(s), while "online" data are immediately available.

6. Output devices provide the means by which information is taken from the accounting system and made available for use.

7. Four types of transactions usually recorded in special journals are: (a) sales on credit, (b) purchases on credit, (c) cash receipts, and (d) cash disbursements.

8. The (a) initial and (b) page number of the journal from which the amount is posted is entered in the Posting Reference column of the ledger account.

9. The double posting does not cause the trial balance to be out of balance because only one credit is posted to the general ledger—the subsidiary ledger posting and its balances are not part of a trial balance (they give details of general ledger accounts).

10. When copies of the sales invoices are used as a sales journal, each invoice total is posted to the proper customer account in the subsidiary Accounts Receivable Ledger, after which the invoices are bound in numerical order. Then at the end of the period the bound invoice copies are totaled and the total is debited to Accounts Receivable and credited to Sales. This method is called direct posting of sales invoices.


7-2

11. Both kinds of credits must 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 (the Other Accounts column total is not posted—instead, each amount is individually posted to its general ledger account). Placing these credits in separate columns makes it possible to post the Accounts Receivable column total to its controlling account.

12. Immediate recording and posting of credit sales and cash receipts from customers provides up-to-date information for use in decisions about granting credit to customers. Also, up-to-date account balances are needed if customers inquire about their balances.

13. In its note 18, Research In Motion discusses its single reportable segment; its operations are substantially all related to the research, design, manufacture, and sales of wireless communications products, services and software.

14. No. Information regarding the net income earned by business segments is not found on Palm‘s Consolidated Statement of Operations (Income Statement). However, notes to its financial statements (not reproduced in Appendix A) include the information regarding Palm‘s single business segment.

15. Apple‘s five reportable segments are: Americas, Europe, Japan, Retail and Other.

16. No. Information regarding any assets owned by Nokia‘s business segments is not reported on the balance sheet. However, certain information is detailed in the notes to its financial statements (not reproduced in Appendix A).

QUICK STUDIES Quick Study 7-1 (15 minutes) 1. B. 7. E. 2. D. 8. A. 3. A. 9. C. 4. B. 10. E. 5. B. 11. B. 6. D. 12. E. Quick Study 7-2 (10 minutes) 1. D 4. C

2. A 5. E

3. B


7-3

Quick Study 7-3 (5 minutes) 1. enterprise resource planning

2. network

3. scanner

4. batch

Quick Study 7-4 (10 minutes) a. Cash Disbursements Journal

b. Sales Journal

c. Purchases Journal

d. Cash Disbursements Journal

e. Cash Receipts Journal

f. Cash Receipts Journal

g. Purchases Journal

h. Cash Disbursements Journal

Quick Study 7-5 (15 minutes)

General Journal

Mar. 2 [In Purchases Journal]

Mar. 12 Automobiles ......................................................... 15,000 T. Lue, Capital ............................................... 15,000 Owner contributed an auto to the business.

Mar. 16 [In Sales Journal]

Mar. 19 Sales Returns and Allowances ........................... 150

Accounts Receivable—K. Gould ................. 150 Customer returned (worthless) merchandise.


7-4

Quick Study 7-6 (15 minutes) a) Accounts Receivable Ledger

ACCOUNTS RECEIVABLE LEDGER

Boerman Company

Date Explanation PR Debit Credit Balance Jan. 10 S1 3,000 3,000

20 R1 2,000 1,000

Lehman Brothers


28 R1 1,600 0 Finger Company


31 R1 1,300 900 b) General Ledger

GENERAL LEDGER

Accounts Receivable

Date Explanation PR Debit Credit Balance

Jan. 31 S1 6,800 6,800 31 R1 4,900 1,900


PURCHASES JOURNAL

Date

Account

Date of

Invoice

Terms

PR

Accounts Payable

Cr.

Inventory

Dr.

Office Supplies

Dr.

Other Accounts

Dr.

June 1 Krause, Inc. ........................ 6/01 n/30 8,100 8,100

14 Store Supplies/ Chang Co. ......................

6/14

n/30

240

240

17 Monder Company ...........................

6/17

n/30

260

260


7-5

Quick Study 7-8 (10 minutes) June 1 Purchases Journal

8 Sales Journal 14 Purchases Journal 17 Purchases Journal 24 Cash Receipts Journal 28 Cash Disbursements Journal 29 Cash Disbursements Journal

Quick Study 7-9A (20 minutes)

PURCHASES JOURNAL

Date

Account

Date of

Invoice

Terms

PR

Accounts Payable

Cr.

Purchases

Dr.

Office Supplies

Dr.

Other Accounts

Dr.

June 1 Krause, Inc. ........................ 6/01 n/30 8,100 8,100

14 Store Supplies/ Chang Co. ......................

6/14

n/30

240

240

17 Monder Company ...........................

6/17

n/30

260

260

Quick Study 7-10 (30 minutes) Part 1


Eric Horner Hong Jiang

June 8 6,100 June 14 20,500

Joe Mack Tess Wilson

June 2 3,600 June 10 13,400 29 7,300 20 11,200


7-6

Quick Study 7-10 (Concluded) Part 2

GENERAL LEDGER

Accounts Receivable Sales

June 30 62,100 June 30 62,100

Part 3

WINSLOW COMPANY Schedule of Accounts Receivable

June 30 Eric Horner ......................................................... $ 6,100

Hong Jiang ......................................................... 20,500

Joe Mack ............................................................ 10,900

Tess Wilson ....................................................... 24,600

Total accounts receivable ................................ $62,100


Segment

Segment Operating

Income

Average Segment Assets

Segment Return on Assets

Americas ....................... $6,637 $1,882 352.7%

Europe ........................... 4,296 1,352 317.8

Japan ............................. 961 483 199.0

Interpretation: The Americas segment reports the highest return on

segment assets. However, each of its other segments has a relatively high

return on segment assets as well.


7-7

Quick Study 7-11 (Concluded)

Product Product Sales Percent of Total Sales

iPhone ............................................ $13,033 30.4%

iPod ................................................ 8,091 18.9

Desktops ........................................ 4,324 10.1

Portables ........................................ 9,535 22.2

Other .............................................. 7,922 18.5

Total ............................................... $42,905 100.1%*

*0.1% rounding error

Interpretation: Sales of Apple‘s iPhone make up its largest percentage of

total individual product sales. Desktops and ―Other‖ make up the smallest

percentage of total product sales.


General Journal

1. [In Purchases Journal]

2. [In Sales Journal]

3. Sales Returns and Allowances ........................... 900 Accounts Receivable—‗Customer‘ ............. 900 Customer returned (worthless) merchandise.


7-8

EXERCISES Exercise 7-1 (15 minutes)

SALES JOURNAL

Date

Account Debited

Invoice Number

PR

Accounts Receivable Dr.

Sales Cr.

Cost of Goods Sold Dr.

Inventory Cr.

Mar. 7 J. Dryer ...................................... 5704 1,150 800 12 R. Land ...................................... 5705 320 200 25 T. Burton ................................... 5706 550 350

Exercise 7-2 (10 minutes) March 2 Cash Receipts Journal

5 Purchases Journal

7 Sales Journal

8 Cash Receipts Journal

12 Sales Journal



25 Sales Journal Exercise 7-3A (15 minutes)

SALES JOURNAL

Date

Account Debited

Invoice Number

PR

Accounts Receivable Dr. Sales Cr.

Mar. 7 J. Dryer ...................................... 5704 1,150 12 R. Land ...................................... 5705 320 25 T. Burton ................................... 5706 550


7-9

Exercise 7-4 (20 minutes)

CASH RECEIPTS JOURNAL

Date

Account Credited Explanation

PR

Cash Dr.

Sales Discount

Dr.

Accounts Recble.

Cr.

Sales Cr.

Other Accounts

Cr.


Inventory Cr.

Nov. 9 Notes Payable ........................ Note to bank 2,750 2,750

13 J. Emling, Capital ................. Contribution 4,000 4,000

18 Sales .......................................... Cash sale 230 230 130

27 J. York ...................................... Invoice, 11/7 882 18 900

Exercise 7-5 (10 minutes) November 3 Purchases Journal

7 Sales Journal




22 Cash Disbursements Journal



Exercise 7-6A (25 minutes)

CASH RECEIPTS JOURNAL

Date

Account Credited

Explanation

PR

Cash Dr.

Sales Discount

Dr.

Accts. Rec. Cr.

Sales Cr.

Other Accounts

Cr.

Nov. 9 Notes Payable ............. Note to bank 2,750 2,750

13 J. Emling, Capital .......... Contribution 4,000 4,000

18 Sales ............................... Cash sale 230 230

27 J. York ............................ Invoice, 11/7 882 18 900


7-10

Exercise 7-7 (15 minutes) a) Accounts Payable Ledger

ACCOUNTS PAYABLE LEDGER

Boeder Company

Date Explanation PR Debit Credit Balance Jan. 9 P1 7,000 7,000

19 D1 5,100 1,900

Johnson Brothers


27 D1 6,600 0

Padley Company


31 D1 3,400 800 b) General Journal

GENERAL JOURNAL

Accounts Payable


Jan. 31 P1 17,800 17,800 31 D1 15,100 2,700

Exercise 7-8 (25 minutes)

CASH DISBURSEMENTS JOURNAL

Date

Ck. No.

Payee

Account Debited

PR

Cash Cr.

Inventory

Cr.

Other Accounts

Dr.

Accounts Payable

Dr.

Apr. 9 210 Kidman Corp. .................................. Store Supplies .......................................................................... 450 450

17 211 City Bank ........................................... Notes Payable .......................................................................... 1,500 1,500

28 212 LeBron ............................................... LeBron ........................................................................................ 3,430 70 3,500

29 213 B. Decker ........................................... Salaries Expense .................................................................... 1,700 1,700

30 214 Scott, Inc. ........................................... Scott, Inc. .................................................................................... 2,750 2,750


7-11

Exercise 7-9 (10 minutes) April 3 Purchases Journal


12 Sales Journal


20 Purchases Journal



30 Cash Disbursements Journal Exercise 7-10A (25 minutes)

CASH DISBURSEMENTS JOURNAL

Date

Ck. No.

Payee

Account Debited

PR

Cash Cr.

Purchases Discounts

Cr.

Other Accounts

Dr.

Accounts Payable

Dr.

Apr. 9 210 Kidman Corp. .................................. Store Supplies ......................................................................... 450 450

17 211 City Bank ........................................... Notes Payable .......................................................................... 1,500 1,500

28 212 LeBron ............................................... LeBron 3,430 70 3,500

29 213 B. Decker ........................................... Salaries Expense .................................................................... 1,700 1,700

30 214 Scott Inc. ............................................ Scott, Inc. ................................................................................... 2,750 2,750

Exercise 7-11 (10 minutes) a. (i) The June 5 purchase would be recorded in the Purchases Journal.

(ii) The June 14 payment would be recorded in the Cash Disbursements Journal.

b. The error in journalizing the June 14 transaction should be discovered

in the process of crossfooting the Cash Disbursements Journal.


7-12

Exercise 7-12 (30 minutes) Part 1

ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER

Anna Page Sara Reed Aaron Reckers

May 17 850 May 20 250 May 10 1,940 May 6 2,880 25 340

Part 2

GENERAL LEDGER

Accounts Receivable

Sales Sales Returns and

Allowances

May 31 6,010 May 20 250 May 31 6,010 May 20 250

Inventory

Cost of Goods Sold

May 31 4,500 May 31 4,500

Part 3

CLEAR VIEW Schedule of Accounts Receivable

May 31

Anna Page ........................................ $ 600

Sara Reed ......................................... 2,280

Aaron Reckers ................................. 2,880

Total accounts receivable .............. $ 5,760

Accounts Receivable Controlling Account

Total debit......................................... $ 6,010

Credit for return ............................... (250)

Balance as of May 31 ...................... $ 5,760


7-13

Exercise 7-13 (10 minutes) 1. When the trial balance is prepared.

2. When the schedule of accounts payable is prepared.



5. When crossfooting the Purchases Journal. Exercise 7-14 (20 minutes)

Segment Income (in $ mil.)

Segment Assets (in $ mil.)


Segment 2011 2010 2011 2010 2011

Specialty Skiing Group .............. $ 62 $ 58 $ 581 $440 12.1%

Skating Group ............ 9 6 53 42 18.9%

Specialty Footwear ....... 22 19 155 136 15.1%

Other Specialty .......... 11 4 37 24 36.1%

Subtotal ...................... 104 87 826 642

General Merchandise

South America ........... 32 36 305 274 11.1%

United States ............. 7 8 52 35 16.1%

Europe ........................ 5 3 14 12 38.5%

Subtotal ...................... 44 47 371 321

Total .............................. $148 $134 $1,197 $963

Analysis and interpretation: This company shows solid profitability in all segments based on segment return on assets.

For the specialty segments, the ―Other Specialty‖ has the highest segment return on assets at 36.1% in 2011, whereas the skiing segment has the lowest return on segment assets at 12.1%.

For the geographic segments, the highest segment return on assets is produced by the European segment with 38.5% in 2011, whereas the United States segment has the lowest return of 11.1%.


7-14

PROBLEM SET A Problem 7-1A (70 minutes) Parts 1, 2 and 3

SALES JOURNAL Page 3

Date

Account Debited

Invoice Number

PR


Cost of Goods Sold Dr. Inventory Cr.

Apr. 3 Brooke Sledd ................................................... 760 3,000 2,000 5 Paul Kohr .......................................................... 761 8,000 6,500

11 Amy Nilson ....................................................... 762 9,500 7,000 13 Brooke Sledd ................................................... 763 4,100 2,600 27 Paul Kohr .......................................................... 764 3,070 2,420 27 Amy Nilson ....................................................... 765 5,700 3,305

30 Totals ................................................................. 33,370 23,825

(106/413) (502/119)

CASH RECEIPTS JOURNAL Page 3

Date

Account Credited

Explanation

PR

Cash Dr.

Sales Discount

Dr.

Accounts Receivable

Cr.

Sales

Cr.

Other Accts.

Cr.


Inventory Cr.

Apr. 13 Brooke Sledd ................................................... Sale of 4/3 2,940 60 3,000 14 Paul Kohr .......................................................... Sale of 4/5 7,840 160 8,000 16 Sales .................................................................. Cash Sales 50,840 50,840 33,880 18 L.T. Notes Payable ............................................ Note to bank 251 50,000 50,000 20 Amy Nilson....................................................... Sale of 4/11 9,310 190 9,500 23 Brooke Sledd ................................................... Sale of 4/13 4,018 82 4,100 30 Sales .................................................................. Cash sales 70,975 ___ _____ 70,975 _____ 55,900 30 Totals ................................................................ 195,923 492 24,600 121,815 50,000 89,780

(101) (415) (106) (413) () (502/119)


7-15

Problem 7-1A (Continued)

Parts 2 and 3

GENERAL LEDGER

Cash Acct. No. 101

Date Explanation PR Debit Credit Balance Mar. 31 85,000 Apr. 30 R3 195,923 280,923

Accounts Receivable Acct. No. 106

Date Explanation PR Debit Credit Balance Apr. 30 S3 33,370 33,370

30 R3 24,600 8,770

Inventory Acct. No. 119

Date Explanation PR Debit Credit Balance Mar. 31 125,000 Apr. 30 S3 23,825 101,175

30 R3 89,780 11,395

Long-Term Notes Payable Acct. No. 251


B. Wise, Capital Acct. No. 301

Date Explanation PR Debit Credit Balance Mar. 31 100,000

Sales Acct. No. 413


30 R3 121,815 155,185

Sales Discounts Acct. No. 415

Date Explanation PR Debit Credit Balance Apr. 30 R3 492 492

Cost of Goods Sold Acct. No. 502


30 R3 89,780 113,605


7-16

Problem 7-1A (Continued) Parts 2 and 3 (continued)

ACCOUNTS RECEIVABLE LEDGER Paul Kohr


14 R3 8,000 0 27 S3 3,070 3,070

Brooke Sledd


13 R3 3,000 0 13 S3 4,100 4,100 23 R3 4,100 0

Amy Nilson


20 R3 9,500 0 27 S3 5,700 5,700

Part 4

WISE COMPANY Trial Balance

April 30 Debit Credit

Cash ...................................................................... $280,923

Accounts receivable ............................................ 8,770

Inventory ............................................................... 11,395

Long-term notes payable .................................... $160,000

B. Wise, Capital .................................................... 100,000

Sales ...................................................................... 155,185

Sales discounts.................................................... 492

Cost of goods sold .............................................. 113,605 _______

Totals .................................................................... $415,185 $415,185


7-17

Problem 7-1A (Concluded)

Part 4 (continued)

WISE COMPANY Schedule of Accounts Receivable

April 30

Paul Kohr .................................................... $3,070 Amy Nilson ................................................. 5,700 Total accounts receivable ......................... $8,770

Part 5

Analysis component

To find the error(s), first re-add the account balances on the schedule of

accounts receivable to confirm that the addition is correct. Then, trace the

balances listed on the schedule of accounts receivable back to the

subsidiary accounts to confirm that they are listed correctly on the

schedule. Next, recalculate the balance of each subsidiary account to

confirm that the additions and subtractions are correct. Next, 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.


7-18

Problem 7-2AA (70 minutes)

Parts 1 and 2


Date

Account Debited

Invoice Number

PR


Apr. 3 Brooke Sledd ................................. 760 3,000

5 Paul Kohr ....................................... 761 8,000

11 Amy Nilson ..................................... 762 9,500

13 Brooke Sledd ................................. 763 4,100

27 Paul Kohr ....................................... 764 3,070

27 Amy Nilson ..................................... 765 5,700

30 Total .................................................... 33,370

(106/413)


Date

Account Credited

Explanation

PR

Cash Dr.

Sales Discounts

Dr.

Accounts Receivable

Cr.

Sales Cr.

Other Accounts

Cr.

Apr. 13 Brooke Sledd .......................................... Sale of 4/3 ................................................................................ 2,940 60 3,000

14 Paul Kohr ................................................ Sale of 4/5 ................................................................................ 7,840 160 8,000

16 Sales ....................................................... Cash Sales .............................................................................. 50,840 50,840

18 L.T. Notes Payable ...................................................

Note to bank ........................................................................................

251 50,000 50,000

20 Amy Nilson ............................................. Sale of 4/11 .............................................................................. 9,310 190 9,500

23 Brooke Sledd .......................................... Sale of 4/13 .............................................................................. 4,018 82 4,100

30 Sales ....................................................... Cash sales ............................................................................... 70,975 ___ _____ 70,975 _____

30 Totals ............................................................ 195,923 492 24,600 121,815 50,000

(101) (415) (106) (413) ()


7-19

Problem 7- 2AA (Continued) Parts 2 and 3

GENERAL LEDGER

Cash Acct. No. 101




30 R3 24,600 8,770







Sales Acct. No. 413


30 R3 121,815 155,185


Date Explanation PR Debit Credit Balance Apr. 30 R3 492 492


7-20

Problem 7- 2AA (Continued) Parts 2 and 3—continued


Paul Kohr


14 R3 8,000 0 27 S3 3,070 3,070

Brooke Sledd


13 R3 3,000 0 13 S3 4,100 4,100 23 R3 4,100 0

Amy Nilson


20 R3 9,500 0 27 S3 5,700 5,700

Part 4



Cash ....................................................................... $280,923

Accounts receivable ............................................. 8,770

Inventory ................................................................ 125,000

Long-term notes payable ..................................... $160,000

B. Wise, Capital ..................................................... 100,000

Sales ....................................................................... 155,185

Sales discounts..................................................... 492 _______

Totals ..................................................................... $415,185 $415,185


7-21

Problem 7- 2AA (Concluded) Part 4—continued

WISE COMPANY Schedule of Accounts Receivable

April 30

Paul Kohr .................................................... $3,070

Amy Nilson ................................................. 5,700

Total accounts receivable ......................... $8,770

Part 5

Analysis component












7-22

Problem 7-3A (120 minutes)

Parts 1 and 3

PURCHASES JOURNAL Page 3

Date

Account

Date of Invoice

Terms

PR

Accounts Payable

Cr.

Inventory

Dr.

Office Supplies

Dr.

Other Accounts

Dr.

Apr. 2 Negi Company ................................................. 4/2 2/10, n/60 13,300 13,300

3 Office Supplies/Madison Inc. ........................... 4/2 n/10, EOM 1,380 1,380

9 Store Equip./Ned‘s Supply ............................ 4/9 n/10, EOM 165/ 11,125 11,125

17 Price Company ................................................ 4/17 2/10, n/30 12,750 12,750

20 Store Supplies/Ned‘s Supply ........................ 4/19 n/10, EOM 125/ 730 730

25 Negi Company ..................................... 4/24 2/10, n/60 10,375 10,375 ____ _____

30 Totals .................................................... 49,660 36,425 1,380 11,855

(201) (119) (124) ()

CASH DISBURSEMENTS JOURNAL Page 3

Date

Ck. No.

Payee

Account Debited

PR

Cash Cr.

Inventory

Cr.

Other Accounts

Dr.

Accounts Payable

Dr.

Apr. 4 587 U.S. View ....................................................... Advertising Expense ....................................................................... 655 999 999 12 588 Negi Company ................................................ Negi Company .................................................................................. 13,034 266 13,300 16 589 Payroll ............................................................ Sales Salaries Expense ................................................................... 621 9,750 9,750 26 590 Price Company ............................................. Price Company ................................................................................. 12,103 247 12,350 30 591 Payroll ............................................................ Sales Salaries Expense ................................................................... 621 9,750 ___ 9,750 _____ 30 Totals .............................................................

45,636 513 20,499 25,650

(101) (119) () (201)


7-23

Problem 7-3A (Continued) Parts 1 and 3—continued

GENERAL JOURNAL Page 3

Apr. 6 Accounts Payable--Madison Inc. ............................ 201/ 85 Office Supplies .................................................. 124 85 Received a credit memorandum.

23 Accounts Payable--Price Co. ................................ 201/ 400

Inventory. ........................................................... 119 400

Parts 2 and 3

GENERAL LEDGER

Cash Acct. No. 101


Mar. 31 Balance 85,000 Apr. 30 D3 45,636 39,364



Mar. 31 125,000 Apr. 23 G3 400 124,600

30 P3 36,425 161,025 30 D3 513 160,512

Office Supplies Acct. No. 124


Apr. 3 P3 1,380 1,380 6 G3 85 1,295

Store Supplies Acct. No. 125


Apr. 20 P3 730 730

Store Equipment Acct. No. 165


Apr. 9 P3 11,125 11,125


7-24

Problem 7-3A (Continued) Parts 2 and 3—continued

General Ledger—continued

Accounts Payable Acct. No. 201


Apr. 6 G3 85 (85) 23 G3 400 (485) 30 P3 49,660 49,175 30 D3 25,650 23,525



Mar. 31 Balance 110,000



Mar. 31 100,000

Sales Salaries Expense Acct. No. 621


Apr. 16 D3 9,750 9,750 30 D3 9,750 19,500

Advertising Expense Acct. No. 655


Apr. 4 D3 999 999


Ned‘s Supply


Apr. 9 P3 11,125 11,125 20 P3 730 11,855

Negi Company


Apr. 2 P3 13,300 13,300 12 D3 13,300 0 25 P3 10,375 10,375


7-25

Problem 7-3A (Concluded) Parts 2 and 3—continued

Accounts Payable Ledger—continued

Price Company


Apr. 17 P3 12,750 12,750 23 G3 400 12,350 26 D3 12,350 0

Madison, Inc.


Apr. 3 P3 1,380 1,380 6 G3 85 1,295

Part 4



Cash ............................................................. $ 39,364

Inventory ..................................................... 160,512

Office supplies............................................ 1,295

Store supplies............................................. 730

Store equipment ......................................... 11,125

Accounts payable....................................... $ 23,525

Long-term notes payable .......................... 110,000

B. Wise, Capital .......................................... 100,000

Sales salaries expense .............................. 19,500

Advertising expense .................................. 999

Totals ........................................................... $233,525 $233,525

WISE COMPANY Schedule of Accounts Payable

April 30

Ned‘s Supply ................................................ $11,855 Negi Company ............................................. 10,375 Madison Inc. ................................................ . 1,295 Total accounts payable .............................. $23,525


7-26


Parts 1 and 3


Date

Account

Date of Invoice

Terms

PR

Accounts Payable

Cr.

Purchases

Dr.

Office Supplies

Dr.

Other Accounts

Dr.

Apr. 2 Negi Company ................................................. 4/2 2/10, n/60 13,300 13,300

3 Office Supplies/Madison Inc. ........................... 4/2 n/10, EOM 1,380 1,380

9 Store Equip./Ned‘s Supply ............................ 4/9 n/10, EOM 165/ 11,125 11,125

17 Price Company ................................................ 4/17 2/10, n/30 12,750 12,750

20 Store Supplies/Ned‘s Supply ........................ 4/19 n/10, EOM 125/ 730 730

25 Negi Company ..................................... 4/24 2/10, n/60 10,375 10,375 ____ _____

30 Totals .................................................... 49,660 36,425 1,380 11,855

(201) (505) (124) ()


Date

Ck. No.

Payee

Account Debited

PR

Cash Cr.

Purchases Discount

Cr.

Other Accounts

Dr.

Accounts Payable

Dr. Apr. 4 587 U.S. View ....................................................... Advertising Expense ....................................................................... 655 999 999

12 588 Negi Company ................................................ Negi Company .................................................................................. 13,034 266 13,300 16 589 Payroll ............................................................ Sales Salaries Expense ................................................................... 621 9,750 9,750 26 590 Price Company ............................................. Price Company ................................................................................. 12,103 247 12,350 30 591 Payroll ............................................................ Sales Salaries Expense ................................................................... 621 9,750 ___ 9,750 _____ 30 Totals .............................................................

45,636 513 20,499 25,650

(101) (507) () (201)


7-27

Problem 7-4AA (Continued) Parts 1 and 3—continued


Apr. 6 Accounts Payable—Madison, Inc ............................... 201/ 85

Office Supplies .................................................. 124 85 Received a credit memorandum.

23 Accounts Payable—Price Co. .............................. 201/ 400

Purchases Returns and Allowances ................. 506 400 Received a credit memorandum.

Parts 2 and 3

GENERAL LEDGER

Cash Acct. No. 101


Mar. 31 Balance 85,000 Apr. 30 D3 45,636 39,364



Mar. 31 125,000



Apr. 3 P3 1,380 1,380 6 G3 85 1,295



Apr. 20 P3 730 730



Apr. 9 P3 11,125 11,125


7-28





Apr. 6 G3 85 (85) 23 G3 400 (485) 30 P3 49,660 49,175 30 D3 25,650 23,525



Mar. 31 Balance 110,000



Mar. 31 100,000

Purchases Acct. No. 505


Apr. 30 P3 36,425 36,425

Purchases Returns and Allowances Acct. No. 506


Apr. 23 G3 400 400

Purchases Discounts Acct. No. 507


Apr. 30 D3 513 513



Apr. 16 D3 9,750 9,750 30 D3 9,750 19,500



Apr. 4 D3 999 999


7-29



Ned‘s Supply


Apr. 9 P3 11,125 11,125 20 P3 730 11,855

Negi Company


Apr. 2 P3 13,300 13,300 12 D3 13,300 0 25 P3 10,375 10,375

Price Company


Apr. 17 P3 12,750 12,750 23 G3 400 12,350 26 D3 12,350 0

Madison, Inc.


Apr. 3 P3 1,380 1,380 6 G3 85 1,295


7-30

Problem 7-4AA (Concluded) Part 4



Cash ................................................................ $ 39,364

Inventory ........................................................ 125,000

Office supplies............................................... 1,295

Store supplies................................................ 730

Store equipment ............................................ 11,125

Accounts payable.......................................... $ 23,525

Long-term notes payable ............................. 110,000

B. Wise, Capital ............................................. 100,000

Purchases ...................................................... 36,425

Purchases returns and allowances ............. 400

Purchases discounts .................................... 513

Sales salaries expense ................................. 19,500

Advertising expense ..................................... 999 _______

Totals .............................................................. $234,438 $234,438

WISE COMPANY Schedule of Accounts Payable

April 30

Ned‘s Supply ................................................ $11,855

Negi Company ............................................. 10,375

Madison, Inc ................................................ . 1,295

Total accounts payable .............................. $23,525


7-31

Problem 7-5A (100 minutes)

Parts 1 and 2


Date

Account Debited

Invoice Number

PR



Mar. 2 Min Cho ..................................................... 854 15,800 7,900

3 Lance Snow .............................................. 855 9,200 4,600

10 Taylor Few ................................................. 856 4,600 2,300

27 Taylor Few ................................................. 857 13,910 6,220

28 Lance Snow .............................................. 858 5,315 2,280

31 Totals ......................................................... 48,825 23,300

(106/413) (502/119)


Date

Account

Date of Invoice

Terms

PR

Accounts Payable

Cr.

Inventory

Dr.

Office Supplies

Dr.

Other Accounts

Dr.

Mar. 1 Soy Industries.................................................. 3/1 2/15, n/30 42,600 42,600

3 Stacy Company ............................................... 3/3 n/10, EOM 1,120 1,120

9 Office Equip./Tells Supply ............................. 3/9 n/10, EOM 163/ 20,850 20,850

14 The JW Company ........................................... 3/13 2/10, n/30 31,625 31,625

16 Store Supplies/Stacy Company ................... 3/16 n/10, EOM 125/ 1,670 _____ ____ 1,670

31 Totals ................................................................ 97,865 74,225 1,120 22,520

(201) (119) (124) ()


7-32


Parts 1 and 2—continued


Date

Account Credited

Explanation

PR

Cash Dr.

Sales Discount

Dr.

Accounts Receivable

Cr.

Sales

Cr.

Other Accts.

Cr.


Inventory Cr.

Mar. 6 L.T. Notes Pay. ....................................................... Note to bank ........................................................................................... 251 72,000 72,000

12 Min Cho ............................................................ Invoice, 3/2 .............................................................................................. 15,484 316 15,800

13 Lance Snow ..................................................... Invoice 3/3 ............................................................................................... 9,016 184 9,200

15 Sales .................................................................. Cash sales .............................................................................................. 164,680 164,680 138,000

20 Taylor Few ........................................................ Invoice, 3/10 ............................................................................................ 4,508 92 4,600

31 Sales .................................................................. Cash sales .............................................................................................. 174,590 ___ _____ 174,590 _____ 143,000

31 Totals ................................................................ 440,278 592 29,600 339,270 72,000 281,000

(101) (415) (106) (413) () (502/119)


Date

Ck. No.

Payee

Account Debited

PR

Cash Cr.

Inventory

Cr.

Other Accounts

Dr.

Accounts Payable

Dr.

Mar.13 416 Soy Industries ................................................. Soy Industries ....................................................................................... 41,748 852 42,600

15 417 Payroll ............................................................... Sales Salaries Expense ....................................................................... 621 15,900 15,900

23 418 The JW Co. ....................................................... The JW Company ................................................................................. 28,616 584 29,200

31 419 Payroll ............................................................... Sales Salaries Expense ....................................................................... 621 15,900 ____ 15,900 ______

31 Totals ................................................................ 102,164 1,436 31,800 71,800

(101) (119) () (201)


7-33




Mar. 17 Accounts Payable—JW Co. ....................................... 201/ 2,425 Inventory ................................................................ 119 2,425 Received a credit memo for returns.

19 Accounts Payable—Tells Supply .............................. 201/ 630

Office Equipment ................................................... 163 630 Received a credit memo for returns.

GENERAL LEDGER

Cash Acct. No. 101


Mar. 31 R2 440,278 440,278 31 D2 102,164 338,114



Mar. 31 S2 48,825 48,825 31 R2 29,600 19,225


Date Explanation PR Debit Credit Balance Mar. 1 Beg. bal. 300,000

17 G2 2,425 297,575 31 P2 74,225 371,800 31 D2 1,436 370,364 31 S2 23,300 347,064 31 R2 281,000 66,064



Mar. 31 P2 1,120 1,120



Mar. 16 P2 1,670 1,670


7-34



Office Equipment Acct. No. 163


Mar. 9 P2 20,850 20,850 19 G2 630 20,220



Mar. 17 G2 2,425 (2,425) 19 G2 630 (3,055) 31 P2 97,865 94,810 31 D2 71,800 23,010



Mar. 6 R2 72,000 72,000

M. Bishop, Capital Acct. No. 308


Mar. 1 Beg. Bal. 300,000

Sales Acct. No. 413


Mar. 31 S2 48,825 48,825 31 R2 339,270 388,095



Mar. 31 R2 592 592



Mar. 31 R2 281,000 281,000 Mar. 31 S2 23,300 304,300



Mar. 15 D2 15,900 15,900 31 D2 15,900 31,800


7-35




Taylor Few


Mar. 10 S2 4,600 4,600 20 R2 4,600 0 27 S2 13,910 13,910

Min Cho


Mar. 2 S2 15,800 15,800 12 R2 15,800 0

Lance Snow


Mar. 3 S2 9,200 9,200 13 R2 9,200 0 28 S2 5,315 5,315


Stacy Company


Mar. 3 P2 1,120 1,120 16 P2 1,670 2,790

Soy Industries


Mar. 1 P2 42,600 42,600 13 D2 42,600 0

Tells Supply


Mar. 9 P2 20,850 20,850 19 G2 630 20,220

JW Company


Mar. 14 P2 31,625 31,625 17 G2 2,425 29,200 23 D2 29,200 0


7-36

Problem 7-5A (Concluded) Part 3

BISHOP COMPANY Trial Balance (Unadjusted)

March 31 Debit Credit

Cash ............................................................. $338,114 Accounts receivable ................................... 19,225 Inventory ...................................................... 66,064 Office supplies ............................................ 1,120 Store supplies ............................................. 1,670 Office equipment......................................... 20,220 Accounts payable ....................................... $ 23,010 Long-term notes payable ........................... 72,000 M. Bishop, Capital ....................................... 300,000 Sales ............................................................. 388,095 Sales discounts........................................... 592 Cost of goods sold ..................................... 304,300 Sales salaries expense ............................... 31,800 _______ Totals ........................................................... $783,105 $783,105

BISHOP COMPANY Schedule of Accounts Receivable

March 31

Taylor Few .............................................................. $13,910 Lance Snow ............................................................ 5,315 Total accounts receivable ..................................... $19,225

BISHOP COMPANY Schedule of Accounts Payable

March 31

Stacy Company ...................................................... $ 2,790 Tells Supply ............................................................ 20,220 Total accounts payable ......................................... $23,010


7-37


Parts 1 and 2


Date

Account Debited

Invoice Number

PR


Mar. 2 Min Cho ..................................................... 854 15,800

3 Lance Snow .............................................. 855 9,200

10 Taylor Few ................................................. 856 4,600

27 Taylor Few ................................................. 857 13,910

28 Lance Snow .............................................. 858 5,315

31 Totals ......................................................... 48,825

(106/413)


Date

Account

Date of Invoice

Terms

PR

Accounts Payable

Cr.

Purchases

Dr.

Office Supplies

Dr.

Other Accounts

Dr.

Mar. 1 Soy Industries.................................................. 3/1 2/15, n/30 42,600 42,600

3 Stacy Company ............................................... 3/3 n/10, EOM 1,120 1,120

9 Office Equip./Tells Supply ............................. 3/9 n/10, EOM 163/ 20,850 20,850

14 The JW Company ........................................... 3/13 2/10, n/30 31,625 31,625

16 Store Supplies/Stacy Company ................... 3/16 n/10, EOM 125/ 1,670 _____ ____ 1,670

31 Totals ................................................................ 97,865 74,225 1,120 22,520

(201) (505) (124) ()


7-38

Problem 7-6AA (Continued)



Date

Account Credited

Explanation

PR

Cash Dr.

Sales Discount

Dr.

Accounts Receivable

Cr.

Sales

Cr.

Other Accounts

Cr.

Mar. 6 L.T. Notes Pay ................................................... Note to bank ........................................................................................... 251 72,000 72,000

12 Min Cho ............................................................ Invoice, 3/2 .............................................................................................. 15,484 316 15,800

13 Lance Snow ..................................................... Invoice 3/3 ............................................................................................... 9,016 184 9,200

15 Sales .................................................................. Cash sales .............................................................................................. 164,680 164,680

20 Taylor Few ........................................................ Invoice, 3/10 ............................................................................................ 4,508 92 4,600

31 Sales .................................................................. Cash sales .............................................................................................. 174,590 ___ _____ 174,590 _____

31 Totals ................................................................ 440,278 592 29,600 339,270 72,000

(101) (415) (106) (413) ()


Date

Ck. No.

Payee

Account Debited

PR

Cash Cr.

Purchases Discounts

Cr.

Other Accounts

Dr.

Accounts Payable

Dr.

Mar.13 416 Soy Industries ................................................. Soy Industries ....................................................................................... 41,748 852 42,600


23 418 The JW Co. ....................................................... The JW Company ................................................................................. 28,616 584 29,200

31 419 Payroll ............................................................... Sales Salaries Expense ....................................................................... 621 15,900 ____ 15,900 _____

31 Totals ................................................................ 102,164 1,436 31,800 71,800

(101) (507) () (201)


7-39




Mar. 17 Accounts Payable—JW Co. ....................................... 201/ 2,425 Purchases Returns and Allowances. ................... 506 2,425 Received a credit memo for returns.

19 Accounts Payable—Tells Supply .............................. 201/ 630

Office Equipment ................................................... 163 630 Received a credit memo for returns.

GENERAL LEDGER

Cash Acct. No. 101


Mar. 31 R2 440,278 440,278 31 D2 102,164 338,114



Mar. 31 S2 48,825 48,825 31 R2 29,600 19,225


Date Explanation PR Debit Credit Balance Mar. 1 Beg. bal. 300,000



Mar. 31 P2 1,120 1,120



Mar. 16 P2 1,670 1,670



Mar. 9 P2 20,850 20,850 19 G2 630 20,220


7-40





Mar. 17 G2 2,425 (2,425) 19 G2 630 (3,055) 31 P2 97,865 94,810 31 D2 71,800 23,010



Mar. 6 R2 72,000 72,000

M. Bishop, Capital Acct. No. 308


Mar. 1 Beg. bal. 300,000

Sales Acct. No. 413


Mar. 31 S2 48,825 48,825 31 R2 339,270 388,095



Mar. 31 R2 592 592



Mar. 31 P2 74,225 74,225



Mar. 17 G2 2,425 2,425



Mar. 31 D2 1,436 1,436



Mar. 15 D2 15,900 15,900 31 D2 15,900 31,800


7-41




Taylor Few


Mar. 10 S2 4,600 4,600 20 R2 4,600 0 27 S2 13,910 13,910

Min Cho


Mar. 2 S2 15,800 15,800 12 R2 15,800 0

Lance Snow


Mar. 3 S2 9,200 9,200 13 R2 9,200 0 28 S2 5,315 5,315


Stacy Company


Mar. 3 P2 1,120 1,120 16 P2 1,670 2,790

Soy Industries


Mar. 1 P2 42,600 42,600 13 D2 42,600 0

Tells Supply


Mar. 9 P2 20,850 20,850 19 G2 630 20,220

JW Company


Mar. 14 P2 31,625 31,625 17 G2 2,425 29,200 23 D2 29,200 0


7-42

Problem 7-6AA (Concluded) Part 3

BISHOP COMPANY Trial Balance*

March 31 Debit Credit

Cash ............................................................................. $338,114 Accounts receivable ................................................... 19,225 Inventory ...................................................................... 300,000 Office supplies ............................................................ 1,120 Store supplies ............................................................. 1,670 Office equipment......................................................... 20,220 Accounts payable ....................................................... $ 23,010 Long-term notes payable ........................................... 72,000 M. Bishop, Capital ....................................................... 300,000 Sales ............................................................................. 388,095 Sales discounts........................................................... 592 Purchases .................................................................... 74,225 Purchases returns and allowances ........................... 2,425 Purchases discounts .................................................. 1,436 Sales salaries expense ............................................... 31,800 _______ Totals ........................................................................... $786,966 $786,966

* Unadjusted trial balance.

BISHOP COMPANY Schedule of Accounts Receivable

March 31

Taylor Few .............................................................. $13,910 Lance Snow ............................................................ 5,315 Total accounts receivable ..................................... $19,225

BISHOP COMPANY Schedule of Accounts Payable

March 31

Stacy Company ...................................................... $ 2,790 Tells Supply............................................................ 20,220 Total accounts payable ......................................... $23,010


7-43

PROBLEM SET B

Problem 7-1B (70 minutes) Parts 1 and 2


Date

Account Debited

Invoice Number

PR



July 5 Kim Newsom .................................................... 918 18,400 9,700

6 Ruth Baker ........................................................ 919 7,500 4,300

13 Stephanie Meyer .............................................. 920 8,350 5,030

14 Kim Newsom .................................................... 921 4,100 2,800

29 Ruth Baker ........................................................ 922 28,090 22,850

30 Stephanie Meyer .............................................. 923 15,750 9,840 31 Totals ................................................................. 82,190 54,520

(106/413) (502/119)


Date

Account Credited

Explanation

PR

Cash Dr.

Sales Discount

Dr.

Accounts Receivable

Cr.

Sales

Cr.

Other Accts.

Cr.


Inventory Cr.

July 15 Kim Newsom ................................................... Sale of 7/5................................................................................................ 18,032 368 18,400

15 Sales .................................................................. Cash sales .............................................................................................. 121,370 121,370 66,330

16 Ruth Baker ....................................................... Sale of 7/6................................................................................................ 7,350 150 7,500

21 L.T. Notes Pay.................................................. Note to bank ........................................................................................... 251 20,000 20,000

23 Stephanie Meyer ............................................. Sale of 7/13 ............................................................................................. 8,183 167 8,350

24 Kim Newsom ................................................... Sale of 7/14 ............................................................................................. 4,018 82 4,100

31 Sales .................................................................. Cash sales .............................................................................................. 79,020 ___ _____ 79,020 _____ 51,855 31 Totals ................................................................ 257,973 767 38,350 200,390 20,000 118,185

(101) (415) (106) (413) () (502/119)


7-44

Problem 7-1B (Continued) Parts 2 and 3

GENERAL LEDGER

Cash Acct. No. 101


June 30 100,000 July 31 R3 257,973 357,973



July 31 S3 82,190 82,190 31 R3 38,350 43,840



June 30 200,000 July 31 S3 54,520 145,480

31 R3 118,185 27,295



June 30 200,000 July 21 R3 20,000 220,000

R. Alcorn, Capital Acct. No. 301


June 30 100,000

Sales Acct. No. 413


July 31 S3 82,190 82,190 31 R3 200,390 282,580



July 31 R3 767 767



July 31 S3 54,520 54,520 31 R3 118,185 172,705


7-45

Problem 7-1B (Continued) Parts 2 and 3 (continued)


Stephanie Meyer

Date Explanation PR Debit Credit Balance July 13 S3 8,350 8,350

23 R3 8,350 0 30 S3 15,750 15,750

Kim Newsom


14 S3 4,100 22,500 15 R3 18,400 4,100 24 R3 4,100 0

Ruth Baker


16 R3 7,500 0 29 S3 28,090 28,090

Part 4

ALCORN INDUSTRIES Trial Balance

July 31 Debit Credit

Cash ...................................................................... $357,973


Inventory ............................................................... 27,295


R. Alcorn, Capital ................................................. 100,000

Sales ...................................................................... 282,580

Sales discounts.................................................... 767

Cost of goods sold .............................................. 172,705 _______

Totals .................................................................... $602,580 $602,580


7-46

Problem 7-1B (Concluded) Part 4

ALCORN INDUSTRIES Schedule of Accounts Receivable

July 31

Ruth Baker .............................................................. $28,090

Stephanie Meyer..................................................... 15,750

Total accounts receivable ..................................... $43,840

Part 5

Analysis component












7-47

Problem 7-2BA (70 minutes)

Parts 1 and 2


Date

Account Debited

Invoice Number

PR


July 5 Kim Newsom ....................................... 918 18,400

6 Ruth Baker ........................................... 919 7,500

13 Stephanie Meyer ................................. 920 8,350

14 Kim Newsom ....................................... 921 4,100

29 Ruth Baker ........................................... 922 28,090

30 Stephanie Meyer ................................. 923 15,750

31 Totals .................................................... 82,190

(106/413)


Date

Account Credited

Explanation

PR

Cash Dr.

Sales Discounts

Dr.

Accounts Receivable

Cr.

Sales Cr.

Other Accounts

Cr.

July 15 Kim Newsom ................................................... Sale of 7/5 ............................................................................................... 18,032 368 18,400

15 Sales ................................................................. Cash sales .............................................................................................. 121,370 121,370

16 Ruth Baker ....................................................... Sale of 7/6 ............................................................................................... 7,350 150 7,500

21 L.T. Notes Payable .............................................................

Note to bank .........................................................................................................

251 20,000 20,000

23 Stephanie Meyer ................................................................

Sale of 7/13 ............................................................................................. 8,183 167 8,350

24 Kim Newsom ................................................... Sale of 7/14 ............................................................................................. 4,018 82 4,100

31 Sales ................................................................. Cash sales .............................................................................................. 79,020 ___ _____ 79,020 _____

31 Totals ................................................................ 257,973 767 38,350 200,390 20,000

(101) (415) (106) (413) ()


7-48

Problem 7-2BA (Continued) Parts 2 and 3

GENERAL LEDGER

Cash Acct. No. 101


June 30 100,000 July 31 R3 257,973 357,973



July 31 S3 82,190 82,190 31 R3 38,350 43,840



June 30 200,000



June 30 200,000 July 21 R3 20,000 220,000



June 30 100,000

Sales Acct. No. 413


July 31 S3 82,190 82,190 31 R3 200,390 282,580



July 31 R3 767 767


7-49

Problem 7-2BA (Continued) Parts 2 and 3—continued


Stephanie Meyer


23 R3 8,350 0 30 S3 15,750 15,750

Kim Newsom


14 S3 4,100 22,500 15 R3 18,400 4,100 24 R3 4,100 0

Ruth Baker


16 R3 7,500 0 29 S3 28,090 28,090


7-50

Part 4



Cash ...................................................................... $357,973


Inventory ............................................................... 200,000


R. Alcorn, Capital ................................................. 100,000

Sales ...................................................................... 282,580

Sales discounts.................................................... 767 _______

Totals .................................................................... $602,580 $602,580


7-51

Problem 7-2BA (Concluded) Part 4—continued

ALCORN INDUSTRIES Schedule of Accounts Receivable

July 31

Ruth Baker .............................................................. $28,090 Stephanie Meyer..................................................... 15,750 Total accounts receivable ..................................... $43,840

Part 5

Analysis component












7-52

Problem 7-3B (80 minutes)

Parts 1 and 3


Date

Account

Date of Invoice

Terms

PR

Accounts Payable

Cr.

Inventory

Dr.

Office Supplies

Dr.

Other Accounts

Dr.

July 1 Tahoe Company ......................................... 6/30 2/10, n/30 6,300 6,300

7 Store Supp./Pryor Inc. ................................. 7/7 n/10, EOM 125/ 1,050 1,050

9 Store Equip./Caro‘s Supply ........................... 7/8 n/10, EOM 165/ 37,710 37,710

17 Dixon Company ........................................... 7/17 2/10, n/30 8,200 8,200

20 Office Supp./Caro‘s Supply ........................... 7/19 n/10, EOM 750 750

26 Tahoe Company .......................................... 7/26 2/10, n/30 9,770 9,770 ___ ______

31 Totals 63,780 24,270 750 38,760 (201) (119) (124) ()


Date

Ck. No.

Payee

Account Debited

PR

Cash Cr.

Inventory

Cr.

Other Accounts

Dr.

Accounts Payable

Dr.

July 3 300 The Weekly ...................................................... Advertising Expense ............................................................................ 655 575 575

10 301 Tahoe Company ............................................. Tahoe Company .................................................................................... 6,174 126 6,300

15 302 Payroll. .............................................................. Sales Salaries Expense........................................................................ 621 30,620 30,620

27 303 Dixon Company .............................................. Dixon Company .................................................................................... 5,684 116 5,800

31 304 Payroll ............................................................... Sales Salaries Expense........................................................................ 621 30,620 ___ 30,620 _____

31 Totals ................................................................ 73,673 242 61,815 12,100

(101) (119) () (201)


7-53

Problem 7-3B (Continued)



July 8 Accounts Payable—Pryor ..................... 201/ 150 Store Supplies ................................... 125 150 Received a credit memorandum.

24 Accounts Payable—Dixon .................... 201/ 2,400

Inventory. ......................................... 119 2,400 Received a credit memorandum.

Parts 2 and 3

GENERAL LEDGER

Cash Acct. No. 101


June 30 Balance 100,000 July 31 D3 73,673 26,327



June 30 Balance 200,000 July 24 G3 2,400 197,600

31 P3 24,270 221,870 31 D3 242 221,628



July 31 P3 750 750



July 7 P3 1,050 1,050 8 G3 150 900



July 9 P3 37,710 37,710


7-54

Problem 7-3B (Continued) Parts 2 and 3—continued




July 8 G3 150 (150) 24 G3 2,400 (2,550) 31 P3 63,780 61,230 31 D3 12,100 49,130



June 30 Balance 200,000



June 30 100,000



July 15 D3 30,620 30,620 31 D3 30,620 61,240



July 3 D3 575 575


Tahoe Company


July 1 P3 6,300 6,300 10 D3 6,300 0 26 P3 9,770 9,770

Pryor, Inc.


July 7 P3 1,050 1,050 8 G3 150 900


7-55

Problem 7-3B (Concluded) Parts 2 and 3—continued


Caro‘s Supply


July 9 P3 37,710 37,710 20 P3 750 38,460

Dixon Company


July 17 P3 8,200 8,200 24 G3 2,400 5,800 27 D3 5,800 0

Part 4



Cash ...................................................................... $ 26,327

Inventory ............................................................... 221,628

Office supplies ..................................................... 750

Store supplies ...................................................... 900

Store equipment................................................... 37,710

Accounts payable ................................................ $ 49,130

Long-term notes payable .................................... 200,000

R. Alcorn, Capital ................................................. 100,000

Sales salaries expense ........................................ 61,240

Advertising expense ............................................ 575 _______

Totals .................................................................... $349,130 $349,130

ALCORN INDUSTRIES Schedule of Accounts Payable

July 31

Pryor, Inc. .................................................... $ 900 Tahoe Company .......................................... 9,770 Caro‘s Supply .............................................. 38,460 Total accounts payable .............................. $49,130


7-56


Parts 1 and 3


Date

Account

Date of Invoice

Terms

PR

Accounts Payable

Cr.

Purchases

Dr.

Office Supplies

Dr.

Other Accounts

Dr.

July 1 Tahoe Company ......................................... 6/30 2/10, n/30 6,300 6,300

7 Store Supp./Pryor Inc. ................................. 7/7 n/10, EOM 125/ 1,050 1,050

9 Store Equip./Caro‘s Supply ........................... 7/8 n/10, EOM 165/ 37,710 37,710

17 Dixon Company ........................................... 7/17 2/10, n/30 8,200 8,200

20 Office Supp./Caro‘s Supply ........................... 7/19 n/10, EOM 750 750

26 Tahoe Company .......................................... 7/26 2/10, n/30 9,770 9,770 ___ _____

31 Totals 63,780 24,270 750 38,760 (201) (505) (124) ()


Date

Ck. No.

Payee

Account Debited

PR

Cash Cr.

Purchases Discounts

Cr.

Other Accounts

Dr.

Accounts Payable

Dr.

July 3 300 The Weekly ...................................................... Advertising Expense ............................................................................ 655 575 575

10 301 Tahoe Company ............................................. Tahoe Company .................................................................................... 6,174 126 6,300

15 302 Payroll. .............................................................. Sales Salaries Expense........................................................................ 621 30,620 30,620

27 303 Dixon Company .............................................. Dixon Company .................................................................................... 5,684 116 5,800

31 304 Payroll ............................................................... Sales Salaries Expense........................................................................ 621 30,620 ___ 30,620 _____

31 Totals ................................................................ 73,673 242 61,815 12,100

(101) (507) () (201)


7-57



July 8 Accounts Payable—Pryor ............................. 201/ 150 Store Supplies .......................................... 125 150 Received a credit memorandum.

24 Accounts Payable—Dixon ............................ 201/ 2,400 Purchases Returns and Allowances ........ 506 2,400 Received a credit memorandum.

Parts 2 and 3

GENERAL LEDGER

Cash Acct. No. 101


June 30 Balance 100,000 July 31 D3 73,673 26,327






July 31 P3 750 750



July 7 P3 1,050 1,050 8 G3 150 900



July 9 P3 37,710 37,710


7-58





July 8 G3 150 (150) 24 G3 2,400 (2,550) 31 P3 63,780 61,230 31 D3 12,100 49,130






June 30 100,000



July 31 P3 24,270 24,270



July 24 G3 2,400 2,400



July 31 D3 242 242



July 15 D3 30,620 30,620 31 D3 30,620 61,240



July 3 D3 575 575


7-59



Tahoe Company


July 1 P3 6,300 6,300 10 D3 6,300 0 26 P3 9,770 9,770

Pryor, Inc.


July 7 P3 1,050 1,050 8 G3 150 900

Caro‘s Supply


July 9 P3 37,710 37,710 20 P3 750 38,460

Dixon Company


July 17 P3 8,200 8,200 24 G3 2,400 5,800 27 D3 5,800 0


7-60

Problem 7-4BA (Concluded) Part 4



Cash ...................................................................... $ 26,327

Inventory ............................................................... 200,000

Office supplies ..................................................... 750

Store supplies ...................................................... 900

Store equipment................................................... 37,710

Accounts payable ................................................ $ 49,130

Long-term notes payable .................................... 200,000

R. Alcorn, Capital ................................................. 100,000

Purchases ............................................................. 24,270

Purchases returns and allowances .................... 2,400

Purchases discounts ........................................... 242

Sales salaries expense ........................................ 61,240

Advertising expense ............................................ 575 _______

Totals .................................................................... $351,772 $351,772

ALCORN INDUSTRIES Schedule of Accounts Payable

July 31

Pryor, Inc. ............................................... $ 900

Tahoe Company ..................................... 9,770

Caro‘s Supply ......................................... 38,460

Total accounts payable ......................... $49,130


7-61

Problem 7-5B (100 minutes)

Parts 1 and 2


Date

Account Debited

Invoice Number

PR



Nov. 8 Sid Ragan .................................................. 439 6,350 3,710

10 Carlos Mane .............................................. 440 12,500 7,500

15 Tony Timmons ......................................... 441 4,250 1,450

22 Carlos Mane .............................................. 442 2,595 1,060

24 Tony Timmons ......................................... 443 3,240 1,090

30 Totals ......................................................... 28,935 14,810

(106/413) (502/119)


Date

Account

Date of Invoice

Terms

PR

Accounts Payable

Cr.

Inventory

Dr.

Office Supplies

Dr.

Other Accounts

Dr.

Nov. 1 Office Equip./Blix Supply ............................... 11/1 n/10, EOM 163/ 5,062 5,062

4 ATM Industries ............................................... 11/3 2/10, n/30 11,400 11,400

5 Store Supplies/Globe Company ..................... 11/5 n/10, EOM 125/ 1,020 1,020

11 Xu Company .................................................... 11/10 2/10, n/30 2,887 2,887

16 Globe Company .............................................. 11/16 n/10, EOM 559 _____ 559 ____

30 Totals ................................................................ 20,928 14,287 559 6,082

(201) (119) (124) ()


7-62



Date

Account Credited

Explanation

PR

Cash Dr.

Sales Discount

Dr.

Accounts Receivable

Cr.

Sales

Cr.

Other Accts.

Cr.


Inventory Cr.

Nov. 2 L.T. Notes Pay.................................................. Note to bank........................................................................................... 251/ 86,250 86,250

15 Sales .................................................................. Cash sales .............................................................................................. 27,170 27,170 17,000

18 Sid Ragan ......................................................... Invoice, 11/8 ........................................................................................... 6,223 127 6,350

19 Carlos Mane ..................................................... Invoice, 11/10 ......................................................................................... 12,250 250 12,500

25 Tony Timmons ................................................ Invoice, 11/15 ......................................................................................... 4,165 85 4,250

30 Sales .................................................................. Cash sales .............................................................................................. 35,703 ___ ______ 35,703 _____ 20,400

30 Totals ................................................................ 171,761 462 23,100 62,873 86,250 37,400

(101) (415) (106) (413) () (502/119)


Date

Ck. No.

Payee

Account Debited

PR

Cash Cr.

Inventory

Cr.

Other Accounts

Dr.

Accounts Payable

Dr.

Nov.12 633 ATM Industries ................................................ ATM Industries ...................................................................................... 11,172 228 11,400


19 635 Xu Co. ............................................................... Xu Company .......................................................................................... 2,352 48 2,400

30 636 Payroll ............................................................... Sales Salaries Expense ....................................................................... 621 8,435 ___ 8,435 _____

30 Totals ................................................................ 30,394 276 16,870 13,800

(101) (119) () (201)


7-63



Nov. 17 Accounts Payable—Xu Co. ................. 201/ 487 Inventory .......................................... 119 487 Received a credit memo for returns.

26 Accounts Payable—Blix Supply ......... 201/ 922

Office Equipment ............................ 163 922 Received a credit memo for returns.

GENERAL LEDGER

Cash Acct. No. 101

Date Explanation PR Debit Credit Balance Nov. 30 R2 171,761 171,761

30 D2 30,394 141,367


Date Explanation PR Debit Credit Balance Nov. 30 S2 28,935 28,935

30 R2 23,100 5,835


Date Explanation PR Debit Credit Balance Nov. 1 Beg. bal. 40,000

17 G2 487 39,513 30 P2 14,287 53,800 30 D2 276 53,524 30 S2 14,810 38,714 30 R2 37,400 1,314


Date Explanation PR Debit Credit Balance Nov. 30 P2 559 559



Nov. 5 P2 1,020 1,020


7-64




Nov. 1 P2 5,062 5,062 26 G2 922 4,140



Nov. 17 G2 487 (487) 26 G2 922 (1,409) 30 P2 20,928 19,519 30 D2 13,800 5,719



Nov. 2 R2 86,250 86,250

J. Suppan, Capital Acct. No. 308


Nov. 1 Beg. Bal. 40,000

Sales Acct. No. 413


Nov. 30 S2 28,935 28,935 30 R2 62,873 91,808



Nov. 30 R2 462 462

Costs of Goods Sold Acct. No. 502


Nov. 30 S2 14,810 14,810 30 R2 37,400 52,210



Nov. 15 D2 8,435 8,435 30 D2 8,435 16,870


7-65



Tony Timmons


Nov. 15 S2 4,250 4,250 24 S2 3,240 7,490 25 R2 4,250 3,240

Sid Ragan


Nov. 8 S2 6,350 6,350 18 R2 6,350 0

Carlos Mane


Nov. 10 S2 12,500 12,500 19 R2 12,500 0 22 S2 2,595 2,595


Globe Company

Date Explanation PR Debit Credit Balance Nov. 5 P2 1,020 1,020

16 P2 559 1,579

ATM Industries


12 D2 11,400 0

Blix Supply


26 G2 922 4,140

Xu Company


17 G2 487 2,400 19 D2 2,400 0


7-66

Problem 7-5B (Concluded)

Part 3

SUPPAN COMPANY Trial Balance November 30

Debit Credit

Cash .............................................................. $141,367 Accounts receivable .................................... 5,835 Inventory ....................................................... 1,314 Office supplies ............................................. 559 Store supplies .............................................. 1,020 Office equipment.......................................... 4,140 Accounts payable ........................................ $ 5,719 Long-term notes payable ............................ 86,250 J. Suppan, Capital ........................................ 40,000 Sales .............................................................. 91,808 Sales discounts............................................ 462 Costs of goods sold .................................... 52,210 Sales salaries expense ................................ 16,870 _______ Totals ............................................................ $223,777 $223,777

SUPPAN COMPANY Schedule of Accounts Receivable

November 30

Tony Timmons. ............................................ $3,240 Carlos Mane .................................................. 2,595 Total accounts receivable ........................... $5,835

SUPPAN COMPANY Schedule of Accounts Payable

November 30

Globe Company. .......................................... $1,579 Blix Supply ................................................... 4,140 Total accounts payable ............................... $5,719


7-67


Parts 1 and 2


Date

Account Debited

Invoice Number

PR


Nov. 8 Sid Ragan ................................................... 439 6,350

10 Carlos Mane ............................................... 440 12,500

15 Tony Timmons .......................................... 441 4,250

22 Carlos Mane ............................................... 442 2,595

24 Tony Timmons .......................................... 443 3,240

30 Totals .......................................................... 28,935

(106/413)


Date

Account

Date of Invoice

Terms

PR

Accounts Payable

Cr.

Purchases

Dr.

Office Supplies

Dr.

Other Accounts

Dr.

Nov. 1 Office Equip./Blix Supply ............................... 11/1 n/10, EOM 163/ 5,062 5,062

4 ATM Industries ............................................... 11/3 2/10, n/30 11,400 11,400

5 Store Supplies/Globe Company ........................ 11/5 n/10, EOM 125/ 1,020 1,020

11 Xu Company .................................................... 11/10 2/10, n/30 2,887 2,887

16 Globe Company .............................................. 11/16 n/10, EOM 559 _____ 559 ____

30 Totals ................................................................ 20,928 14,287 559 6,082

(201) (505) (124) ()


7-68

Problem 7-6BA (Continued)

Parts 1 and 2--Continued


Date

Account Credited

Explanation

PR

Cash Dr.

Sales Discount

Dr.

Accounts Receivable

Cr.

Sales

Cr.

Other Accts.

Cr.

Nov. 2 L.T. Notes Pay.................................................. Note to bank ........................................................................................... 251/ 86,250 86,250

15 Sales .................................................................. Cash sales .............................................................................................. 27,170 27,170

18 Sid Ragan ......................................................... Invoice, 11/8 ........................................................................................... 6,223 127 6,350

19 Carlos Mane ..................................................... Invoice, 11/10 ......................................................................................... 12,250 250 12,500

25 Tony Timmons ................................................ Invoice, 11/15 ......................................................................................... 4,165 85 4,250

30 Sales .................................................................. Cash sales .............................................................................................. 35,703 ___ _____ 35,703 ______

30 Totals ................................................................ 171,761 462 23,100 62,873 86,250

(101) (415) (106) (413) ()


Date

Ck. No.

Payee

Account Debited

PR

Cash Cr.

Purchases Discounts

Cr.

Other Accounts

Dr.

Accounts Payable

Dr.

Nov.12 633 ATM Industries ................................................ ATM Industries ...................................................................................... 11,172 228 11,400


19 635 Xu Co. ............................................................... Xu Company .......................................................................................... 2,352 48 2,400

30 636 Payroll ............................................................... Sales Salaries Expense ....................................................................... 621 8,435 ___ 8,435 _____

30 Totals ................................................................ 30,394 276 16,870 13,800

(101) (507) () (201)


7-69




Nov. 17 Accounts Payable—Xu Co. ................. 201/ 487 Purchases Returns and Allow.. ..... 506 487 Received a credit memo for returns.

26 Accounts Payable—Blix Supply ......... 201/ 922

Office Equipment ............................ 163 922 Received a credit memo for returns.

GENERAL LEDGER

Cash Acct. No. 101

Date Explanation PR Debit Credit Balance Nov. 30 R2 171,761 171,761

30 D2 30,394 141,367


Date Explanation PR Debit Credit Balance Nov. 30 S2 28,935 28,935

30 R2 23,100 5,835


Date Explanation PR Debit Credit Balance Nov. 1 Beg. bal. 40,000


Date Explanation PR Debit Credit Balance Nov. 30 P2 559 559



Nov. 5 P2 1,020 1,020



Nov. 1 P2 5,062 5,062 26 G2 922 4,140


7-70



GENERAL LEDGER



Nov. 17 G2 487 (487) 26 G2 922 (1,409) 30 P2 20,928 19,519 30 D2 13,800 5,719



Nov. 2 R2 86,250 86,250

J. Suppan, Capital Acct. No. 308


Nov. 1 Beg. bal. 40,000

Sales Acct. No. 413


Nov. 30 S2 28,935 28,935 30 R2 62,873 91,808



Nov. 30 R2 462 462



Nov. 30 P2 14,287 14,287



Nov. 17 G2 487 487



Nov. 30 D2 276 276


7-71





Nov. 15 D2 8,435 8,435 30 D2 8,435 16,870


Tony Timmons


Nov. 15 S2 4,250 4,250 24 S2 3,240 7,490 25 R2 4,250 3,240

Sid Ragan


Nov. 8 S2 6,350 6,350 18 R2 6,350 0

Carlos Mane


Nov. 10 S2 12,500 12,500 19 R2 12,500 0 22 S2 2,595 2,595


Globe Company


16 P2 559 1,579

ATM Industries


12 D2 11,400 0


7-72




Blix Supply


26 G2 922 4,140

Xu Company


17 G2 487 2,400 19 D2 2,400 0

Part 3

SUPPAN COMPANY Trial Balance November 30

Debit Credit

Cash ............................................................. $141,367 Accounts receivable ................................... 5,835 Inventory ...................................................... 40,000 Office supplies ............................................ 559 Store supplies ............................................. 1,020 Office equipment......................................... 4,140 Accounts payable ....................................... $ 5,719 Long-term notes payable ........................... 86,250 J. Suppan, Capital ....................................... 40,000 Sales ............................................................. 91,808 Sales discounts........................................... 462 Purchases .................................................... 14,287 Purchases returns and allowances ........... 487 Purchases discounts .................................. 276 Sales salaries expense ............................... 16,870 _______ Totals ........................................................... $224,540 $224,540


7-73

Problem 7-6BA (Concluded) Part 3—continued

SUPPAN COMPANY Schedule of Accounts Receivable

November 30

Tony Timmons. ........................................... $3,240 Carlos Mane ................................................. 2,595 Total accounts receivable .......................... $5,835

SUPPAN COMPANY Schedule of Accounts Payable

November 30

Globe Company. .......................................... $1,579 Blix Supply ................................................... 4,140 Total accounts payable ............................... $5,719


7-74

SERIAL PROBLEM – SP 7

Serial Problem, Business Solutions (100 minutes) Parts 1 and 2


Date

Account Debited

Invoice Number

PR



Jan. 13 Liu Corp. ..................................................... n/a 5,200 3,560

26 KC, Inc. ....................................................... n/a 5,800 4,640

Feb. 23 Delta Co. ..................................................... n/a 3,220 2,660

Mar. 25 Wildcat Services ....................................... n/a 2,800 2,002

30 IFM Company ............................................ n/a 2,220 1,048

31 Totals .......................................................... 19,240 13,910

(106/413) (502/119)


Date

Account Credited

Explanation

PR

Cash Dr.

Sales Discount

Dr.

Accounts Receivable

Cr.

Services Revenue

Cr.

Other Accts.

Cr.


Inventory Cr.

Jan. 9 Gomez Co ..................................................... Invoice, n/a 2,668 2,668

16 Services Revenue ......................................... Cash Sales 4,000 4,000

22 Liu Corp ......................................................... Invoice, 1/13 4,653 47 4,700

Feb.11 Alex‘s Eng. Co .............................................. Invoice, 1/11 5,500 5,500

Mar. 9 Delta Co ......................................................... Invoice, 2/23 3,220 3,220

16 Services Revenue ......................................... Cash Sales 5,260 __ _____ 5,260 _ _

31 Totals ............................................................. 25,301 47 16,088 9,260 0 0

(101) (415) (106) (403) () (502/119)


7-75

Serial Problem, Business Solutions (Continued)


Date

Account

Date of Invoice

Terms

PR

Accounts Payable

Cr.

Inventory

Dr.

Computer Supplies

Dr.

Other Accounts

Dr.

Jan. 7 Kansas Corp ............................................. 1/7 1/10, n/30 5,800 5,800 26 Kansas Corp ............................................. 1/26 1/10, n/30 9,000 9,000

Mar. 8 Harris Office Products ............................ 3/8 2,730 _____ 2,730 31 Totals ......................................................... 17,530 14,800 2,730 0

(201) (119) (126) ()


Date

Ck. No.

Payee

Account Debited

PR

Cash Cr.

Inventory

Cr.

Other Accounts

Dr.

Accounts Payable

Dr.

Jan. 4 n/a Lyn Addie ................................................... Wages Expense ......................... Wages Payable ..........................

623/210 625 125 500

15 n/a Not specified ............................................. Merchandise Inventory ............. 119 600 600 17 n/a Kansas Corp ............................................. Kansas Corp ............................... 5,742 58 5,800 31 n/a Lyn Addie ................................................... Wages Expense ......................... 623 1,250 1,250

Feb. 1 n/a Hillside Mall ............................................... Prepaid Rent ............................... 131 2,475 2,475 3 n/a Kansas Corp ............................................. Kansas Corp ............................... 8,414 90 8,504 5 n/a Not specified ............................................. Advertising Expense ................ 655 600 600

15 n/a S. Rey ......................................................... S. Rey, Withdrawals .................. 302 4,800 4,800 26 n/a Lyn Addie ................................................... Wages Expense ......................... 623 1,000 1,000 27 n/a S. Rey ......................................................... Mileage Expense ....................... 676 192 192

Mar. 11 n/a Not Specified ............................................. Repairs Expense ....................... 684 960 960 19 n/a Harris Off. Prod ......................................... Harris Office Products .............. 3,830 3,830 31 n/a S. Rey ......................................................... Mileage Expense ....................... 676 128 ___ 128 _____ 31 Totals .......................................................... 30,616 148 12,630 18,134

(101) (119) () (201)


7-76

Serial Problem, Business Solutions (Concluded)

Part 3


2012

Jan. 5 Cash ................................................................... 101 25,000 S. Rey, Capital .......................................... 301 25,000 Additional investment by owner.

11 Accounts Receivable—Alex‘s Eng. Co .......... 106.1 5,500 Unearned Computer Services Revenue ......... 236 1,500 Computer Services Revenue .................. 403 7,000 Completed work on project.

20* Sales Returns and Allowances ....................... 414 500 Accounts Receivable—Liu Corp ............ 106.5 500 Customer returned defective goods.

* An optional additional entry for Jan. 20 is to debit ―Loss from Defective Merchandise‖ and credit ―Cost of Goods Sold‖ for $320.

24 Accounts Payable—Kansas Corp................... 201 496 Merchandise Inventory ........................... 119 496 Returned merchandise for credit.

29 No entry recorded in the journal (but memorandum noted).

Mar. 24 Accounts Receivable—Easy Leasing ............ 106.3 9,047 Computer Services Revenue .................. 403 9,047 Billed customer for services.


7-77

Comprehensive Problem

Comprehensive Problem, Colo Company (150 minutes)

Part 1


Date Account Debited

Invoice Number

PR



May 2 Hensel Company .................................... 8785 6,100 4,100

16 Hensel Company .................................... 8786 3,990 1,890

22 Lee Services ........................................... 8787 6,850 4,990

26 Crane Corp. ............................................. 8788 14,210 8,230

31 Totals .......................................................... 31,150 19,210

(106/413) (502/119)


7-78

Comprehensive Problem, Colo Company (Part 1—Continued)


Date

Account

Date of Invoice

Terms

PR

Accounts Payable

Cr.

Inventory

Dr.

Office Supplies

Dr.

Other Accounts

Dr.

May 4 Store Supp./Gear Supp .................................. 5/04 n/10, EOM 125/ 37,729 37,072 83 574

10 Office Equip./Gear Supp ................................ 5/10 n/10, EOM 163/ 4,074 4,074

11 Garcia, Inc ........................................................ 5/10 2/10, n/30 8,800 8,800

17 Fink Corp .......................................................... 5/14 2/10, n/60 13,650 13,650

24 Store Supp./Gear Supp .................................. 5/24 n/10, EOM 125/ 9,030 8,120 280 630

25 Peyton Products ............................................. 5/23 2/10, n/30 3,080 3,080 ___ ____

31 Totals ................................................................ 76,363 70,722 363 5,278 (201) (119) (124) ()


Date

Account Credited

Explanation

PR

Cash Dr.

Sales Discount

Dr.

Accounts Receivable

Cr.

Sales

Cr.

Other Accts.

Cr.


Inventory Cr.

May 5 Knox, Inc. .......................................................... Sale of Apr. 28 .................................................................................................. 4,459 91 4,550 9 Store Supplies ................................................. Sold store

supplies .................................................................................................. 125

350

350

11 Hensel Company ............................................ Sale of May 2 .......................................................................................... 5,978

122

6,100

15 Sales .................................................................. Cash sales May 1-15 ..................................................................................................

59,220

59,220

38,200

30 Lee Services .................................................... Sale of May 22 .................................................................................................. 6,713 137 6,850 31 Sales .................................................................. Cash sales,

May 16-31 ................................................................................................

66,052

___

_____

66,052

___

42,500

31 Totals ................................................................ 142,772 350 17,500 125,272 350 80,700 (101) (415) (106) (413) () (502/119)


7-79

Comprehensive Problem, Colo Company (Part 1—Continued)


Date

Ck. No.

Payee

Account Debited

PR

Cash Cr.

Inventory

Cr.

Other Accounts

Dr.

Accounts Payable

Dr. May 1 3410 S&P Mgmt. Co. ................................................ Rent Exp.–Selling Space ...................................................................... 642 2,968

Rent Exp.–Office Space ....................................................................... 641 3,710 742 8 3411 Peyton Products. ............................................ Peyton Products .................................................................................... 6,174 126 6,300

15 3412 Payroll ............................................................... Sales Salaries Expense ........................................................................ 621 5,320 Office Salaries Expense ....................................................................... 620 8,470 3,150

19 3413 Garcia, Inc. ....................................................... Garcia, Inc. .............................................................................................. 8,624 176 8,800 23 3414 Fink Corp. ......................................................... Fink Corp. ............................................................................................... 13,377 273 13,650 26 3415 Perennial Power .............................................. Utilities Expense .................................................................................... 690 1,283 1,283 29 3416 Jenny Colo ....................................................... J. Colo, Withdrawals ............................................................................. 302 7,000 7,000 30 3417 Payroll ............................................................... Sales Salaries Expense ........................................................................ 621 5,320

Office Salaries Expense ....................................................................... 620 8,470 ___ 3,150 _____ 31 Totals ................................................................ 57,108 575 28,933 28,750

(101) (119) () (201)

GENERAL JOURNAL Page 2 May 2 Sales Returns and Allow. ................................................. 414 175

Accounts Receivable—Knox, Inc. .............................. 106/ 175 Issued a credit memo for returns.

3 Accounts Payable—Peyton Products ............................. 201/ 798 Inventory ....................................................................... 119 798 Received a credit memo for returns.

12 Accts. Payable—Gear Supply Co. ................................... 201/ 854 Office Equipment ......................................................... 163 854 Received a credit memo for returns.


7-80

Comprehensive Problem, Colo Company (Continued) Part 2

COLO COMPANY Work Sheet for Month Ended May 31, 2011

Unadjusted Trial Balance

Adjustments

Income Statement

Balance Sheet or State-ment of Owner‘s Equity

Account Debit Credit Debit Credit Debit Credit Debit Credit

Cash ....................................................... 135,911 135,911

Accounts receivable ............................. 18,200 18,200

Merchandise inventory ......................... 189,519 189,519

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 25,690

Accum. depr. –Office equipment. ........ 9,898 (e) 329 10,227

Store equipment .................................... 38,920 38,920

Accumulated depr. –Store equip ......... 17,556 (d) 567 18,123

Accounts payable ................................. 53,059 53,059

Jenny Colo, Capital ............................... 308,085 308,085

Jenny Colo, Withdrawals ...................... 7,000 7,000

Sales ....................................................... 156,422 156,422

Sales discounts ..................................... 350 350

Sales returns and allowances .............. 175 175

Cost of goods sold ................................ 99,910 99,910

Depr. Expense–Office equipment ........ (e) 329 329

Depr. 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 ...................................................... 545,020 545,020 2,407 2,407 124,775 156,422 421,141 389,494

Net income ............................................ 31,647 ______ ______ 31,647

Totals ...................................................... 156,422 156,422 421,141 421,141


7-81

Comprehensive Problem, Colo Company (Continued) Part 2—continued

Adjusting entries (Part 2)

May 31 Insurance Expense ..................................................... 637 553

Prepaid Insurance ................................................. 128 553 To adjust for expired insurance.

31 Store Supplies Expense ............................................ 651 669

Store Supplies ....................................................... 125 669 To adjust for store supplies used.

31 Office Supplies Expense ........................................... 650 289

` Office Supplies ...................................................... 124 289 To adjust for office supplies used.

31 Depreciation Expense–Store Equip.......................... 613 567

Accumulated Depr.–Store Equip. ........................ 166 567 To record depreciation of store eq.

31 Depreciation Expense–Office Equip......................... 612 329

Accumulated Depr.–Office Equip. ....................... 164 329 To record depreciation of office eq.


7-82


Closing entries (Part 2)

May 31 Sales ............................................................................ 413 156,422

Income Summary .................................................. 901 156,422 To close temporary accounts with

credit balances.

May 31 Income Summary ....................................................... 901 124,775

Sales Returns and Allowances ............................ 414 175 Sales Discounts .................................................... 415 350 Cost of Goods Sold ............................................... 502 99,910 Depr. Expense, Office Equipment ....................... 612 329 Depr. Expense, Store Equipment ........................ 613 567 Office Salaries Expense ....................................... 620 6,300 Sales Salaries Expense ........................................ 621 10,640 Insurance Expense ............................................... 637 553 Rent Expense, Office Space................................. 641 742 Rent Expense, Selling Space ............................... 642 2,968 Office Supplies Expense ...................................... 650 289 Store Supplies Expense ....................................... 651 669 Utilities Expense ................................................... 690 1,283 To close temporary accounts with

debit balances.

May 31 Income Summary ..................................... 901 31,647

J. Colo, Capital .................................... 301 31,647 To close income summary to

owner’s capital.

May 31 J. Colo, Capital ......................................... 301 7,000

J. Colo, Withdrawals ........................... 302 7,000 To close withdrawals to owner’s capital.


7-83


GENERAL LEDGER

Cash Acct. No. 101


Apr. 30 Balance 50,247 May 31 R2 142,772 193,019

31 D2 57,108 135,911



Apr. 30 Balance 4,725 May 2 G2 175 4,550

31 S2 31,150 35,700 31 R2 17,500 18,200

Merchandise Inventory Acct. No. 119


Apr. 30 Balance 220,080 May 3 G2 798 219,282

31 D2 575 218,707 31 P2 70,722 289,429 31 R2 80,700 208,729 31 S2 19,210 189,519



Apr. 30 Balance 430 May 31 P2 363 793

31 G2 289 504



Apr. 30 Balance 2,447 May 4 P2 574 3,021

9 R2 350 2,671 24 P2 630 3,301 31 G2 669 2,632


7-84


Prepaid Insurance Acct. No. 128


Apr. 30 Balance 3,318 May 31 G2 553 2,765



Apr. 30 Balance 22,470 May 10 P2 4,074 26,544

12 G2 854 25,690

Accumulated Depreciation–Office Equipment Acct. No. 164


Apr. 30 Balance 9,898 May 31 G2 329 10,227



Apr. 30 Balance 38,920

Accumulated Depreciation–Store Equipment Acct. No. 166


Apr. 30 Balance 17,556 May 31 G2 567 18,123



Apr. 30 Balance 7,098 May 3 G2 798 6,300

12 G2 854 5,446 31 P2 76,363 81,809 31 D2 28,750 53,059

Jenny Colo, Capital Acct. No. 301


Apr. 30 Balance 308,085 May 31 G2 31,647 339,732

31 G2 7,000 332,732


7-85


Jenny Colo, Withdrawals Acct. No. 302


May 29 D2 7,000 7,000 31 G2 7,000 0

Sales Acct. No. 413


May 31 S2 31,150 31,150 31 R2 125,272 156,422 31 G2 156,422 0

Sales Returns and Allowances Acct. No. 414


May 2 G2 175 175 31 G2 175 0



May 31 R2 350 350 31 G2 350 0



May 31 S2 19,210 19,210 31 R2 80,700 99,910 31 G2 99,910 0

Depreciation Expense—Office Equipment Acct. No. 612


May 31 G2 329 329 31 G2 329 0

Depreciation Expense—Store Equipment Acct. No. 613


May 31 G2 567 567 31 G2 567 0


7-86


Office Salaries Expense Acct. No. 620


May 15 D2 3,150 3,150 30 D2 3,150 6,300 31 G2 6,300 0



May 15 D2 5,320 5,320 30 D2 5,320 10,640 31 G2 10,640 0

Insurance Expense Acct. No. 637


May 31 G2 553 553 31 G2 553 0

Rent Expense, Office Space Acct. No. 641


May 1 D2 742 742 31 G2 742 0

Rent Expense, Selling Space Acct. No. 642


May 1 D2 2,968 2,968 31 G2 2,968 0

Office Supplies Expense Acct. No. 650


May 31 G2 289 289 31 G2 289 0

Store Supplies Expense Acct. No. 651


May 31 G2 669 669 31 G2 669 0


7-87


Utilities Expense Acct. No. 690


May 26 D2 1,283 1,283 31 G2 1,283 0

Income Summary Acct. No. 901


May 31 G2 124,775 124,775 31 G2 156,422 31,647 31 G2 31,647 0


Crane Corp.


May 26 S2 14,210 14,210

Hensel Company


May 2 S2 6,100 6,100 11 R2 6,100 0 16 S2 3,990 3,990

Knox, Inc.


Apr. 28 S2 4,725 4,725 May 2 G2 175 4,550

5 R2 4,550 0

Lee Services


May 22 S2 6,850 6,850 30 R2 6,850 0


7-88



Fink Corp.


May 17 P2 13,650 13,650 23 D2 13,650 0

Garcia, Inc.


May 11 P2 8,800 8,800 19 D2 8,800 0

Gear Supply Co.


May 4 P2 37,729 37,729 10 P2 4,074 41,803 12 G2 854 40,949 24 P2 9,030 49,979

Peyton Products


Apr. 29 P2 7,098 7,098 May 3 G2 798 6,300

8 D2 6,300 0 25 P2 3,080 3,080


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Comprehensive Problem, Colo Company (Continued) Part 3

COLO COMPANY Income Statement

For Month Ended May 31, 2011

Revenue

Sales ........................................................................... $156,422

Less: Sales discounts ............................................ $ 350

Sales returns and allowances ..................... 175 525

Net sales .................................................................... 155,897

Less: Cost of goods sold ......................................... 99,910

Gross profit on sales .................................................. 55,987

Operating expenses

Selling expenses

Depreciation expense—Store equipment ............. 567

Sales salaries expense ........................................... 10,640

Rent expense—Selling space ................................ 2,968

Store supplies expense .......................................... 669

Total selling expenses ........................................... 14,844

General and administrative expenses

Depreciation expense—Office equipment ............ 329

Office salaries expense .......................................... 6,300

Insurance expense ................................................. 553

Rent expense—Office space ................................. 742

Office supplies expense ......................................... 289

Utilities expense...................................................... 1,283

Total general and administrative expenses ......... 9,496

Total operating expenses ........................................ 24,340

Net income .................................................................. $ 31,647


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COLO COMPANY Statement of Owner‘s Equity

For Month Ended May 31, 2011

Jenny Colo, Capital, April 30, 2011 ................ $308,085 Plus: Net income ............................................. 31,647 339,732

Less: Withdrawals by owner .......................... (7,000)

Jenny Colo, Capital, May 31, 2011 ................. $332,732

COLO COMPANY Balance Sheet May 31, 2011

Assets Current assets Cash .............................................................. $135,911 Accounts receivable .................................... 18,200 Merchandise inventory ................................ 189,519 Office supplies ............................................. 504 Store supplies .............................................. 2,632 Prepaid insurance ........................................ 2,765 Total current assets ..................................... $349,531 Plant assets Office equipment.......................................... 25,690 Less accumulated depreciation ................. 10,227 15,463 Store equipment........................................... 38,920 Less accumulated depreciation ................. 18,123 20,797 Total plant assets......................................... 36,260 Total assets .................................................... $385,791

Liabilities Current liabilities Accounts payable ........................................ $ 53,059

Equity Jenny Colo, Capital........................................ 332,732 Total liabilities and equity ............................. $385,791


7-91

Comprehensive Problem, Colo Company (Concluded) Part 4

COLO COMPANY Post-Closing Trial Balance

May 31, 2011

Cash ...................................................................... $135,911 Accounts receivable ............................................ 18,200 Merchandise inventory ........................................ 189,519 Office supplies ..................................................... 504 Store supplies ...................................................... 2,632 Prepaid insurance ................................................ 2,765 Office equipment.................................................. 25,690 Accumulated depreciation—Office equip. ........ $ 10,227 Store equipment................................................... 38,920 Accumulated depreciation—Store equip. ......... 18,123 Accounts payable ................................................ 53,059 Jenny Colo, Capital.............................................. _______ 332,732 Totals .................................................................... $414,141 $414,141

COLO COMPANY Schedule of Accounts Receivable

May 31, 2011

Crane Corp. .................................................. $14,210 Hensel Company ......................................... 3,990 Total accounts receivable ........................... $18,200

COLO COMPANY Schedule of Accounts Payable

May 31, 2011

Peyton Products .......................................... $ 3,080 Gear Supply Co. ........................................... 49,979 Total accounts payable ............................... $53,059


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Reporting in Action — BTN 7-1 1. Research In Motion‘s Note 18 identifies its single reported business

segment. 2. Research In Motion identifies and describes its single reportable

segment; its operations are substantially all related to the research, design, manufacture, and sales of wireless communications products, services and software.

3. Solution depends on the most recent information obtained.

Comparative Analysis — BTN 7-2

1. Research In Motion - Current Year Revenue/Segment Assets

Domestic segment: $8,620 / [($4,059 + $2,647)/2] = 257.1%

International segment: $6,333 / [($6,145 + $5,454)/2] = 109.2%

Research In Motion – One Year Prior Revenue/Segment Assets

Domestic Segment: $6,968 / [($2,647 + $1,739)/2] = 317.7%

International Segment: $4,097 / [($5,454 + $3,772)/2] = 88.8% Apple – Current Year Revenue/Segment Assets

Domestic Segment: $22,325 / [($2,698 + $ 2,269)/2] = 898.9%

International Segment: $20,580 / [($495 + $410)/2] = 4,548.1%

Apple – One Year Prior Revenue/Segment Assets

Domestic Segment: $20,893/ [($2,269 + $1,752)/2] = 1,039.2% International Segment: $16,598 / [($410 + $260)/2] = 4,954.6%

2. Apple‘s revenue earned as a percentage of its segment assets is markedly higher than Research In Motion‘s for both years and for both domestic and international segments. Apple earns higher revenue for assets employed in international segments versus domestic segments for both years and Research In Motion has the opposite result with a higher return for domestic segments.


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Ethics Challenge — BTN 7-3 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 and 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

have a responsibility to the company‘s ―stakeholders‖ and the public. In our society, auditors provide credibility to financial reporting by offering professional audit opinions about companies‘ financial statements. While it is sometimes difficult to be responsible to clients, as well as to the stakeholders and the public, auditors must maintain their independence to keep the public‘s trust.

3. Since Erica Gray is a sole practitioner it is questionable whether she

can consult on the client‘s accounting system and then remain objective in subsequent years when she 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, Erica Gray would need to do both jobs herself, making it difficult to maintain independence in fact and appearance.

(Note to instructors: The Sarbanes-Oxley Act specifically prohibits auditors from providing financial information and system designs for their SEC audit clients. This was codified by the SEC [Final Ruling 68].)

Communicating in Practice — BTN 7-4 The memo should recommend the use of special journals and subsidiary ledgers. It should explain the time-saving aspect of journalizing in labeled columns and also the posting of column totals representing the impact of groups of like transactions. The memo should discuss the timely information provided by subsidiary ledgers regarding customer and creditor balances. A discussion of the uses of a schedule for verifying the accuracy of subsidiary ledgers should also be included.


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Taking It to the Net — BTN 7-5

(See Dell‘s Note 14 – Segment Information) 1. Large Enterprise; Public; Small and Medium Business; and Consumer. 2. The Public segment reports $1,361 million of operating income and the

Large Enterprise segment reports $2,604 million of assets. These totals are slightly larger than its next largest segments, which is Small and Medium Business segment with $1,040 million in operating income and the Public segment with $2,464 million in assets.

3. Dell‘s Operating Income and Total Assets by Segment

($ millions)

Operating Income 2010

Total Assets 2010 : Total Assets 2009


Large Enterprise ........... $ 819 $2,604 : $2,335 33.2%

Public ............................ $1,361 $2,464 : $1,997 61.0%

Small & Medium Business .....................

$1,040 $1,051 : $1,123 95.7%

Consumer ..................... $ 107 $1,293 : $ 699 10.7%

The Small and Medium Business had the highest segment return on assets for the fiscal year ended 2010 with a 95.7% return. The other three showed returns on assets ranging from 10% to 61%.

4. The six product groups reported by Dell include: Desktop PCs, Mobility,

Software and peripherals, Servers and networking, Enhanced services, and Storage.

($ millions) 2010 Fiscal Year

Mobility ................................................................ $16,610 31.4% Desktop PCs ....................................................... 12,947 24.5 Software and peripherals ................................... 9,499 18.0 Servers and networking ..................................... 6,032 11.4 Services ............................................................... 5,622 10.6 Storage ................................................................. 2,192 4.1

Totals ................................................................... $52,902 100.0%

Dell earned more—in both dollars and returns—from its Mobility group; its Desktop PCs was second in both categories.


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Teamwork in Action — BTN 7-6

For check figures in the implementation of this activity see the solution to Problem 7-5A or 7-5B.

Entrepreneurial Decision — BTN 7-7 1. The following special journals are likely to be used:

Sales journal to record credit sales

Cash receipts journal to record all cash receipts

Purchases journal to record credit purchases

Cash disbursements journal to record all cash payments

General journal to record all transactions not in special journals The company also is likely to use the following subsidiary ledgers:

Accounts receivable subsidiary ledger to track amounts owed by individual customers

Accounts payable ledger to track amounts owed to individual vendors

Inventory ledger to keep track of all different inventory items (including inventory ready to sell, inventory in the process of being completed, and materials to be used in the production of inventory)

2.

Year

One Year Hence

Two Years Hence

Three Years Hence

Four Years Hence

Five Years Hence

Sales .............................. $100.0 mil 120.0 mil $138.0 mil $172.5 mil $207.0 mil

Computations Year 2: $100.0 mil x 120% = $120.0 mil

Year 3: $120.0 mil x 115% = $138.0 mil Year 4: $138.0 mil x 125% = $172.5 mil Year 5: $172.5 mil x 120% = $207.0 mil

If sales follow the growth projected, the company will have more than

doubled the current $100 mil in annual sales to $207 mil annually.


7-96

Global Decision — BTN 7-8 1. Nokia has the following reported segments:

Devices and services

NAVTEQ

Nokia Siemens Networks

2. Nokia discloses dollar amounts for the following line items:

Profit and Loss Information i. Net sales to external customers ii. Net sales to other segments iii. Depreciation and amortization iv. Impairment v. Operating profit/(loss) vi. Share of results of associated companies

Balance sheet information i. Capital expenditures ii. Segment assets iii. Investments in associated companies iv. Segment liabilities

3. Yes. On all financial measures reported except for segment assets, the Devices and Services segment dominates Nokia‘s other segments. The Nokia Siemens Networks segment dominates other segments on the basis of segment assets.

HWChap007

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