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CHAPTER 7
Accounting Information Systems
ASSIGNMENT CLASSIFICATION TABLE

Study Objectives

Questions

Brief
Exercises

A
Problems

B
Problems

1
...


1, 2, 3, 4

1, 2, 3

2
...


5, 6, 9,
11,16

4, 5

1, 2, 3, 4,
5, 6, 7, 9,
11, 12

1A, 2A, 3A,
4A, 5A, 6A

1B, 2B, 3B,
4B, 5B

3
...


7, 8, 10,
11, 12, 13,
14, 17

6, 7,
8, 9

6, 7, 8,
10, 12

1A, 2A, 3A,
4A, 5A, 6A

1B, 2B, 3B,
4B, 5B

4
...


12, 15

10

1, 3, 9, 11,
13, 14

1A, 2A, 3A,
4A, 5A, 6A

1B, 2B, 3B,
4B, 5B

7-1

Exercises

ASSIGNMENT CHARACTERISTICS TABLE
Problem
Number

Difficulty
Level

Description

Time
Allotted (min
...


Simple

30–40

2A

Journalize transactions in cash payments journal;
post to control account and subsidiary ledgers
...


Moderate

40–50

4A

Journalize transactions in special journals
...


Moderate

60–70

6A

Journalize in special journals; post; prepare
a trial balance
...


Simple

30–40

2B

Journalize transactions in cash payments journal;
post to the general and subsidiary ledgers
...


Moderate

40–50

4B

Journalize transactions in special journals
...


Moderate

60–70

7-2

7-3

Describe the nature and purpose
of a subsidiary ledger
...


Indicate how companies post
a multi-column journal
...


3
...


Broadening Your Perspective

Identify the basic concepts
of an accounting information
system
...


Study Objective

Q7-5

Knowledge

E7-1
E7-3
E7-4
E7-5
E7-6
E7-7
E7-9

P7-2A
P7-3A
P7-4A
P7-5A
P7-6A
P7-1B

P7-2B
P7-3B
P7-4B
P7-5B

Financial Reporting
(Mini Practice Set)

E7-1
E7-3
E7-9
E7-13
E7-14
P7-1A

P7-6A Q7-11
P7-1B
P7-2B
P7-3B
P7-4B
P7-5B

Analysis

P7-4A P7-5BQ7-11
P7-5A
P7-6A
P7-1B
P7-2B
P7-3B
P7-4B

E7-11
E7-12
P7-1A
P7-2A
P7-3A
P7-4A
P7-5A

Application

BE7-6 E7-6
BE7-7 E7-7
BE7-8 E7-10
BE7-9 E7-12
E7-8 P7-1A
E7-10 P7-2A
P7-3A

BE7-1
BE7-2
BE7-3

Exploring the Web

Q7-12
Q7-15
BE7-10
E7-11

Q7-7
Q7-8
Q7-10
Q7-12
Q7-13
Q7-14
Q7-17

Q7-6
Q7-9
Q7-16
BE7-4
BE7-5
E7-2
E7-11

Q7-1
Q7-2
Q7-3
Q7-4

Comprehension

Synthesis

Decision Making
Across the
Organization
Communication
Ethics Case
All About You

Evaluation

Correlation Chart between Bloom’s Taxonomy, Study Objectives and End-of-Chapter Exercises and Problems

BLOOM’S TAXONOMY TABLE

ANSWERS TO QUESTIONS
1
...

(b) Disagree
...


2
...
The system must be cost-effective; that is, the benefits obtained from the
information must outweigh the cost of providing it
...
To be useful, information must be understandable, relevant, reliable, timely, and
accurate
...
The system should accommodate a variety of users and changing information needs
...


Common features of a computerizied accounting package beyond recording transactions and
preparing financial statements are: easy data access and report preparation; audit trail, internal
controls, customization; and network compatibility
...


ERP systems go far beyond the functions of an entry level general ledger package
...


5
...
The accounts are assembled
together to facilitate the accounting process by freeing the general ledger from details concerning
individual balances
...

Free the general ledger of excessive details relating to accounts receivable and accounts
payable
...

Assist in locating errors in individual accounts by reducing the number of accounts in one ledger
and by using control accounts
...


6
...

(2) In contrast, postings to the control accounts are usually made in total at the end of the month
...
Subsidiary
ledger accounts keep track of specific account activity (i
...
, specific debtors or creditors)
...


7-4

Questions Chapter 7 (Continued)
7
...
Records entries for all sales of merchandise on account
...
Records entries for all cash received by the business
...
Records entries for all purchases of merchandise on account
...
Records entries for all cash paid
...
(1) Since the sales journal employs only one line to record a Sales transaction,
its use reduces recording time; (2) the column totals are only posted to the general ledger
once an accounting period; and (3) the journal’s use separates responsibilities between
employees
...
(1) Its use aids in the posting process since the totals for Cash, Sales
Discounts, Accounts Receivable, and Sales are all recorded in the general ledger only at
the end of the month; and (2) it allows all accounts receivable credits to be posted to the
appropriate subsidiary ledger accounts daily
...
The advantages are similar to those of the sales journal except that
items involved are Merchandise Inventory debits and Accounts Payable credits
...
Similar advantages to cash receipts journal except the columns
involved are different
...


8
...
Since Thogmartin
Company has a single-column sales journal, only credit sales can be recorded there
...

Finally, no cash is received or paid, so neither the cash receipts or cash payments journal should
be used
...


At the end of the month, after all postings to both the general ledger and the subsidiary accounts
have been made, the total of the subsidiary account balances should equal the balance of the
control account in the general ledger
...


10
...
Therefore,
the columns included in any special journal should correspond to the unique needs of the entity
...
These businesses rarely sell on credit to their customers
...


11
...
The
customers’ ledger will be posted correctly, but the Accounts Receivable control account will
be incorrect
...


12
...
The other account is Sales
...
)

7-5

Questions Chapter 7 (Continued)
13
...

(b) General journal
...


(d) Sales journal
...

(f) General journal
...


(a) Cash receipts journal
...

(c) General journal
...

(e) General journal
...


15
...

However, any other item purchased on credit could also be included in a special column or the
“other” column
...


One such example is a purchase return
...
The debit/credit equality is unaffected since the balance
sheet equation is computed using general ledger (control) accounts only
...


17
...
In addition, all correcting, adjusting, and closing entries should be made
in the general journal
...

2
...


True
...

True
...

2
...


(e)
(d)
(a)

4
...
(c)

BRIEF EXERCISE 7-3
1
...

3
...


True
...
The benefits obtained from information provided by the accounting
information system must outweigh the cost of providing that information
...

False
...


BRIEF EXERCISE 7-4
Accounts Receivable Subsidiary Ledger
Date
Jan
...
15
24

Date
Jan
...


Ref
...


General Ledger

Agler Co
...
31
3,000
31

Barto Co
...

Debit Credit
9,000
9,000

Balance
9,000
0
7-7

Accounts Receivable
Ref
...

2
...
General ledger
4
...

2
...


Cash Receipts Journal
Cash Payments Journal
Cash Payments Journal

4
...
Purchases Journal
6
...

2
...
Yes
4
...

2
...

4
...

2
...

4
...


Cash Receipts Journal
Cash Receipts Journal
Cash Receipts Journal
Sales Journal and Cash Receipts Journal
Purchases Journal

BRIEF EXERCISE 7-10
1
...


Both in total and daily
In total

3
...
Only daily

7-8

SOLUTIONS TO EXERCISES
EXERCISE 7-1
(a) $350,400
...

(b) $85,900
...

(c) The column total of $161,400 in the sales journal would be posted to
the credit side of the Sales account and the debit side of the Accounts
Receivable account in the general ledger
...


EXERCISE 7-2
To:

Andrea Barden, Chief Financial Officer

From:

Student

Subject:

Jeremy Dody account

The explanation of the three entries in the subsidiary ledger for the Jeremy
Dody account is as follows:
Sept
...
The entry was
recorded on page 31 of the Sales Journal
...
9

This was a sales return or allowance granted to Dody
...


Sept
...
The entry was
recorded on page 8 of the Cash Receipts Journal
...

7-9

EXERCISE 7-3
(a) & (b)

General Ledger

Accounts Receivable
Date
Explanation
Sept
...


Debit

S
CR
G

Credit

4,490
7,030
220

Balance
10,960
15,450
8,420
8,200

Accounts Receivable Subsidiary Ledger
Bannister
Date
Explanation
Sept
...
1 Balance

Ref
...


Debit

S
CR

Explanation

1,100

S
CR
G

Iman
Date
Sept
...
1 Balance

Ref
...


Debit

CR
7-10

Credit

1,310

Credit

2,300
220

Credit

380

Credit
1,800

Balance
2,060
3,160
1,850

Balance
4,820
5,620
3,320
3,100

Balance
0
1,330
950

Balance
2,640
840

EXERCISE 7-3 (Continued)
Ruiz
Date
Sept
...


Credit

1,260
1,240

Balance
1,440
2,700
1,460

SEAVER COMPANY
Schedule of Customers
As of September 30, 2008
Bannister
...

Iman
...

Ruiz
...


$1,850
3,100
950
840
1,460
$8,200

Accounts Receivable
...

$13,000 [$11,000 + ($9,000 + $7,000 + $8,500) – ($8,000 + $2,500 + $9,000) – $3,000]
...


EXERCISE 7-5
(a)
(b)
(c)

(d)

$3,375 [$8,250 – ($3,000 + $1,875)
...

Jones
($3,000 + $6,750 – $6,000)
$3,750
Brown
($1,875 + $5,250 – $1,875 – $2,250)
3,000
Aatski
($3,375 + $6,375 – $6,750)
3,000
$9,750
The purchase return ($2,250) would be recorded in the general journal
...
2 T
...
Lowther

Invoice
Accounts Receivable Dr
...

No
...

Sales Cr
...

101
102

720
800
1,520

420
480
900

MONTALVO COMPANY
Purchases Journal

Date

Account Credited

2008
Sept
...
Rincon
W
...


P1
Merchandise Inventory Dr
...


2/10, n/30
n/30

600
860
1,460

EXERCISE 7-7
(a) & (b)

PHERIGO CO
...
Pherigo, Cap
...
Moody

Ref
...

50,000
6,300
9,000
65,300

Sales
Accounts
Discounts Receivable Sales
Dr
...

Cr
...

Accounts Merchandise Inventory
Cr
...

50,000

6,300
9,000
9,000

7-12

6,300

4,200
50,000

4,200

EXERCISE 7-7 (Continued)
PHERIGO CO
...

Dr
...

No
...


Cash
Cr
...
Cash Payments
2
...
Cash Payments
4
...

6
...

8
...

10
...
), Other Accounts (Dr
...
), Sales Discounts (Dr
...

Cash (Cr
...

Cash (Cr
...
), and
Accounts Payable (Dr
...
), Accounts Receivable (Cr
...
), Other Accounts (Dr
...
), Other Accounts (Dr
...
), Other Accounts (Cr
...
), Other Accounts (Dr
...
), Sales (Cr
...
),
and Merchandise Inventory (Cr
...
2

5

7

Equipment
...


9,400

Accounts Payable—Lyden
Company
...


9,400

410
410
400

Merchandise Inventory
...

(b) To:

Sales Returns and Allowances
...


260

400

260

President Velasquez

From:

Chief Accountant

Subject:

Posting of Control and Subsidiary Accounts

The posting of these accounts varies with the journals used in recording
the transactions
...
The individual entries are posted daily to the
subsidiary accounts
...
The individual amounts in the column are posted daily to
the subsidiary accounts
...
Each entry
that pertains to a control and a subsidiary account is dual posted
...

I hope this memo answers your questions about posting
...

2
...

4
...

6
...


Cash Payments Journal
General Journal
Cash Receipts Journal
Cash Receipts Journal
Sales Journal
Cash Receipts Journal
General Journal

8
...

10
...

12
...


Cash Receipts Journal
Cash Payments Journal
General Journal
General Journal
Cash Payments Journal
Purchases Journal

EXERCISE 7-11
(a) The debit posting reference on February 28 should be from the cash
payments journal to record the payments made during the month
...
Tebbetts’
ending balance must be $2,600
...
)
(b) Only the general journal amounts were dual posted
...
), $265 (Cr
...


EXERCISE 7-12
(a)

Purchases Journal

Date

Account Credited

July 3
12
14
17
20
21
29

Ref
...

Erik Co
...

Chacon Corp
...

Erik Co
...


P1
Merchandise Inventory Dr
...

2,400
500
1,100
1,400
700
600
1,600
8,300
120/201

7-15

EXERCISE 7-12 (Continued)
(b)

General Journal

Date
July

1

Accounts and Explanations
Store Equipment
...


Ref
...
120/
400
Accounts Payable—Heinen
Inc
...
)

18

Accounts Payable—Chacon
Corp
...


201/
120/

100

Accounts Payable—Drago Co
...


201/
120/

200

25

100

200

EXERCISE 7-13
$925 ($200 + $240 + $145 + $190 + $150)
...
The total of all these
debits should therefore be the total credit sales for the month, which would
be the same amount as the end-of-month debit to Accounts Receivable
...


Apr
...
Grider,
301
Capital
4 Baez
5 Eggleston Co
...

29 Chelsea

Cash
Dr
...

Discounts Receivable Sales Accounts Merchandise Inventory
Dr
...

Cr
...

Cr
...
1 Balance
30

Ref
...
112
Balance
7,450
1,430

Accounts Receivable Subsidiary Ledger
Ogden
Date
Apr
...

CR1

7-17

Debit

Credit
600

Balance
1,550
950

PROBLEM 7-1A (Continued)
Chelsea
Date
Apr
...

Date
Explanation
Apr
...
1
4

Ref
...


1,200

Debit

CR1
CR1

Ref
...

Total

$ 950
480
$1,430

7-18

Credit

Balance
1,200
0

Balance
2,900
1,980
480

Balance
1,800
0

PROBLEM 7-2A

(a)

Cash Payments Journal
CP1

Date

Ck
...
Account Debited

Oct
...
Inventory
Equipment
Bovary Company
Merch
...

T
...

Sims Company

Other
Accounts Merchandise
Accounts Payable
Inventory
Ref
...

Dr
...

120
157

300
800

120

2,250

306

400

2,700
1,800

3,750
(X)

(b)

54

1,600
2,500
8,600
(201)

32
86
(120)

Cash
Cr
...
1 Balance
31

Ref
...
201
Balance
10,700
2,100

Accounts Payable Subsidiary Ledger
Bovary Company
Date
Oct
...


Debit

CP1

2,700

7-19

Credit

Balance
2,700
0

PROBLEM 7-2A (Continued)
Nyman Co
...
1 Balance
19

Pyron Co
...
1 Balance
15

Sims Company
Date
Explanation
Oct
...


Debit

CP1

1,600

Ref
...


Debit

CP1

2,500

(c) Accounts payable balance:

$2,100

Subsidiary account balances:
Nyman Co
...


Accounts Merchandise
Other
Payable
Inventory
Accounts
Cr
...

Dr
...

Sager Company
Wayne Bros
...
Cost of Goods Sold Dr
...

Sales Cr
...

1,300
1,500
3,450
1,570
310
2,800
5,600
16,530
(112)(401)

7-21

910
1,050
2,415
1,099
217
1,960
3,920
11,571
(505)(120)

PROBLEM 7-3A (Continued)
General Journal
Date
July

8

22

Accounts and Explanations
Ref
...
201/
Merchandise Inventory
...


G1
Credit

40

(b)
Accounts Receivable
Date
Explanation
July 31
22

Merchandise Inventory
Date
Explanation
July 31
8
31

Supplies
Date
Explanation
July 13

300
300

40

General Ledger
Ref
...

P1
G1
S1

Ref
...
112
Balance
16,530
16,490

No
...
126
Balance
720

PROBLEM 7-3A (Continued)
Equipment
Date
Explanation
July 26

Accounts Payable
Date
Explanation
July 31
8

Sales
Date
July 31

Explanation

Sales Returns and Allowances
Date
Explanation
July 22

Cost of Goods Sold
Date
Explanation
July 31

Advertising Expense
Date
Explanation
July 18

Ref
...

P1
G1

Ref
...

G1

Ref
...

P1

7-23

Debit
900

Debit

Credit

No
...
201
Balance
24,100
23,800

300

Debit

Debit
40

Debit
11,571

Debit
600

Credit
16,530

No
...
412
Balance
40

Credit

No
...
610
Balance
600

PROBLEM 7-3A (Continued)
Accounts Receivable Subsidiary Ledger
Wayne Bros
...

S1
S1

Debit
1,500
1,570

Credit

Balance
1,500
3,070

Pinick Company
Date
Explanation
July 3
21
22

Ref
...

S1
S1

Debit
3,450
5,600

Credit

Balance
3,450
9,050

Haddad Company
Date
Explanation
July 21

Ref
...

P1
P1

7-24

Debit

Credit
720
900

Balance
720
1,620

PROBLEM 7-3A (Continued)
Wayward Shipping
Date
Explanation
July 2
28

Ref
...

P1
P1

Debit

Credit
8,000
3,600

Balance
8,000
11,600

Moon Company
Date
Explanation
July 5
8
24

Ref
...

P1

Debit

Credit
600

Balance
600

Anton Company
Date
Explanation
July 15

Ref
...

Subsidiary account balances
Wayne Bros
...

Sager Company
...

Total
...

Subsidiary account balances
Cress Supply
...

Fritz Company
...

Lynda Advertisements
...

Total
...
4
9
17
31

Milam
Connor Corp
...

Milam

Invoice
Accounts Receivable Dr
...

No
...

Sales Cr
...

371
372
373
374

5,250
6,400
1,200
9,330
22,180
(112)(401)

3,150
3,840
720
5,598
13,308
(505)(120)

Purchases Journal

Date

Account Credited

Jan
...


P1
Merchandise Inventory Dr
...


Wortham Co
...

Betz Co
...

Forgetta Corp
...
5

19

Accounts and Explanations
Ref
...
201/
Merchandise Inventory
...

Accounts Payable—Murphy
Corp
...
6
13
15 Connor Corp
...


Ref
...

Cr
...

3,150
6,260
6,336
5,250
3,200
4,230
1,200
29,626
(101)

Sales
Cr
...

Accounts Merchandise Inventory
Cr
...


3,150
6,260

3,200
4,230

64

64
(414)

1,890
3,756

1,920
2,538

6,400
5,250

1,200
12,850
(112)

16,840
(401)

0
(X)

10,104
(505)(120)

Cash Payments Journal
CP1

Date

Account Debited

Jan
...

Salaries Expense
Noyes Co
...

Dr
...

Cr
...

80
9,506
14,300
4,410
13,200
41,496
(101)

PROBLEM 7-5A

(a), (d) & (g)
Cash
Date
July 31
31

Explanation

Accounts Receivable
Date
Explanation
July 31
31

Merchandise Inventory
Date
Explanation
July 31
29
31
31
31

Store Supplies
Date
Explanation
July 4
31 Adjusting entry

Prepaid Rent
Date
Explanation
July 11
31 Adjusting entry

General Ledger

Ref
...

S1
CR1

Ref
...

CP1
G1

Ref
...
101
Balance
101,035
61,969

No
...
120
Balance
44,020
43,600
43,366
30,561
26,661

No
...
131
Balance
6,000
5,500

PROBLEM 7-5A (Continued)
Accounts Payable
Date
Explanation
July 31
31

Reyes, Capital
Date
Explanation
July 1

Reyes, Drawing
Date
Explanation
July 19

Sales
Date
July 31
31

Explanation

Sales Discounts
Date
Explanation
July 31

Cost of Goods Sold
Date
Explanation
July 31
31

Ref
...

CR1

Ref
...

S1
CR1

Ref
...

S1
CR1

7-30

Debit

Credit
44,020

30,200

Debit

Debit
2,500

Debit

Debit
85

Debit
12,805
3,900

Credit
80,000

Credit

Credit
19,700
6,000

Credit

Credit

No
...
301
Balance
80,000

No
...
401
Balance
19,700
25,700

No
...
505
Balance
12,805
16,705

PROBLEM 7-5A (Continued)
Supplies Expense
Date
Explanation
July 31 Adjusting entry

Ref
...

G1

(b)

Debit
460

Debit
500

Credit

No
...
729
Balance
500

Sales Journal
S1

Date

Account Debited

July 6
8
10
21

Ref
...
Cost of Goods Sold Dr
...

Merchandise Inventory Cr
...

S
...
Pitts
H
...
Beauty
16 W
...

29 Merchandise
Inventory

Ref
...

80,000
6,000
3,564
4,851
6,200
420
101,035
(101)

Cost of Goods Sold
Sales
Accounts
Other
Dr
...

Cr
...

Cr
...

80,000
6,000
36
49

85
(414)

14,700
(112)

3,900

3,600
4,900
6,200

7-31

6,000
(401)

420
80,420
(X)

3,900
(505)(120)

PROBLEM 7-5A (Continued)
(c)

Accounts Receivable Subsidiary Ledger

Ewing Co
...

S1
CR1

Debit
6,200

H
...

S1

Debit
5000

Credit

Balance
5,000

W
...

S1
CR1

Debit
4,900

Credit

Balance
4,900
0

Ref
...
Beauty
Date
Explanation
July 8
13

Credit
6,200

4,900

Credit
3,600

Balance
6,200
0

Balance
3,600
0

Accounts Payable Subsidiary Ledger
C
...
Ernst
Date
July 5
10

Explanation

Explanation

Ref
...

P1
CP1

7-32

Debit

Credit
15,300

Balance
15,300
0

Credit
8,100

Balance
8,100
0

15,300

Debit
8,100

PROBLEM 7-5A (Continued)
M
...

P1

Debit

Credit
7,900

Balance
7,900

G
...

P1
CP1

Debit

Credit
6,800

Balance
6,800
0

J
...

P1

Debit

Credit
5,920

Balance
5,920

(e)

Explanation

6,800

REYES CO
...

Accounts Receivable
...

Store Supplies
...

Accounts Payable
...

Reyes, Drawing
...

Sales Discounts
...


7-33

Debit
$ 61,969
5,000
26,661
600
6,000

Credit

$ 13,820
80,000
2,500
25,700
85
16,705
$119,520

$119,520

PROBLEM 7-5A (Continued)
(f)

Accounts receivable balance
...
Prince
...


$13,820

Subsidiary accounts balance
M
...

J
...


$ 7,900
5,920
$13,820

(g)
General Journal
Date
July 31

31

Accounts and Explanations
Supplies Expense
...


Ref
...

Prepaid Rent
...

Adjusted Trial Balance
July 31, 2008
Cash
...

Merchandise Inventory
...

Prepaid Rent
...

Reyes, Capital
...

Sales
...

Cost of Goods Sold
...

Rent Expense
...
7
13
23
29

T
...
Rensing
Notes Receivable

Ref
...

3,500
4,900
9,100
40,000
57,500
(101)

Sales
Discounts
Dr
...


100

Cost of Goods Sold
Dr
...


3,500
5,000

Sales
Cr
...


9,100
0
100
(414)

8,500
(112)

9,100
(401)

5,460
40,000
40,000
(X)

5,460
(505)(120)

Cash Payments Journal
CP1
Other
Accounts Merchandise
Accounts Payable
Inventory
Ref
...

Dr
...


Date

Account Debited

Jan
...
Inwood
Sales Salaries Expense
Office Salaries Expense
E
...

300
1,000
14,850
2,800
2,000
950
21,900
(101)

Sales Journal
S1
Date

Account
Debited

Jan
...
Rensing
24 F
...


Accounts Receivable Dr
...

Sales Cr
...

5,000
7,400
12,400
(112)(401)

7-36

3,000
4,440
7,440
(505)(120)

PROBLEM 7-6A (Continued)
Purchases Journal

Date

Account Credited

Jan
...

Accounts Payable Cr
...


E
...
Marley

2,000
1,600
3,600
(120)(201)
General Journal

Date
Jan
...

Accounts Receivable—
J
...

Merchandise Inventory
...
60)
Cost of Goods Sold
...

/412

Accounts Payable—D
...

Notes Payable
...
Marley
...


/201
120

300

/112
/120

Debit
300

G1
Credit

300
180

/505

180

18,000

300

(a) & (c)
General Ledger
Cash
Date
Jan
...


Debit

CR1
CP1

57,500

7-37

Credit

21,900

No
...
1 Balance
14
31
31

Notes Receivable
Date
Explanation
Jan
...
1 Balance
11
14
30
31
31
31
31

Equipment
Date
Explanation
Jan
...

G1
CR1
S1

Ref
...


Debit

CP1
G1
G1
P1
CP1
CR1
S1

300
180

Ref
...

Jan
...
112
Balance
15,000
14,700
6,200
18,600

No
...
120
Balance
23,000
23,300
23,480
23,180
26,780
26,630
21,170
13,730

Credit

No
...
158
Balance
1,500

PROBLEM 7-6A (Continued)
Notes Payable
Date
Explanation
Jan
...
1 Balance
20
30
31
31

B
...
1 Balance

Sales
Date
Jan
...
14

Sales Discounts
Date
Explanation
Jan
...

G1

Debit

Ref
...


Ref
...

G1

Ref
...
200
Balance
18,000

No
...
301
Balance
86,450

No
...
412
Balance
300

Credit

No
...
31
31
14

Sales Salaries Expense
Date
Explanation
Jan
...
18

Rent Expense
Date
Explanation
Jan
...

CR1
S1
G1

Ref
...

CP1

Ref
...
505
Balance
5,460
12,900
12,720

Credit

No
...
727
Balance
2,000

Credit

No
...
Anders
Date
Explanation
Jan
...
Cone
Date
Jan
...


Debit

G1

300

Ref
...
Dudley
Date
Explanation
Jan
...
Rensing
Date
Explanation
Jan
...

S1
CR1

Ref
...
Marley
Date
Explanation
Jan
...
Feeney
Date
Explanation
Jan
...
Goodman
Date
Explanation
Jan
...
Inwood
Date
Explanation
Jan
...

P1
G1

Debit

Credit
1,600

Balance
1,600
1,300

Ref
...


Debit

Credit

G1

18,000

Balance
18,000
0

Ref
...
Vietti
Date
Jan
...

P1
CP1

Debit

Credit
2,000

950

Balance
2,000
1,050

CORTEZ CO
...

Accounts Receivable
...

Merchandise Inventory
...

Accumulated Depreciation—Equipment
...

Accounts Payable
...
Cortez, Capital
...

Sales Returns and Allowances
...

Cost of Goods Sold
...

Office Salaries Expense
...


Debit
$ 77,100
18,600
5,000
13,730
6,450
$

300
100
12,720
2,800
2,000
1,000
$139,800

(e) Accounts Receivable Subsidiary Ledger
J
...

F
...

T
...


Accounts Receivable Control
...
Marley
...
Feeney
...
Vietti
...


7-43

$ 1,300
10,000
1,050
$12,350
$12,350

PROBLEM 7-1B

(a)

Cash Receipts Journal
CR1

Date

Account
Credited

Sales
Accounts
Cash Discounts Receivable
Ref
...

Dr
...


June 1 J
...

1,862
6 Farley Co
...

28,141
(101)

(b)

Sales
Cr
...

Accounts Merchandise Inventory
Cr
...

10,000

26
38

1,300
1,900

50

2,500

6,135

4,090

320
4,500
114
(414)

1,600
7,300
(112)

10,635
(401)

3,000
10,320
(X)

7,090
(505/120)

General Ledger

Accounts Receivable
Date
Explanation
June 1 Balance
30

Ref
...
112
Balance
7,300
0

Accounts Receivable Subsidiary Ledger
Deering & Son
Date
June

1
9

Explanation
Balance

Ref
...

Date
Explanation
June 1 Balance
6

Grinnell Bros
...

Date
Explanation
June 1 Balance
3

Ref
...


1,900

Debit

CR1

Ref
...

Sum of all subsidiary accounts = 0
...

No
...
1
3
5
11
15
16
19
25
30

11
12
13
14
15
16
17
18
19

Merch
...

Merch
...
Ruttan
B
...
Kimberlin
Prepaid Insurance
A
...


Other
Accounts
Ref
...

120
157

1,140
1,700

120

2,000

306

500

130

3,000

1,500

15

1,000

30

1,150

8,340
(X)

(b)

Accounts Merchandise
Payable
Inventory
Dr
...


23

3,500
7,150
(201)

00
68
(120)

Cash
Cr
...
1 Balance
30

Ref
...
201
Balance
9,350
2,200

Accounts Payable Subsidiary Ledger
A
...

Date
Explanation
Nov
...


Debit

CP1

3,500

7-46

Credit

Balance
4,500
1,000

PROBLEM 7-2B (Continued)
C
...
1 Balance
19

G
...
1 Balance
15

Wex Bros
...
1 Balance
5

Ref
...


Debit

CP1

1,000

Ref
...
Hess & Co
...
Kimberlin

$1,000
1,200
$2,200

7-47

Credit

Balance
2,350
1,200

Credit

Balance
1,000
0

Credit

Balance
1,500
0

PROBLEM 7-3B

(a)

Purchases Journal
P1

Date

Account Credited (Debited)

Ref
...
Exp
...

Dr
...

7,500
360
8,000
8,700
900
4,500
7,200
500
900
0
500
39,060
(201)

7,500
360
8,000
8,700
900
4,500
7,200
500

36,760
(120)

900
500
2,300
(X)

Sales Journal
S1
Date

Account Debited

May 5
5
5
23
23

Ellie Company
DeShazer Bros
...

Liu Company

Accounts Receivable Dr
...

Sales Cr
...

Merchandise Inventory Cr
...

Merchandise Inventory
...

Supplies
...

Merchandise Inventory
...

Accounts Receivable—
Liu Company
...


Debit

Credit

500

100

300

112/

200

General Ledger

Ref
...

P1
G1
G1
S1

7-49

Debit
12,180

Credit
200

Debit
36,760

Credit
500
300
7,917

No
...
120
Balance
36,760
36,260
35,960
28,043

PROBLEM 7-3B (Continued)
Supplies
Date
Explanation
May 15
17
Equipment
Date
Explanation
May 28
Accounts Payable
Date
Explanation
May 31
10
17
20
Sales
Date
May 31

Explanation

Sales Returns and Allowances
Date
Explanation
May 26
Cost of Goods Sold
Date
Explanation
May 31
Advertising Expense
Date
Explanation
May 25

Ref
...

P1

Ref
...

S1

Ref
...

S1

Ref
...
126
Balance
900
800
No
...
201
Balance
39,060
38,560
38,460
38,160
No
...
412
Balance
200

Credit

No
...
610
Balance
900

PROBLEM 7-3B (Continued)
Accounts Receivable Subsidiary Ledger
Ellie Company
Date
Explanation
May 5

Ref
...

Date
Explanation
May 5
23

Ref
...

S1
S1
G1

Debit
1,500
3,600

Credit

200

Balance
1,500
5,100
4,900

Accounts Payable Subsidiary Ledger
Ruden Freight
Date
Explanation
May 3
18

Ref
...

P1
P1
G1

Debit

Credit
7,500
4,500

Balance
7,500
12,000
11,700

7-51

300

PROBLEM 7-3B (Continued)
Rodriguez Supply
Date
Explanation
May 15
17
28

Ref
...

P1
P1

Zeider Company
Date
Explanation
May 8
10

Amster Advertising
Date
Explanation
May 25

Credit
900
500

Balance
900
800
1,300

Debit

Credit
8,000
7,200

Balance
8,000
15,200

Ref
...

P1

Debit

Credit
900

Balance
900

100

500

(c) Accounts receivable balance
...

DeShazer Bros
...

Total
...


7-52

$11,980

$1,980
5,100
4,900
$11,980
$38,160

PROBLEM 7-3B (Continued)
Subsidiary account balances
Ruden Freight
...

Rodriguez Supply
...

Zeider Company
...

Total
...
4
17
25
30

Enos Co
...
Richter & Co
...

G
...


Invoice
Accounts Receivable Dr
...

No
...

Sales Cr
...

204
205
206
207

7,700
5,350
5,220
4,600
22,870
(112)(401)

5,390
3,745
3,654
3,220
16,009
(505)(120)

Purchases Journal

Date

Account Credited

Oct
...


P1
Merchandise Inventory Dr
...


Camacho Company
Finn Corp
...

Camacho Company

16,500
3,500
8,500
14,000
42,500
(120)(201)

General Journal
Date
Oct
...

Merchandise Inventory
...

Accounts Payable—
Robinson Co
...


Debit

201/
120/

210

126/
201/

G1
Credit

260

210

260

PROBLEM 7-4B (Continued)

Cash Receipts Journal
CR1
Account
Credited

Date
Oct
...


Enos Co
...
Richter &
Co
...

9,160
7,546
8,180
27,000
8,200

Sales
Accounts
Discounts Receivable
Dr
...


Cost of Goods Sold
Other
Dr
...

Cr
...

9,160

154

6,412

7,700
8,180

5,726
27,000

8,200

5,243
107
7,540 000
72,869
261
(101)
(414)

5,740

5,350
00
13,050
(112)

7,540
33,080
(401)

5,278
23,156
(505)(120)

27,000
(X)

Cash Payments Journal
CP1

Date

Account Debited

Ref
...
5
9
18

Supplies
Camacho Co
...

Land
Buildings
Advertising
Expense

126

23
26
30

Other
Accounts
Dr
...


Cash
Cr
...


2,125

2,125
3,290

3,290
140
145

21,000
14,000

35,000

610

400
37,605
(X)

400
57,065
(101)

7-55

19,790
(201)

330
(120)

PROBLEM 7-5B

(b)

Purchases Journal

Date

Account Credited

Feb
...

Accounts Payable Cr
...


J
...
Kneiser
J
...
Reedy

4,600
30,000
2,400
7,800
44,800
(120)(201)
Cash Payments Journal
CP1
Other
Accounts
Dr
...


Feb
...
Vopat
Equipment
P
...
Wyrick,
Drawing
J
...


1,250

157

Accounts
Payable
Dr
...
28
28

Explanation

92

30,000

300

1,250
4,508
7,000
29,700

392
(120)

1,100
2,400
45,958
(101)

1,100
2,400
37,000
(201)

9,350
(X)

(a), (d) & (g)

Cash
Cr
...

CR1
CP1

7-56

Debit
48,595

Credit
45,958

No
...
28
28

Merchandise Inventory
Date
Explanation
Feb
...
9
28

Explanation
Adjusting entry

Equipment
Date
Explanation
Feb
...

S1
CR1

Ref
...

CP1
G1

Ref
...

Feb
...
28
28

Ref
...
112
Balance
27,000
15,000

No
...
126
Balance
1,250
300

No
...
158
Balance
200

No
...
Wyrick, Capital
Date
Explanation
Feb
...
Wyrick, Drawing
Date
Explanation
Feb
...
28
28

Explanation

Sales Discounts
Date
Explanation
Feb
...
28
28
Supplies Expense
Date
Explanation
Feb
...
28 Adjusting entry

Ref
...

CP1

Ref
...

CR1

Ref
...

G1

Ref
...
301
Balance
30,000

No
...
401
Balance
27,000
33,500

Credit

No
...
505
Balance
17,820
22,110

Credit

No
...
711
Balance
200

PROBLEM 7-5B (Continued)
(c)

Accounts Receivable Subsidiary Ledger

S
...
3
13

Explanation

F
...
12

C
...
9
26

Ref
...

S1

Debit
8,000

Credit

Balance
8,000

Explanation

Ref
...

S1

Debit
7,000

M
...
26

Credit
5,500

6,500

Credit

Balance
5,500
0

Balance
7,000

Accounts Payable Subsidiary Ledger
G
...
21

Ref
...
Vopat
Date
Feb
...

P1
CP1

Debit

Credit
4,600

Balance
4,600
0

Explanation

7-59

4,600

PROBLEM 7-5B (Continued)
P
...
7
17

Ref
...
Nunez
Date
Feb
...

P1
CP1

(e)

Explanation

Debit

Credit
30,000

Balance
30,000
0

Credit
2,400

Balance
2,400
0

30,000

Debit
2,400

WYRICK CO
...

Accounts Receivable
...

Supplies
...

Accounts Payable
...
Wyrick, Capital
...
Wyrick, Drawing
...

Sales Discounts
...


7-60

Debit
$ 2,637
15,000
22,148
1,250
7,000

Credit

$ 7,800
30,000
1,100
33,500
55
22,110
$71,300

$71,300

PROBLEM 7-5B (Continued)
(f)

Accounts Receivable control account
...
Catt
...
Didde
...


$ 7,800

Accounts Payable subsidiary account
G
...


$ 7,800

(g)

General Journal

Date
Feb
...

Supplies
...

631
126

Debit
950

Depreciation Expense
...


711

G1
Credit

200

7-61

158

950

200

PROBLEM 7-5B (Continued)
(h)

WYRICK CO
...

Accounts Receivable
...

Supplies
...

Accumulated Depreciation—Equipment
...

A
...

A
...

Sales
...

Cost of Goods Sold
...

Depreciation Expense
...

(a)
Sales Journal

Date

Account Debited

Jan
...
Remy
J
...
Draves
S
...
Remy
R
...
Hachinski
J
...


Ref
...

Sales Cr
...
5
5
16
16
16
27
27
27

Terms

S
...
Laux
D
...
Kosko
S
...
Moreno
D
...
Yost

Ref
...

Accounts Payable Cr
...
7
7
10
13
13
20
21
31

Account
Credited

Ref
...
Ingles
B
...


Cash
Dr
...
Remy
J
...
Ingles

Sales
Cr
...


4,000
2,000
15,500
3,100
1,500
17,500
900
11,500
(112)

22,920
55,920
(401)

Cash Payments Journal
CP1
Date
Jan
...
Kosko
D
...
Packard, Drawing

Ref
...


Accounts
Payable
Dr
...


180
9,000
11,000

729
306

1,000
800
400

D
...
Kosko

15,000
13,700
200

Sales Salaries Expense
Office Salaries Expense

627
727

4,300
3,600
9,880
(X)

7-64

48,700
(201)

600
(125)

Cash
Cr
...


9

18

21

Account Titles and Explanations
Sales Returns and
Allowances
...
Fine
...
Kosko
...

(Received credit for
returned goods)
Accounts Payable—
R
...

Notes Payable
...

412

Debit
300

112/

201/

G1
Credit

300

200

512

200

201/
200

15,000

Office Supplies Expense
...


728
125

900

Insurance Expense
...


722/

200

Depreciation Expense
...

Interest Payable
...
31

31

31

31

Account Titles and Explanations
Merchandise Inventory (Jan
...

Sales
...

Income Summary
...

120
401

Debit
15,000
77,720

512
350

200

Income Summary
...
1)
...

Purchases
...

Rent Expense
...

Office Salaries Expense
...

Insurance Expense
...

Interest Expense
...

I
...


350
301

9,685

I
...

I
...


301
306

800

(b) & (e)
Cash
Date
Jan
...


Debit

CR1
CP1

67,420

7-66

Credit

59,180

No
...
1 Balance
31
31
9

Notes Receivable
Date
Explanation
Jan
...
1 Balance
31
31

Office Supplies
Date
Explanation
Jan
...
1 Balance
31

Equipment
Date
Explanation
Jan
...


Debit

S1
CR1
G1

21,800

Ref
...


Debit

G1
G1

Credit

Credit

15,000
20,000

Ref
...


900

Debit

G1

Ref
...
112
Balance
13,000
34,800
23,300
23,000

No
...
120
Balance
20,000
35,000
15,000

No
...
130
Balance
2,000
1,800

No
...

Jan
...
21 Balance

Accounts Payable
Date
Explanation
Jan
...
31

I
...
1 Balance
31
31

I
...
15
31

Ref
...

P1
CP1
G1
G1

Ref
...

G1
G1

Ref
...
158
Balance
1,500
1,625

Credit
15,000

No
...
201
Balance
35,000
87,600
38,900
38,700
23,700

No
...
301
Balance
78,700
88,385
87,585

No
...
31
31
31

Sales
Date
Jan
...
9
31

Purchases
Date
Explanation
Jan
...
18
31

Freight-In
Date
Explanation
Jan
...

G1
G1
G1

Ref
...

G1
G1

Ref
...

G1
G1

Ref
...
350
Balance
92,920
9,685
0

Credit
21,800
55,920

No
...
412
Balance
300
0

No
...
512
Balance
200
0

No
...
31
31

Depreciation Expense
Date
Explanation
Jan
...
31
31

Insurance Expense
Date
Explanation
Jan
...
31
31

Office Supplies Expense
Date
Explanation
Jan
...

CP1
G1

Ref
...

G1
G1

Ref
...

CP1
G1

Ref
...
627
Balance
4,300
0

No
...
718
Balance
30
0

No
...
727
Balance
3,600
0

No
...
12
31

Ref
...
729
Balance
1,000
0

Accounts Receivable Subsidiary Ledger
R
...
1 Balance
11
22

J
...
3
9
13
25

Explanation

B
...
1 Balance
7
25

S
...
1 Balance
7
11
21

Ref
...

S1
G1
CR1
S1

Debit
1,800

Ref
...


Debit

Credit

CR1
S1
CR1

7-71

2,000

Credit
4,000

900
900

Balance
7,500
5,500
9,000

Balance
4,000
0
900
0

COMPREHENSIVE PROBLEM (Continued)
B
...
3
13
22

Ref
...
Laux
Date
Jan
...
Kosko
Date
Explanation
Jan
...
Mikush
Date
Explanation
Jan
...
Moreno
Date
Explanation
Jan
...

P1
P1

Debit

Credit
2,700
1,200

Balance
2,700
3,900

Ref
...


Debit

G1

15,000

Ref
...
Yost
Date
Jan
...

P1
P1
P1

7-73

Debit

Credit
3,000
1,500
2,800

Balance
3,000
4,500
7,300

41,990
23,000
39,000
20,000
1,600
2,000
6,450

Cash
Accounts Receivable
Notes Receivable
Merchandise Inventory
Office Supplies
Prepaid Insurance
Equipment
Accum
...
Packard, Capital
I
...


196,820

200

77,720

78,700

1,500
15,000
23,700

Cr
...


900
200

30

(3)

(4)

1,255

125

(1)
(2)

Cr
...


,
196,975

200

77,720

1,625
15,000
23,700
30
78,700

Cr
...


800

41,990
23,000
39,000
15,000
700
1,800
6,450

Dr
...


Balance Sheet

128,740

77,720

15,000

Cr
...

Income Statement
For the Month Ended January 31, 2008
Sales revenues
Sales
...

Net sales revenue
...

Purchases
...

Net purchases
...

Total merchandise available for
sale
...

Cost of goods sold
...

Operating expenses
Selling expenses
Sales salaries expense
...

Rent expense
...

Insurance expense
...

Total admin
...

Total oper
...

Income from operations
...

Net income
...

Statement of Owner’s Equity
For the Month Ended January 31, 2008
I
...

Add: Net income
...

I
...


$78,700
9,685
88,385
800
$87,585

PACKARD CO
...

Notes receivable
...

Merchandise inventory
...

Prepaid insurance
...


$41,990
39,000
23,000
15,000
700
1,800

Capital assets
Equipment
...

Total assets
...

Accounts payable
...

Total liabilities
...
Packard, Capital
...

7-76

$15,000
23,700
30
$ 38,730

87,585
$126,315

COMPREHENSIVE PROBLEM (Continued)
(f)

PACKARD CO
...

Notes Receivable
...

Merchandise Inventory
...

Prepaid Insurance
...

Accumulated Depreciation—Equipment
...

Accounts Payable
...

I
...


Debit
$ 41,990
39,000
23,000
15,000
700
1,800
6,450
$

$127,940

Accounts Receivable balance
...
Draves
...
Fine
...
Hachinski
...
Remy
...

Subsidiary account balances
D
...

D
...

S
...


$23,700

$ 3,900
12,500
7,300
$23,700

7-77

BYP 7-1

FINANCIAL REPORTING PROBLEM—A MINI PRACTICE SET

(a)
Sales Journal
S1
Date
Jan
...
Cost of Goods Sold Dr
...

Ref
...

Merchandise Inventory Cr
...
Richey
J
...
Dvorak
S
...
Richey
R
...
Garcia
J
...
5
5
16
16
16
27
27
27

S
...
Lynch
D
...
Hoyt
S
...
Omara
D
...
Vogel

Terms
n/30
n/30
1/10, n/30
2/10, n/30
n/30
1/10, n/30
n/30
n/30

7-78

Ref
...

Accounts Payable Cr
...
7
7
10
13
13
20
21
31

Account
Credited

Ref
...
LaDew
B
...
Richey
J
...
LaDew

Cash
Dr
...

Cr
...


Cost of Goods Sold
Other
Dr
...

Cr
...


Jan
...
Hoyt
D
...
Bluma, Drawing

120

Other
Accounts
Dr
...


Office
Supplies
Dr
...

180
110

1,000
800
400

D
...
Hoyt

18,000
14,000

180
280
200

Sales Salaries Expense
Office Salaries Expense

627
727

4,300
3,800
10,135
(X)

7-79

52,000
(201)

600
(125)

750
(120)

Cash
Cr
...


18

21

Ref
...

($300 X
...


9

Account Titles and Explanations
Sales Returns and Allowances
...
Forbes
...
Hoyt
...

(Received credit for
returned goods)

201/
120/

200

Accounts Payable—R
...

Notes Payable
...

Office Supplies
...

Prepaid Insurance
...

Accumulated Depreciation—
Equipment
...

Interest Payable
...

Income Summary
...
31

31

31

Account Titles and Explanations
Income Summary
...

Sales Returns and
Allowances
...

Rent Expense
...

Office Salaries Expense
...

Insurance Expense
...

Interest Expense
...

350
414

Income Summary
...
Bluma, Capital
...
Bluma, Capital
...
Bluma, Drawing
...
1
31
31

Debit
57,145

G1
Credit
110

412
505
729
627
727
728
722
711
718

300
46,560
1,000
4,300
3,800
700
200
125
50

20,755

800

General Ledger

Explanation
Balance

Accounts Receivable
Date
Explanation
Jan
...


Debit

CR1
CP1

Credit

68,290
61,985

Ref
...
101
Balance
35,750
104,040
42,055

No
...
1 Balance

Merchandise Inventory
Date
Explanation
Jan
...
1 Balance
31
31

Prepaid Insurance
Date
Explanation
Jan
...
1 Balance

Ref
...


Debit

P1
S1
CR1
CP1
CP1
G1
G1

Credit

Credit

62,000
12,600
34,140
235
750
180
200

Ref
...


700

Debit

G1

Ref
...
115
Balance
39,000

No
...
125
Balance
1,000
1,600
900

No
...
157
Balance
6,450

BYP 7-1 (Continued)
Accumulated Depreciation—Equipment
Date
Explanation
Ref
...
1 Balance
31
G1

Notes Payable
Date
Explanation
Jan
...
1 Balance
31
31
18
21

Interest Payable
Date
Explanation
Jan
...
Bluma, Capital
Date
Explanation
Jan
...
Bluma, Drawing
Date
Explanation
Jan
...

G1

Ref
...

G1

Ref
...

CP1
G1

7-83

125

Debit

Debit

Debit

No
...
200
Balance
15,000

Credit

Credit
62,000

52,000
200
15,000

Debit

Debit

Credit
50

Credit
20,755

800

Debit
800

Credit
800

No
...
230
Balance
50

No
...
306
Balance
800
0

BYP 7-1 (Continued)
Income Summary
Date
Explanation
Jan
...
31
31
31

Explanation

Sales Returns and Allowances
Date
Explanation
Jan
...
31
31

Ref
...

S1
CR1
G1

Ref
...

CR1
G1

Debit

Credit
77,900

No
...
401
Balance
21,000
77,900
0

Credit

No
...
31
31
9
31

Explanation

No
...
505

Ref
...
31
31

Depreciation Expense
Date
Explanation
Jan
...
31
31

Insurance Expense
Date
Explanation
Jan
...
31
31

Office Supplies Expense
Date
Explanation
Jan
...

CP1
G1

Ref
...

G1
G1

Ref
...

CP1
G1

Ref
...
627
Balance
4,300
0

No
...
718
Balance
50
0

No
...
727
Balance
3,800
0

No
...
12
31

Ref
...
729
Balance
1,000
0

Accounts Receivable Subsidiary Ledger
R
...
1 Balance
11
22

J
...
3
9
13
25

B
...
1 Balance
7
25
S
...
1 Balance
7
11
21

Ref
...

S1
G1
CR1
S1

Debit
1,800

Ref
...


Debit

Credit

CR1
S1
CR1

7-86

2,000

Credit
4,000

900
900

Balance
7,500
5,500
9,000

Balance
4,000
0
900
0

BYP 7-1 (Continued)
B
...
3
13
22

Ref
...
Lynch
Date
Explanation
Jan
...
Hoyt
Date
Jan
...
Moses
Date
Explanation
Jan
...
Omara
Date
Explanation
Jan
...

P1
P1

Debit

Credit
2,200
1,200

Balance
2,200
3,400

Ref
...


Debit

G1

15,000

Ref
...
Vogel
Date
Jan
...

P1
P1
P1

7-88

Debit

Credit
5,000
1,500
5,400

Balance
5,000
6,500
11,900

42,055
22,200
39,000
32,725
1,600
2,000
6,450

Cash
Accounts Receivable
Notes Receivable
Merchandise Inventory
Office Supplies
Prepaid Insurance
Equipment
Accum
...
Bluma, Capital
M
...


202,900

77,900

78,700

1,500
15,000
29,800

Cr
...


700
200

1,075

50

(3)

(4)

125

(1)
(2)

Cr
...


203,075

77,900

1,625
15,000
29,800
50
78,700

Cr
...


800

42,055
22,200
39,000
32,725
900
1,800
6,450

Dr
...


Balance Sheet

145,930

77,900

Cr
...

Income Statement
For the Month Ended January 31, 2008
Sales revenues
Sales
...

Sales returns and
allowances
...

Cost of goods sold
...

Operating expenses
Selling expenses
Sales salaries expense
...

Rent expense
...

Insurance expense
...

Total administrative
expenses
...

Income from operations
...


50

Net income
...

Owner’s Equity Statement
For the Month Ended January 31, 2008
M
...

Add: Net income
...

M
...


$78,700
20,755
99,455
800
$98,655

BLUMA CO
...

Accounts receivable
...

Merchandise inventory
...

Prepaid insurance
...


$42,055
22,200
39,000
32,725
900
1,800

Property, plant, and equipment
Equipment
...

Total assets
...

Accounts payable
...

Total liabilities
...
Bluma, Capital
...

7-91

$15,000
29,800
50
$ 44,850

98,655
$143,505

BYP 7-1 (Continued)
(f)

BLUMA CO
...

Notes Receivable
...

Merchandise Inventory
...

Prepaid Insurance
...

Accumulated Depreciation—Equipment
...

Accounts Payable
...

M
...


Debit
$ 42,055
39,000
22,200
32,725
900
1,800
6,450
$

$145,130

Accounts Receivable balance
...
Dvorak
...
Forbes
...
Garcia
...
Richey
...

Subsidiary account balances
D
...

D
...

S
...


$29,800

$ 3,400
14,500
11,900
$29,800

7-92

BYP 7-2

EXPLORING THE WEB

(a) Some of the key features of the general ledger module highlighted by
the company are:
Highly flexible account and fiscal period setup, including different
account structures for separate companies
...

Statistical accounts for tracking nonfinancial information, such as
head count and square footage
...

Unlimited budgets, unlimited years of history
...

Vendor classes provide a fast, consistent method for entering new
records by entering common information for you
...

Automatically calculates the number of days it takes to pay each
vendor
...

Put transactions on “hold” until you want to pay them
...

Complete vendor and transaction history
...

(1) Sales Journal columns:
Date
...

Invoice Number
...

Accounts Receivable, Dr
...

Cost of Goods Sold, Dr
...

(2) Purchases Journal columns:
Date
...

Terms
...

Accounts Payable, Cr
...

Merchandise Inventory—Parts, Dr
...

(3) Cash Receipts Journal columns:
Date
...

Reference
...

Accounts Receivable, Cr
...

Sales—Parts, Cr
...

Other Accounts, Cr
...
and Merchandise Inventory—
Appliances, Cr
...
and Merchandise Inventory—Parts, Cr
...
column is not needed because all credit
terms are net/30 days
...

Check Number
...

Reference
...

Accounts Payable, Dr
...

Salaries Expense, Dr
...

Merchandise Inventory—Parts, Cr
...

(b) Hughey & Payne should have:
(1) An accounts receivable control account with individual customers’
accounts in a customers’ subsidiary ledger
...

The use of control accounts and subsidiary ledgers will: (1) provide
necessary up-to-date information on specific customer and creditor
balances, (2) free the general ledger of excessive detail, (3) help locate
errors in individual accounts, and (4) make possible a division of labor in
posting
...
Jim Houser
2 Main Street
Central City, Michigan 48172
Dear Mr
...
Unfortunately, the inefficiencies in recording transactions
have continued at an even higher rate
...
In addition, the
daily posting of transactions continues to be very time consuming
...
Because of
the increased volume of business, I believe it is time for us to use special
journals for journalizing transactions
...
There would be four special journals:
1
...

3
...


Sales journal—for all sales of merchandise on account
...

Purchases journal—for all purchases of merchandise on account
...


To use special journals, we will need columnar journal paper which can be
obtained at any office supply store at very low cost
...
Special journals will permit
a division of labor so that all three of us can be recording transactions at the
same time
...

Special journals also make it possible to do some postings monthly
...
As a result,
it should free up some time for us to do other things!
I am confident that the use of special journals will improve the efficiency of the
accounting department
...

Yours sincerely,
Barb

7-96

BYP 7-5

ETHICS CASE

(a) The stakeholders in this case are:
Jose Molina, manager of Roniger’s centralized computer accounting
operation
...

(b) Jose’s instructions to assign the Bayport code to all uncoded and
incorrectly coded sales documents overstates the sales of Bayport
and understates the sales of Freeport and Rockport, thereby affecting
the employee bonus plan
...
He is
padding the sales of his wife’s, relatives’, and friends’ Bayport division
sales and unfairly aiding them in the bonus competition
...
This would prevent the
manager from arbitrarily designating the division to be credited for the
uncoded sales
...
Once entries are made in the journal, they are posted to the ledger
by using the Post function
...
These
include the following: Chart of Accounts, Trial Balance, General Ledger,
Subsidiary Ledger, Journals, Balance Sheet, Income Statement, Owner’s
Equity Statement

---