CHAPTER 8 ACCOUNTING FOR PURCHASES, ACCOUNTS PAYABLE, AND CASH PAYMENTS Chapter Opener: Thinking Critically Students may discuss one or more of the following merchandise selection tools: consumer surveys, customer requests, or sales history reports Fast Facts Net revenues for 2009 declined 8%, from $3.4 billion in 2008 to $3.1 billion in 2009. Williams-Sonona, Inc. owns and operates six separate, home-centered retail businesses: Williams-Sonoma, Pottery Barn, Pottery Barn Kids, PBTeen, Williams-Sonoma Home and West Elm. The company operates 590 retail stores. Managerial Implications: Thinking Critically Answers will vary. Students should recognize the need for checks and balances for avoiding theft and waste. Discussion Questions These questions are designed to check students understanding of new terms, concepts, and procedures presented in the chapter. 1. Authorization of purchase, check-in of goods, verification of invoice, proper authorization of payment, division of labor and tasks, use of prenumbered forms. 2. Documentation of credit issued. 3. Allowance made for damaged merchandise. 4. Documentation of returned merchandise. 5. List of all creditors and the balance owed by each. Prepared so that its total can be proved against the balance of the Accounts Payable account. 6. The Accounts Payable account is the control account; summarizes the balances of the creditor accounts. 7. Individual accounts of all creditors. 8. Helps pay bills promptly and maintain a good credit reputation. 9. Add Freight In to Purchases, then deduct Purchases Returns and Allowances and Purchases Discounts. 10. Purchases journal. 11. Purchase invoice denotes incoming merchandise, sales invoice denotes outgoing (sold) merchandise. 12. Debit. 13. Income Statement in the Cost of Goods Sold section. 14. Provides a separate record.
15. a. Net amount of the invoice is due 30 days after the date of the invoice. b. If the invoice is paid within 10 days of its date, a 2 percent discount may be taken; otherwise, the total amount is due in 30 days. c. The amount of the invoice is due 10 days after the end of the month in which the invoice is issued. d. Payment in full is due 20 days after date of the invoice. e. If the invoice is paid within 10 days of its date, 1% discount may be taken; otherwise, the total amount is due in 20 days. f. If payment is made within 5 days of its date, a 3 percent discount may be taken; otherwise, the total amount is due in 30 days. g. Payment in full is due 15 days after the end of the month in which the invoice is issued.
EXERCISE 8.1 Dr Purchases Cr Purchases Discounts Cr Purchases Return and Allowances Dr Freight In
EXERCISE 8.2 GENERAL JOURNAL PAGE 1 1 2 June 4 Purchases 9 5 5 00 2 3 Accounts Payable/Schmidt Company 9 5 5 00 3 4 Purchased merchandise on account, 4 5 Invoice 100, n/30 5 6 6 7 15 Purchases 1 4 4 0 00 7 8 Cash 1 4 4 0 00 8 9 Purchased merchandise for cash 9 10 10 11 30 Accounts Payable/Schmidt Company 9 5 5 00 11 12 Cash 9 5 5 00 12 13 Paid amount due, Invoice 100 13 14 14
EXERCISE 8.3 GENERAL JOURNAL PAGE DATE DESCRIPTION Post 1 1 2 Apr. 1 Purchases 1 2 1 0 00 2 3 Cash 1 2 1 0 00 3 4 Purchased merchandise for cash 4 5 5 6 2 Cash 1 0 8 00 6 7 Purchases Returns and Allowances 1 0 8 00 7 8 Returned merchandise purchased April 1 for refund 8 9 9 10 4 Purchases 6 6 1 00 10 11 Freight In 3 6 00 11 12 Accounts Payable/Stein Distributors 6 9 7 00 12 13 Purchased merchandise on account, 13 14 Invoice 125, n/30 14 15 15 16 7 Accounts Payable/Stein Distributors 4 3 00 16 17 Purchases Returns and Allowances 4 3 00 17 18 Received Credit Memo 202 for return of 18 19 damaged merchandise 19 20 20 21 30 Accounts Payable/Stein Distributors ($697 $43) 6 5 4 00 21 22 Cash 6 5 4 00 22 23 Paid amount due on Invoice 125 after receipt 23 24 of Credit Memo 202, check 1458 24 25 25
EXERCISE 8.4 GENERAL JOURNAL PAGE DEBIT CREDIT 1 1 2 Apr. 1 Purchases 1 0 0 0 00 2 3 Freight In 2 0 00 3 4 Accounts Payable/O Rourke Fabricators 1 0 2 0 00 4 5 Purchased merchandise on account, 5 6 Invoice 885, 2/10, n/30 6 7 7 8 9 Accounts Payable/O Rourke Fabricators 1 0 2 0 00 8 9 Purchases Discounts (2% x $1,000) 2 0 00 9 10 Cash ($1,020 - $20) 1 0 0 0 00 10 11 Paid amount due on Invoice 885, Check 457 11 12 12 13 15 Purchases 7 5 0 00 13 14 Freight In 2 5 00 14 15 Accounts Payable/Kroll Company 7 7 5 00 15 16 Purchased merchandise on account, 16 17 Invoice 145, 2/10, n/30 17 18 18 19 17 Accounts Payable/Kroll Company 5 0 00 19 20 Purchases Returns and Allowances 5 0 00 20 21 Received Credit Memo 332 for return of 21 22 damaged merchandise 22 23 23 24 24 Accounts Payable/Kroll Company ($775 - $50) 7 2 5 00 24 25 Purchases Discounts (2% x ($775 - $50)) 1 4 00 25 26 Cash ($725 - $14) 7 1 1 00 26 27 Paid amount due on Invoice 145, 27 28 Check 470 28 29 29
EXERCISE 8.5 GENERAL JOURNAL PAGE DATE DESCRIPTION 1 1 2 March 8 Purchases ($4,000 - $800 = $3,200; $3,200 - $320 = $2,880) 2 8 8 0 00 2 3 Accounts Payable/Classy Accessories 2 8 8 0 00 3 4 Purchased merchandise on account, 4 5 Invoice 1091, 1/10, n/30 5 6 6 7 17 Accounts Payable/Classy Accessories 2 8 8 0 00 7 8 Purchases Discounts (1% x $2,880) 2 8 80 8 9 Cash ($2,880 - $28.80) 2 8 5 1 20 9 10 Paid amount due on Invoice 1091, 10 11 Check 185 11 12 12 Post DEBIT CREDIT EXERCISE 8.6 DATE GENERAL JOURNAL PAGE 20 DESCRIPTION 1 1 2 Feb. 10 Purchases 2 0 0 0 00 2 3 Accounts Payable/Schmidt, Inc. 2 0 0 0 00 3 4 Purchased merchandise on account., 4 5 Invoice 1980, terms 2/10, n/30 5 6 6 7 13 Accounts Payable/Schmidt, Inc. 1 0 0 00 7 8 Purchases Returns and Allowances 1 0 0 00 8 9 Received Credit Memorandum 230 for return 9 10 of damaged merchandise, Invoice 1980 10 11 11 12 19 Accounts Payable/Schmidt, Inc. ($2,000 - $100) 1 9 0 0 00 12 13 Purchases Discounts ($2,000 - $100) x 2% 3 8 00 13 14 Cash ($1,900 - $38) 1 8 6 2 00 14 15 Paid amount owed on Invoice 1980 15 16 less return of February 13, Check #2010 16 17 17 Post DEBIT CREDIT
EXERCISE 8.6 (continued) DATE GENERAL JOURNAL PAGE 20 DESCRIPTION Post 1 1 2 Feb. 10 Accounts Receivable/Bryant Company 2 0 0 0 00 2 3 Sales 2 0 0 0 00 3 4 Sold merchandise on account., 4 5 Invoice 1980, terms 2/10, n/30 5 6 6 7 13 Sales Returns and Allowances 1 0 0 00 7 8 Accounts Receivable/Bryant Company 1 0 0 00 8 9 Accepted return of damaged merchandise, Credit 9 10 Memorandum 230; original sale made on 10 11 Invoice 1980, February 10 11 12 12 13 19 Sales Discounts 3 8 00 13 14 Cash 1 8 6 2 00 14 15 Accounts Receivable/Bryant Company 1 9 0 0 00 15 16 Received payment on on Invoice 1980, 16 17 less sales discount 17 18 18 EXERCISE 8.7 Purchases Add freight in Delivered Cost of Purchases Less Purchase Returns and Allowances Purchases Discounts Net Delivered Cost of Purchases $2,810 2,050 $40,795 2,226 43,021 4,860 $38,161
EXERCISE 8.8 GENERAL JOURNAL PAGE 40 DEBIT CREDIT 1 1 2 Jan. 8 Accounts Payable/Stamos Distributors 202 2 0 0 00 2 3 Cash 2 0 0 00 3 4 Made partial payment on account, check 1240 4 5 5 6 10 Accounts Payable/Evans Enterprises 202 1 0 0 00 6 7 Purchases Returns and Allowances 1 0 0 00 7 8 Received Credit Memorandum 123 as allowance 8 9 for discolored merchandise 9 10 10
EXERCISE 8.8 (continued) ACCOUNT Accounts Payable ACCOUNT NO. DATE ITEM Post BALANCE Jan. 1 Balance 5 1 0 0 00 8 J40 2 0 0 00 4 9 0 0 00 10 J40 1 0 0 00 4 8 0 0 00 202 NAME ADDRESS Evans Enterprises DEBIT TERMS CREDIT BALANCE Jan. 1 Balance 1 1 0 0 00 10 CM 123 J40 1 0 0 00 1 0 0 0 00 NAME ADDRESS Stamos Distributors DEBIT TERMS CREDIT BALANCE Jan. 1 Balance 2 6 0 0 00 8 J40 2 0 0 00 2 4 0 0 00 NAME ADDRESS DATE Tonetta Company DESCRIPTION Post DEBIT TERMS CREDIT BALANCE Jan. 1 Balance 1 4 0 0 00
EXERCISE 8.9 Trends, Inc. Schedule of Accounts Payable January 31, Evans Enterprises 1 0 0 0 00 Stamos Distributors 2 4 0 0 00 Tonetta Company 1 4 0 0 00 Total 4 8 0 0 00 2. Does the total of your accounts payable schedule agree with the balance of the accounts payable account in the general ledger at January 31,? Yes. The total of the schedule of accounts payable is $4,800, and the balance of the Accounts Payable account is $4,800.
PROBLEM 8.1A GENERAL JOURNAL PAGE 1 1 1 2 April 1 Purchases 501 9 6 5 00 2 3 Freight In 502 1 1 00 3 4 Accounts Payable/Camera & Film Products 205 9 7 6 00 4 5 Purchased merchandise on account, 5 6 Invoice 825, n/30 6 7 7 8 3 Purchases 501 8 1 0 00 8 9 Accounts Payable/Vision Supplies, Inc. 205 8 1 0 00 9 10 Purchased lenses on account, 10 11 Invoice 998, n/30 11 12 12 13 11 Purchases 501 4 7 0 0 00 13 14 Accounts Payable/Optical Products 205 4 7 0 0 00 14 15 Purchased DVD camcorders on account, 15 16 Invoice 4101, n/30 16 17 17 18 15 Purchases 501 2 1 0 0 00 18 19 Cash 101 2 1 0 0 00 19 20 Recorded various cash purchases for April 1 15. 20 21 21 22 26 Purchases 501 5 5 0 0 00 22 23 Freight In 502 2 1 8 00 23 24 Accounts Payable/Myers Brothers Camera Supplies 205 5 7 1 8 00 24 25 Purchased lighting equipment on account, 25 26 Invoice 9288, n/30 26 27 27 28 27 Accounts Payable/Vision Supplies, Inc. 205 5 4 0 00 28 29 Cash 101 5 4 0 00 29 30 Issues chk 102 for partial payment of Invoice 998 30 31 31 32 30 Purchases 501 2 5 7 0 00 32 33 Cash 101 2 5 7 0 00 33 34 Recorded various cash purchases for April 16 30. 34 35 35 36 30 Accounts Payable/Camera & Film Products 205 9 7 6 00 36 37 Cash 101 9 7 6 00 37 38 Issued chk 103 for full payment of Invoice 825 38 39 39
PROBLEM 8.1A (continued) ACCOUNT Cash GENERAL LEDGER ACCOUNT NO. April 1 Balance 10 9 0 0 00 15 J1 2 1 0 0 00 8 8 0 0 00 27 J1 5 4 0 00 8 2 6 0 00 30 J1 2 5 7 0 00 5 6 9 0 00 30 J1 9 7 6 00 4 7 1 4 00 101 BALANCE ACCOUNT Accounts Payable ACCOUNT NO. April 1 J1 9 7 6 00 9 7 6 00 3 J1 8 1 0 00 1 7 8 6 00 11 J1 4 7 0 0 00 6 4 8 6 00 26 J1 5 7 1 8 00 12 2 0 4 00 27 J1 5 4 0 00 11 6 6 4 00 30 J1 9 7 6 00 10 6 8 8 00 205 BALANCE ACCOUNT Purchases ACCOUNT NO. April 1 J1 9 6 5 00 9 6 5 00 3 J1 8 1 0 00 1 7 7 5 00 11 J1 4 7 0 0 00 6 4 7 5 00 15 J1 2 1 0 0 00 8 5 7 5 00 26 J1 5 5 0 0 00 14 0 7 5 00 30 J1 2 5 7 0 00 16 6 4 5 00 501 BALANCE
PROBLEM 8.1A (continued) ACCOUNT Freight In GENERAL LEDGER ACCOUNT NO. 502 BALANCE April 1 J1 1 1 00 1 1 00 26 J1 2 1 8 00 2 2 9 00 Analyze: The total cash payments on account during April were $1,516.
PROBLEM 8.2A GENERAL JOURNAL PAGE 1 1 1 2 Sept. 2 Purchases 501 5 6 0 0 00 2 3 Freight In 502 2 1 0 00 3 4 Accounts Payable/Colorado Ski Shop 201 5 8 1 0 00 4 5 Purchased ski boots on account, 5 6 Invoice 6672, n/30 6 7 7 8 3 Purchases 501 11 2 0 0 00 8 9 Accounts Payable/Alaska Supply Company 201 11 2 0 0 00 9 10 Purchased skis on account, 10 11 Invoice 5916, terms 1/10, n/30 11 12 12 13 7 Accounts Payable/Colorado Ski Shop 201 9 0 0 00 13 14 Purchases Returns and Allowances 503 9 0 0 00 14 15 Received Credit Memorandum 165 for $900 15 16 for damaged ski boots purchased 16 17 on Sept. 2. 17 18 18 19 11 Purchases 501 4 0 0 0 00 19 20 Accounts Payable/Cold Mountain Clothing Company 201 4 0 0 0 00 20 21 Purchased ski jackets on account, 21 22 Invoice 4091, n/30 22 23 23 24 12 Accounts Payable/Alaska Supply Company 201 11 2 0 0 00 24 25 Purchases Discounts ($11,200 x 1%) 504 1 1 2 00 25 26 Cash ($11,200 - $112) 101 11 0 8 8 00 26 27 Paid amount due on Invoice 5916, Check 104 27 28 28 29 22 Purchases 501 3 7 6 0 00 29 30 Freight In 502 1 2 0 00 30 31 Accounts Payable/Alaska Supply Company 201 3 8 8 0 00 31 32 Purchased ski poles on account, 32 33 Invoice 5950, terms 1/10, n/30 33 34 34
PROBLEM 8.2A (continued) GENERAL JOURNAL PAGE 2 1 1 2 Sept. 23 Purchases 501 2 2 5 0 00 2 3 Accounts Payable/Swenson Ski Goods 201 2 2 5 0 00 3 4 Purchased ski pants on account, 4 5 Invoice 528, n/30 5 6 6 7 25 Accounts Payable/Swenson Ski Goods 201 3 0 0 00 7 8 Purchases Return and Allowances 503 3 0 0 00 8 9 Received Credit Memorandum 245 for $300 9 10 for defective ski pants, original purchase 10 11 made on Sept. 23. 11 12 12 13 27 Purchases 501 2 6 0 0 00 13 14 Freight In 502 1 0 0 00 14 15 Accounts Payable/Colorado Ski Shop 201 2 7 0 0 00 15 16 Purchased ski sweaters on account, 16 17 Invoice 6722, n/30 17 18 18 19 30 Accounts Payable/Colorado Ski Shop 201 4 9 1 0 00 19 20 Cash ($5,810 - $900) 101 4 9 1 0 00 20 21 Paid amount due on Invoice 6672 less return of 21 22 Sept. 7, Check 110 22 23 23 Analyze: The amount of the cash discount on September 12 was $112.
PROBLEM 8.3A ACCOUNT Cash GENERAL LEDGER ACCOUNT NO. Sept 1 Balance 25 0 0 0 00 12 J1 11 0 8 8 00 13 9 1 2 00 30 J2 4 9 1 0 00 9 0 0 2 00 101 BALANCE ACCOUNT Accounts Payable DATE DESCRIPTION Post ACCOUNT NO. Sept 2 J1 5 8 1 0 00 5 8 1 0 00 3 J1 11 2 0 0 00 17 0 1 0 00 7 J1 9 0 0 00 16 1 1 0 00 11 J1 4 0 0 0 00 20 1 1 0 00 12 J1 11 2 0 0 00 8 9 1 0 00 22 J1 3 8 8 0 00 12 7 9 0 00 23 J2 2 2 5 0 00 15 0 4 0 00 25 J2 3 0 0 00 14 7 4 0 00 27 J2 2 7 0 0 00 17 4 4 0 00 30 J2 4 9 1 0 00 12 5 3 0 00 201 BALANCE ACCOUNT Purchases ACCOUNT NO. BALANCE Sept 2 J1 5 6 0 0 00 5 6 0 0 00 3 J1 11 2 0 0 00 16 8 0 0 00 11 J1 4 0 0 0 00 20 8 0 0 00 22 J1 3 7 6 0 00 24 5 6 0 00 23 J2 2 2 5 0 00 26 8 1 0 00 27 J2 2 6 0 0 00 29 4 1 0 00 501
PROBLEM 8.3A (continued) ACCOUNT Freight In ACCOUNT NO. 502 BALANCE Sept 2 J1 2 1 0 00 2 1 0 00 22 J1 1 2 0 00 3 3 0 00 27 J2 1 0 0 00 4 3 0 00 ACCOUNT Purchases Returns and Allowances ACCOUNT NO. 503 BALANCE Sept 7 J1 9 0 0 00 9 0 0 00 25 J2 3 0 0 00 1 2 0 0 00 ACCOUNT Purchases Discounts ACCOUNT NO. 504 BALANCE Sept 12 J1 1 1 2 00 1 1 2 00
PROBLEM 8.3A (continued) NAME ADDRESS DATE ACCOUNTS PAYABLE SUBSIDIARY LEDGER Alaska Supply Company DESCRIPTION Post DEBIT CREDIT TERMS 1/10, n/30 BALANCE Sept. 3 Invoice 5916 J1 11 2 0 0 00 11 2 0 0 00 12 J1 11 2 0 0 00-0 - 22 Invoice 5950 J1 3 8 8 0 00 3 8 8 0 00 NAME ADDRESS DATE Cold Mountain Clothing Company DESCRIPTION Post DEBIT CREDIT TERMS n/30 BALANCE Sept. 11 Invoice 4091 J1 4 0 0 0 00 4 0 0 0 00 NAME ADDRESS DATE Colorado Ski Shop DESCRIPTION Post DEBIT CREDIT TERMS Sept. 2 Invoice 6672 J1 5 8 1 0 00 5 8 1 0 00 7 CM 165 J1 9 0 0 00 4 9 1 0 00 27 Invoice 6722 J2 2 7 0 0 00 7 6 1 0 00 30 J2 4 9 1 0 00 2 7 0 0 00 n/30 BALANCE NAME ADDRESS DATE Swenson Ski Goods DESCRIPTION Post DEBIT CREDIT TERMS BALANCE Sept. 23 Invoice 528 J2 2 2 5 0 00 2 2 5 0 00 25 CM 245 J2 3 0 0 00 1 9 5 0 00 n/30
PROBLEM 8.3A (continued) Big Elk Ski Shop Schedule of Accounts Payable September 30, Alaska Supply Company 3 8 8 0 00 Cold Mountain Clothing Company 4 0 0 0 00 Colorado Ski Shop 2 7 0 0 00 Swenson Ski Goods 1 9 5 0 00 Total 1 2 5 3 0 00 The balance of the Accounts Payable control account is $12,530. Analyze: $5,600 + $4,000 + $2,250 + $2,600 = $14,450. The portion of purchases in September for clothing items is $14,450.
PROBLEM 8.4A GENERAL JOURNAL PAGE 1 1 1 2 June 1 Purchases 501 3 5 0 0 00 2 3 Cash 101 3 5 0 0 00 3 4 Purchased merchandise, Check 101 4 5 5 6 3 Purchases 501 1 2 0 0 00 6 7 Accounts Payable/BioCenter Inc. 205 1 2 0 0 00 7 8 Purchased merchandise on account, 8 9 Invoice 606, terms 1/10, n/30 9 10 10 11 5 Purchases 501 4 8 5 0 00 11 12 Freight In 504 1 0 0 00 12 13 Accounts Payable/New Concepts Corporation 205 4 9 5 0 00 13 14 Purchased merchandise on account, 14 15 Invoice 1011, terms 2/10, n/30 15 16 16 17 9 Accounts Payable/BioCenter Inc. 205 1 2 0 0 00 17 18 Purchases Discounts ($1,200 x 1%) 503 1 2 00 18 19 Cash ($1,200 - $12) 1 1 8 8 00 19 20 Paid amount due to Invoice 606, 20 21 Check 102 21 22 22 23 10 Accounts Payable/New Concepts Corporation 205 2 0 0 00 23 24 Purchases Returns and Allowances 502 2 0 0 00 24 25 Received Credit Memorandum 227 for return 25 26 of damaged merchandise 26 27 27 28 11 Purchases 501 1 5 8 0 00 28 29 Accounts Payable/BioCenter Inc. 205 1 5 8 0 00 29 30 Purchased merchandise on account, 30 31 Invoice 612, terms 1/10, n/30 31 32 32
PROBLEM 8.4A (continued) GENERAL JOURNAL PAGE 2 1 1 2 June 14 Accounts Payable/New Concepts Corporation ($4,950 - $200) 205 4 7 5 0 00 2 3 Purchases Discounts ($4,650 x 2%) 503 9 3 00 3 4 Cash 101 4 6 5 7 00 4 5 Paid amount owed on Invoice 1011, 5 6 Check 103 6 7 7 8 15 Purchases ($8,200 - $1,230 = $6,970; $6,970 - $697 = $6,273) 501 6 2 7 3 00 8 9 Accounts Payable/Park Research 205 6 2 7 3 00 9 10 Purchased merchandise on account, 10 11 Invoice 1029, terms n/30 11 12 12 13 20 Purchases 501 2 0 0 0 00 13 14 Cash 101 2 0 0 0 00 14 15 Purchased merchandise, Check 104 15 16 16 17 25 Cash 101 1 8 0 00 17 18 Purchases Returns and Allowances 502 1 8 0 00 18 19 Received cash for return of defective merchandise 19 20 purchased June 20 20 21 21 22 30 Purchases 501 2 2 0 0 00 22 23 Freight In 504 7 5 00 23 24 Accounts Payable/New Concepts Corporation 205 2 2 7 5 00 24 25 Purchased merchandise on account, 25 26 Invoice 1080, terms 2/10, n/30 26 27 27 Analyze: The amount of trade discounts received on the June 15 purchase from Park Research was $1,927 (List price, $8,200, less purchase price, $6,273).
PROBLEM 8.5A GENERAL LEDGER ACCOUNT Cash ACCOUNT NO. BALANCE June 1 Balance 36 4 0 0 00 1 J1 3 5 0 0 00 32 9 0 0 00 9 J1 1 1 8 8 00 31 7 1 2 00 14 J2 4 6 5 7 00 27 0 5 5 00 20 J2 2 0 0 0 00 25 0 5 5 00 25 J2 1 8 0 00 25 2 3 5 00 101 ACCOUNT Accounts Payable ACCOUNT NO. BALANCE June 3 J1 1 2 0 0 00 1 2 0 0 00 5 J1 4 9 5 0 00 6 1 5 0 00 9 J1 1 2 0 0 00 4 9 5 0 00 10 J1 2 0 0 00 4 7 5 0 00 11 J1 1 5 8 0 00 6 3 3 0 00 14 J2 4 7 5 0 00 1 5 8 0 00 15 J2 6 2 7 3 00 7 8 5 3 00 30 J2 2 2 7 5 00 10 1 2 8 00 201 ACCOUNT Purchases ACCOUNT NO. BALANCE June 1 J1 3 5 0 0 00 3 5 0 0 00 3 J1 1 2 0 0 00 4 7 0 0 00 5 J1 4 8 5 0 00 9 5 5 0 00 11 J1 1 5 8 0 00 11 1 3 0 00 15 J2 6 2 7 3 00 17 4 0 3 00 20 J2 2 0 0 0 00 19 4 0 3 00 30 J2 2 2 0 0 00 21 6 0 3 00 501
PROBLEM 8.5A (continued) ACCOUNT Purchases Returns and Allowances ACCOUNT NO. 502 BALANCE June 10 J1 2 0 0 00 2 0 0 00 25 J2 1 8 0 00 3 8 0 00 ACCOUNT Purchases Discounts ACCOUNT NO. 503 BALANCE June 9 J1 1 2 00 1 2 00 14 J2 9 3 00 1 0 5 00 ACCOUNT Freight In ACCOUNT NO. 504 BALANCE DEBIT June 5 J1 1 0 0 00 1 0 0 00 30 J2 7 5 00 1 7 5 00 CREDIT
PROBLEM 8.5A (continued) NAME ADDRESS DATE ACCOUNTS PAYABLE SUBSIDIARY LEDGER BioCenter Inc. DESCRIPTION Post DEBIT CREDIT TERMS 1/10, n/30 BALANCE June 3 Invoice 606 J1 1 2 0 0 00 1 2 0 0 00 9 J1 1 2 0 0 00 0 00 11 Invoice 612 J1 1 5 8 0 00 1 5 8 0 00 NAME ADDRESS DATE New Concepts Corporation DESCRIPTION Post DEBIT CREDIT TERMS 2/10, n/30 BALANCE June 5 Invoice 1011 J1 4 9 5 0 00 4 9 5 0 00 10 CM 227 J1 2 0 0 00 4 7 5 0 00 14 J2 4 7 5 0 00 0 00 30 Invoice 1080 J2 2 2 7 5 00 2 2 7 5 00 NAME ADDRESS DATE Park Research DESCRIPTION Post DEBIT CREDIT TERMS BALANCE June 15 Invoice 1029 J2 6 2 7 3 00 6 2 7 3 00 n/30
PROBLEM 8.5A (continued) Maggiore Medical Devices Schedule of Accounts Payable June 30, BioCenter Inc. 1 5 8 0 00 New Concepts Corporation 2 2 7 5 00 Park Research 6 2 7 3 00 Total 10 1 2 8 00 Analyze: The amount of merchandise returned to vendors by Maggiore Medical Devices in June was $380.
PROBLEM 8.6A Brown Company GENERAL JOURNAL PAGE 21 1 1 2 Jan. 8 Accounts Payable/Smith, Inc. 201 2 0 0 0 00 2 3 Purchases Discounts 4 0 00 3 4 Cash 1 9 6 0 00 4 5 Paid amount owed on Invoice 1885 5 6 less cash discount, Check # 2101 6 7 7 8 10 Purchases 1 5 0 0 00 8 9 Accounts Payable/Smith, Inc. 201 1 5 0 0 00 9 10 Purchased merchandise on account, 10 11 Invoice 1920, terms 2/10, n/30 11 12 12 13 15 Accounts Payable/Smith, Inc. 201 1 0 0 00 13 14 Purchases Returns and Allowances 1 0 0 00 14 15 Received Credit Memorandum 320 for return 15 16 of damaged merchandise, Invoice 1920 16 17 17 18 19 Accounts Payable/Smith, Inc. ($1,500 - $100) 201 1 4 0 0 00 18 19 Purchases Discounts ($1,500 - $100) x 2% 2 8 00 19 20 Cash 1 3 7 2 00 20 21 Paid amount owed on Invoice 1920 21 22 less return of January 15, Check # 2130 22 23 23 24 30 Purchases 3 2 0 0 00 24 25 Accounts Payable/Smith, Inc. 201 3 2 0 0 00 25 26 Purchased merchandise on account, 26 27 Invoice 1950, terms 2/10, n/30 27 28 28
PROBLEM 8.6A (continued) Smith, Inc. GENERAL JOURNAL PAGE 21 1 1 2 Jan. 8 Sales Discounts 4 0 00 2 3 Cash 1 9 6 0 00 3 4 Accounts Receivable/Brown Company 111 2 0 0 0 00 4 5 Received payment on Invoice 1885, 5 6 less sales discount 6 7 7 8 10 Accounts Receivable/Brown Company 111 1 5 0 0 00 8 9 Sales 1 5 0 0 00 9 10 Sold merchandise on account, 10 11 Invoice 1920, terms 2/10, n/30 11 12 12 13 15 Sales Returns and Allowances 1 0 0 00 13 14 Accounts Receivable/Brown Company 111 1 0 0 00 14 15 Accepted return of damaged merchandise, 15 16 Credit Memorandum 320; original sale 16 17 made on Invoice 1920, January 10 17 18 18 19 19 Sales Discounts 2 8 00 19 20 Cash 1 3 7 2 00 20 21 Accounts Receivable/Brown Company 111 1 4 0 0 00 21 22 Received payment on Invoice 1920, 22 23 less sale discount 23 24 24 25 30 Accounts Receivable/Brown Company 111 3 2 0 0 00 25 26 Sales 3 2 0 0 00 26 27 Sold merchandise on account, 27 28 Invoice 1950, 2/10, n/30 28 29 29
PROBLEM 8.6A (continued) ACCOUNT Accounts Payable GENERAL LEDGER Brown Company ACCOUNT NO. Jan. 1 Balance 2 0 0 0 00 8 J21 2 0 0 0 00-0 - 10 J21 1 5 0 0 00 1 5 0 0 00 15 J21 1 0 0 00 1 4 0 0 00 19 J21 1 4 0 0 00-0 - 30 J21 3 2 0 0 00 3 2 0 0 00 201 BALANCE NAME ACCOUNTS PAYABLE SUBSIDIARY LEDGER Brown Company Smith, Inc. TERMS 2/10, n/30 ADDRESS DATE Post BALANCE Jan. 1 Balance 2 0 0 0 00 8 J21 2 0 0 0 00-0 - 10 J21 1 5 0 0 00 1 5 0 0 00 15 J21 1 0 0 00 1 4 0 0 00 19 J21 1 4 0 0 00-0 - 30 J21 3 2 0 0 00 3 2 0 0 00
PROBLEM 8.6A (continued) GENERAL LEDGER Smith, Inc. ACCOUNT Accounts Receivable ACCOUNT NO. 111 BALANCE Jan. 1 Balance 2 0 0 0 00 8 J21 2 0 0 0 00-0 - 10 J21 1 5 0 0 00 1 5 0 0 00 15 J21 1 0 0 00 1 4 0 0 00 19 J21 1 4 0 0 00-0 - 30 J21 3 2 0 0 00 3 2 0 0 00 NAME ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER Smith, Inc. Brown Company TERMS ADDRESS DATE Post DEBIT CREDIT BALANCE Jan. 1 Balance 2 0 0 0 00 8 J21 2 0 0 0 00-0 - 10 J21 1 5 0 0 00 1 5 0 0 00 15 J21 1 0 0 00 1 4 0 0 00 19 J21 1 4 0 0 00-0 - 30 J21 3 2 0 0 00 3 2 0 0 00 Analyze: The balance of the accounts payable for Smith, Inc. in the Brown Company accounts payable subsidiary ledger is $3,200. The balance of the accounts receivable for Brown Company in the Smith, Inc. accounts receivable subsidiary ledger is $3,200.
PROBLEM 8.1B GENERAL JOURNAL PAGE 1 1 1 2 June 1 Purchases 501 5 0 2 5 00 2 3 Freight In 502 1 2 5 00 3 4 Accounts Payable/Mow Down Corporation 205 5 1 5 0 00 4 5 Purchased lawn mowers on account, 5 6 Invoice 925, n/30 6 7 7 8 5 Purchases 501 6 7 6 0 00 8 9 Accounts Payable/Patio Furniture, Inc. 205 6 7 6 0 00 9 10 Purchased outdoor chairs and tables on account, 10 11 Invoice 992, n/30 11 12 12 13 9 Purchases 501 9 4 8 00 13 14 Accounts Payable/Summer Lawn Center 205 9 4 8 00 14 15 Purchased grass seed on account, 15 16 Invoice 4001, n/30 16 17 17 18 15 Purchases 501 2 9 0 0 00 18 19 Cash 101 2 9 0 0 00 19 20 Recorded various cash purchases for June 1 15. 20 21 21 22 20 Purchases 501 7 2 5 0 00 22 23 Freight In 502 3 2 0 00 23 24 Accounts Payable/Mason Industries 205 7 5 7 0 00 24 25 Purchased sprinkler system on account, 25 26 Invoice 9228, n/30 26 27 27 28 27 Accounts Payable/Patio Furniture, Inc. 205 3 0 0 0 00 28 29 Cash 101 3 0 0 0 00 29 30 Issued chk 104 for partial payment of Invoice 992 30 31 31 32 30 Purchases 501 2 6 5 0 00 32 33 Cash 101 2 6 5 0 00 33 34 Recorded various cash purchases for June 16 30. 34 35 35 36 30 Accounts Payable/Mow Down Corporation 205 5 1 5 0 00 36 37 Cash 101 5 1 5 0 00 37 38 Issued chk 105 for full payment of Invoice 925 38 39 39
PROBLEM 8.1B (continued) ACCOUNT Cash GENERAL LEDGER ACCOUNT NO. June 1 Balance 20 0 0 0 00 15 J1 2 9 0 0 00 17 1 0 0 00 27 J1 3 0 0 0 00 14 1 0 0 00 30 J1 2 6 5 0 00 11 4 5 0 00 30 J1 5 1 5 0 00 6 3 0 0 00 101 BALANCE ACCOUNT Accounts Payable ACCOUNT NO. June 1 J1 5 1 5 0 00 5 1 5 0 00 5 J1 6 7 6 0 00 11 9 1 0 00 9 J1 9 4 8 00 12 8 5 8 00 20 J1 7 5 7 0 00 20 4 2 8 00 27 J1 3 0 0 0 00 17 4 2 8 00 30 J1 5 1 5 0 00 12 2 7 8 00 205 BALANCE ACCOUNT Purchases ACCOUNT NO. June 1 J1 5 0 2 5 00 5 0 2 5 00 5 J1 6 7 6 0 00 11 7 8 5 00 9 J1 9 4 8 00 12 7 3 3 00 15 J1 2 9 0 0 00 15 6 3 3 00 20 J1 7 2 5 0 00 22 8 8 3 00 30 J1 2 6 5 0 00 25 5 3 3 00 501 BALANCE
PROBLEM 8.1B (continued) ACCOUNT Freight In GENERAL LEDGER ACCOUNT NO. June 1 J1 1 2 5 00 1 2 5 00 20 J1 3 2 0 00 4 4 5 00 502 BALANCE Analyze: The total freight costs incurred during June were $445.
PROBLEM 8.2B GENERAL JOURNAL PAGE 1 1 1 2 April 2 Purchases 501 2 2 0 0 00 2 3 Freight In 502 2 1 0 00 3 4 Accounts Payable/Mailing and Packing Center 201 2 4 1 0 00 4 5 Purchased copy paper on account, 5 6 Invoice 3772, n/30 6 7 7 8 8 Purchases 501 1 9 0 0 00 8 9 Accounts Payable/Special Occasion Cards 201 1 9 0 0 00 9 10 Purchased gift cards on account, 10 11 Invoice 9516, terms 1/10, n/30 11 12 12 13 9 Accounts Payable/Mailing and Packing Center 201 2 0 0 00 13 14 Purchases Returns and Allowances 503 2 0 0 00 14 15 Received Credit Memorandum 155 for 15 16 water-damaged copy paper purchased on April 2 16 17 17 18 12 Purchases 501 1 0 0 0 00 18 19 Accounts Payable/Specialty Cards 201 1 0 0 0 00 19 20 Purchased novelty items on account, 20 21 Invoice 4901, n/30 21 22 22 23 17 Accounts Payable/Special Occasion Cards 201 1 9 0 0 00 23 24 Purchases Discounts ($1,900 x 1%) 504 1 9 00 24 25 Cash ($1,900 - $19) 101 1 8 8 1 00 25 26 Paid amount due on Invoice 9516, 26 27 Check 105 27 28 28 29 22 Purchases 501 9 0 0 00 29 30 Accounts Payable/Specialty Cards 201 9 0 0 00 30 31 Purchased cards on account, Invoice 4921, 31 32 n/30 32 33 33
PROBLEM 8.2B (continued) GENERAL JOURNAL PAGE 2 1 2010 1 2 April 23 Purchases 501 1 9 8 0 00 2 3 Freight In 502 7 0 00 3 4 Accounts Payable/Business Forms, Inc. 201 2 0 5 0 00 4 5 Purchased forms on account, Invoice 2020, n/30 5 7 7 8 25 Accounts Payable/Specialty Cards 201 1 0 0 00 8 9 Purchases Returns and Allowances 503 1 0 0 00 9 10 Received Credit Memorandum 225 for return of 10 11 defective cards originally purchased on April 22 11 13 13 14 27 Purchases 501 2 9 0 0 00 14 15 Freight In 502 7 5 00 15 16 Accounts Payable/Business Forms, Inc. 201 2 9 7 5 00 16 17 Purchased toner on account, Invoice 2029, 17 18 n/30 18 19 19 20 30 Accounts Payable/Mailing and Packing Center 201 2 2 1 0 00 20 21 Cash ($2,410 - $200) 101 2 2 1 0 00 21 22 Paid amount due on Invoice 3772 less 22 23 return of April 9, Check 111 23 24 24 Analyze: The cost per card was $1.50 ($905 600 cards).
PROBLEM 8.3B GENERAL LEDGER ACCOUNT Cash ACCOUNT NO. April 1 Balance 12 5 0 0 00 17 J1 1 8 8 1 00 10 6 1 9 00 30 J2 2 2 1 0 00 8 4 0 9 00 101 BALANCE ACCOUNT Accounts Payable ACCOUNT NO. April 2 J1 2 4 1 0 00 2 4 1 0 00 8 J1 1 9 0 0 00 4 3 1 0 00 9 J1 2 0 0 00 4 1 1 0 00 12 J1 1 0 0 0 00 5 1 1 0 00 17 J1 1 9 0 0 00 3 2 1 0 00 22 J1 9 0 0 00 4 1 1 0 00 23 J2 2 0 5 0 00 6 1 6 0 00 25 J2 1 0 0 00 6 0 6 0 00 27 J2 2 9 7 5 00 9 0 3 5 00 30 J2 2 2 1 0 00 6 8 2 5 00 201 BALANCE ACCOUNT Purchases ACCOUNT NO. April 2 J1 2 2 0 0 00 2 2 0 0 00 8 J1 1 9 0 0 00 4 1 0 0 00 12 J1 1 0 0 0 00 5 1 0 0 00 22 J1 9 0 0 00 6 0 0 0 00 23 J2 1 9 8 0 00 7 9 8 0 00 27 J2 2 9 0 0 00 10 8 8 0 00 501 BALANCE
PROBLEM 8.3B (continued) ACCOUNT Freight In ACCOUNT NO. 502 BALANCE April 2 J1 2 1 0 00 2 1 0 00 23 J2 7 0 00 2 8 0 00 27 J2 7 5 00 3 5 5 00 ACCOUNT Purchases Returns and Allowances ACCOUNT NO. 503 BALANCE April 9 J1 2 0 0 00 2 0 0 00 25 J2 1 0 0 00 3 0 0 00 ACCOUNT Purchases Discounts ACCOUNT NO. 504 BALANCE April 17 J1 1 9 00 1 9 00
PROBLEM 8.3B (continued) NAME ADDRESS ACCOUNTS PAYABLE SUBSIDIARY LEDGER Business Forms, Inc. TERMS 1/10, n/30 BALANCE April 23 Invoice 2020 J2 2 0 5 0 00 2 0 5 0 00 27 Invoice 2029 J2 2 9 7 5 00 5 0 2 5 00 NAME ADDRESS DATE Mailing and Packing Center DESCRIPTION Post DEBIT CREDIT TERMS n/30 BALANCE April 2 Invoice 3772 J1 2 4 1 0 00 2 4 1 0 00 9 CM 155 J1 2 0 0 00 2 2 1 0 00 30 J2 2 2 1 0 00-0 - NAME ADDRESS DATE Special Occasion Cards DESCRIPTION Post DEBIT CREDIT TERMS n/30 BALANCE April 8 Invoice 9516 J1 1 9 0 0 00 1 9 0 0 00 17 J1 1 9 0 0 00-0 - NAME ADDRESS Specialty Cards TERMS n/30 BALANCE April 12 Invoice 4901 J1 1 0 0 0 00 1 0 0 0 00 22 Invoice 4921 J1 9 0 0 00 1 9 0 0 00 25 CM 225 J2 1 0 0 00 1 8 0 0 00
PROBLEM 8.3B (continued) Tiffany s Card and Novelty Shop Schedule of Accounts Payable April 30, Business Forms, Inc. 5 0 2 5 00 Mailing and Packing Center - 0 - Special Occasion Cards - 0 - Specialty Cards 1 8 0 0 00 Total 6 8 2 5 00 The balance of the Accounts Payable control account is $6,825. Analyze: The amount of purchase discounts in April was $19.
PROBLEM 8.4B GENERAL JOURNAL PAGE 1 1 1 2 Aug. 1 Purchases 501 2 5 0 0 00 2 3 Cash 101 2 5 0 0 00 3 4 Purchased merchandise, Check 101 4 5 5 6 2 Purchases 501 2 2 0 0 00 6 7 Accounts Payable/Brown Dental Corporation 201 2 2 0 0 00 7 8 Purchased merchandise on account, 8 9 Invoice 866, terms 1/10, n/30 9 10 10 11 5 Purchases 501 3 9 0 0 00 11 12 Freight In 504 1 0 0 00 12 13 Accounts Payable/Dental Concepts 201 4 0 0 0 00 13 14 Purchased merchandise on account, 14 15 Invoice 2111, terms 2/10, n/30 15 16 16 17 10 Accounts Payable/Brown Dental Corporation 201 2 2 0 0 00 17 18 Purchases Discounts ($2,200 x 1%) 503 2 2 00 18 19 Cash ($2,200 - $22) 101 2 1 7 8 00 19 20 Paid amount due on Invoice 866, 20 21 Check 102 21 22 22 23 10 Accounts Payable/Dental Concepts 201 3 0 0 00 23 24 Purchases Returns and Allowances 502 3 0 0 00 24 25 Received Credit Memorandum 272 for return 25 26 of damaged merchandise purchased on August 5 26 27 27 28 11 Purchases 501 1 7 0 0 00 28 29 Accounts Payable/Brown Dental Corporation 201 1 7 0 0 00 29 30 Purchased merchandise on account, 30 31 Invoice 898, terms 1/10, n/30 31 32 32
PROBLEM 8.4B (continued) GENERAL JOURNAL PAGE 2 1 1 2 Aug. 14 Accounts Payable/Dental Concepts ($4,000 - $300) 201 3 7 0 0 00 2 3 Purchases Discounts ($3,600 x 2%) 503 7 2 00 3 4 Cash 101 3 6 2 8 00 4 5 Paid amount owed on Invoice 2111, less 5 6 return of August 10, Check 103 6 7 7 8 15 Purchases 501 2 8 8 0 00 8 9 Accounts Payable/Surgical Supplies 201 2 8 8 0 00 9 10 Purchased merchandise on account, 10 11 Invoice 1902, terms n/30 11 12 $4,000 - ($4,000 x 20%) = $3,200 12 13 $3,200 - ($3,200 x 10%) = $2,880 13 14 14 15 20 Purchases 501 1 9 0 0 00 15 16 Cash 101 1 9 0 0 00 16 17 Purchased merchandise, Check 104 17 18 18 19 24 Cash 101 1 7 5 00 19 20 Purchases Returns and Allowances 502 1 7 5 00 20 21 Received cash for return of defective merchandise 21 22 purchased August 20 22 23 23 24 30 Purchases 501 2 1 2 5 00 24 25 Freight In 504 7 5 00 25 26 Accounts Payable/Dental Concepts 201 2 2 0 0 00 26 27 Purchased merchandise on account, 27 28 Invoice 2285, terms 2/10, n/30 28 29 29 Analyze: 2.5% ($100 $4,000).
PROBLEM 8.5B ACCOUNT Cash GENERAL LEDGER ACCOUNT NO. Aug. 1 Balance 39 7 0 0 00 1 J1 2 5 0 0 00 37 2 0 0 00 10 J1 2 1 7 8 00 35 0 2 2 00 14 J2 3 6 2 8 00 31 3 9 4 00 20 J2 1 9 0 0 00 29 4 9 4 00 24 J2 1 7 5 00 29 6 6 9 00 101 BALANCE ACCOUNT Accounts Payable ACCOUNT NO. Aug. 2 J1 2 2 0 0 00 2 2 0 0 00 5 J1 4 0 0 0 00 6 2 0 0 00 10 J1 2 2 0 0 00 4 0 0 0 00 10 J1 3 0 0 00 3 7 0 0 00 11 J1 1 7 0 0 00 5 4 0 0 00 14 J2 3 7 0 0 00 1 7 0 0 00 15 J2 2 8 8 0 00 4 5 8 0 00 30 J2 2 2 0 0 00 6 7 8 0 00 201 BALANCE ACCOUNT Purchases ACCOUNT NO. Aug. 1 J1 2 5 0 0 00 2 5 0 0 00 2 J1 2 2 0 0 00 4 7 0 0 00 5 J1 3 9 0 0 00 8 6 0 0 00 11 J1 1 7 0 0 00 10 3 0 0 00 15 J2 2 8 8 0 00 13 1 8 0 00 20 J2 1 9 0 0 00 15 0 8 0 00 30 J2 2 1 2 5 00 17 2 0 5 00 501 BALANCE
PROBLEM 8.5B (continued) ACCOUNT Purchases Returns and Allowances ACCOUNT NO. 502 BALANCE Aug. 10 J1 3 0 0 00 3 0 0 00 24 J2 1 7 5 00 4 7 5 00 ACCOUNT Purchases Discounts ACCOUNT NO. 503 BALANCE Aug. 10 J1 2 2 00 2 2 00 14 J2 7 2 00 9 4 00 ACCOUNT Freight In ACCOUNT NO. 504 BALANCE Aug. 5 J1 1 0 0 00 1 0 0 00 30 J2 7 5 00 1 7 5 00
PROBLEM 8.5B (continued) NAME ADDRESS ACCOUNTS PAYABLE SUBSIDIARY LEDGER Brown Dental Corporation TERMS 1/10, n/30 BALANCE Aug. 2 Invoice 866 J1 2 2 0 0 00 2 2 0 0 00 10 J1 2 2 0 0 00-0 - 11 Invoice 898 J1 1 7 0 0 00 1 7 0 0 00 NAME ADDRESS Dental Concepts DEBIT CREDIT TERMS 2/10, n/30 BALANCE Aug. 5 Invoice 2111 J1 4 0 0 0 00 4 0 0 0 00 10 CM 272 J1 3 0 0 00 3 7 0 0 00 14 J2 3 7 0 0 00-0 - 30 Invoice 2285 J2 2 2 0 0 00 2 2 0 0 00 NAME ADDRESS DATE Surgical Supplies DESCRIPTION Post DEBIT CREDIT TERMS n/30 BALANCE Aug. 15 Invoice 1902 J2 2 8 8 0 00 2 8 8 0 00
PROBLEM 8.5B (continued) Dental Supplies, Inc. Schedule of Accounts Payable August 31, Brown Dental Corporation 1 7 0 0 00 Dental Concepts 2 2 0 0 00 Surgical Supplies 2 8 8 0 00 Total 6 7 8 0 00 Analyze: On August 31, Dental Supplies, Inc. owes Dental Concepts $2,200.
PROBLEM 8.6B Banh Company GENERAL JOURNAL PAGE 12 1 1 2 Feb. 8 Accounts Payable/Santoni, Inc. 201 6 0 0 0 00 2 3 Purchases Discounts 1 2 0 00 3 4 Cash 5 8 8 0 00 4 5 Paid amount owed on Invoice 1985, less 5 6 cash discount, Check 2001 6 7 7 8 9 Purchases 3 8 0 0 00 8 9 Accounts Payable/Santoni, Inc. 201 3 8 0 0 00 9 10 Purchased merchandise on account, 10 11 Invoice 1990, terms 2/10, n/30 11 12 12 13 15 Accounts Payable/Santoni, Inc. 201 4 0 0 00 13 14 Purchases Returns and Allowances 4 0 0 00 14 15 Received Credit Memorandum 220 for return 15 16 of damaged merchandise, Invoice 1990 16 17 17 18 18 Accounts Payable/Santoni, Inc. ($3,800 - $400) 201 3 4 0 0 00 18 19 Purchases Discounts ($3,400 x 2%) 6 8 00 19 20 Cash ($3,400 - $68) 3 3 3 2 00 20 21 Paid amount owed on Invoice 1990, 21 22 less return of February 15, Check 2009 22 23 23 24 28 Purchases 6 2 0 0 00 24 25 Accounts Payable/Santoni, Inc. 201 6 2 0 0 00 25 26 Purchased merchandise on account, 26 27 Invoice 2008, terms 2/10, n/30 27 28 28
PROBLEM 8.6B (continued) Santoni, Inc. GENERAL JOURNAL PAGE 12 1 1 2 Feb. 8 Sales Discounts 1 2 0 00 2 3 Cash 5 8 8 0 00 3 4 Accounts Receivable/Banh Company 111 6 0 0 0 00 4 5 Received payment for Invoice 1985, 5 6 less sales discount 6 7 7 8 9 Accounts Receivable/Banh Company 111 3 8 0 0 00 8 9 Sales 3 8 0 0 00 9 10 Sold merchandise on account, 10 11 Invoice 1990, 2/10, n/30 11 12 12 13 15 Sales Returns and Allowances 4 0 0 00 13 14 Accounts Receivable/Banh Company 111 4 0 0 00 14 15 Accepted return for damaged merchandise, Credit 15 16 Memorandum 220; original sale made on 16 17 Invoice 1990, February 9. 17 18 18 19 18 Sales Discounts ($3,800 - $400) x 2% 6 8 00 19 20 Cash 3 3 3 2 00 20 21 Accounts Receivable/Banh Company 111 3 4 0 0 00 21 22 Received payment for Invoice 1990, 22 23 less sale discount 23 24 24 25 28 Accounts Receivable/Banh Company 111 6 2 0 0 00 25 26 Sales 6 2 0 0 00 26 27 Sold merchandise on account, Invoice 2008, 27 28 2/10, n/30 28 29 29
PROBLEM 8.6B (continued) ACCOUNT Accounts Payable GENERAL LEDGER Banh Company ACCOUNT NO. Jan. 1 Balance 6 0 0 0 00 8 J12 6 0 0 0 00-0 - 9 J12 3 8 0 0 00 3 8 0 0 00 15 J12 4 0 0 00 3 4 0 0 00 18 J12 3 4 0 0 00-0 - 28 J12 6 2 0 0 00 6 2 0 0 00 201 BALANCE NAME ADDRESS ACCOUNTS PAYABLE SUBSIDIARY LEDGER Banh Company Santoni, Inc. TERMS 2/10, n/30 DATE Post BALANCE Jan. 1 Balance 6 0 0 0 00 8 J12 6 0 0 0 00-0 - 9 Invoice 1990 J12 3 8 0 0 00 3 8 0 0 00 15 CM 220 J12 4 0 0 00 3 4 0 0 00 18 J12 3 4 0 0 00-0 - 28 Invoice 2008 J12 6 2 0 0 00 6 2 0 0 00
PROBLEM 8.6B (continued) ACCOUNT Accounts Receivable GENERAL LEDGER Santoni, Inc ACCOUNT NO. BALANCE Jan. 1 Balance 6 0 0 0 00 8 J12 6 0 0 0 00-0 - 9 J12 3 8 0 0 00 3 8 0 0 00 15 J12 4 0 0 00 3 4 0 0 00 18 J12 3 4 0 0 00-0 - 28 J12 6 2 0 0 00 6 2 0 0 00 111 ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER Santoni, Inc. NAME Banh Company ADDRESS DATE Post BALANCE Jan. 1 Balance 6 0 0 0 00 8 J12 6 0 0 0 00-0 - 9 J12 3 8 0 0 00 3 8 0 0 00 15 J12 4 0 0 00 3 4 0 0 00 18 J12 3 4 0 0 00-0 - 28 J12 6 2 0 0 00 6 2 0 0 00 Analyze: The balance of the accounts payable for Santoni, Inc. in the Banh Company accounts payable subsidiary ledger is $6,200. The balance of the accounts receivable for Banh Company in the Santoni, Inc. accounts receivable subsidiary ledger is $6,200.
CRITICAL THINKING PROBLEM 8.1 GENERAL JOURNAL PAGE 1 1 1 2 Jan. 1 Cash 49 0 0 0 00 2 3 Supplies 1 0 0 0 00 3 4 William Evans, Capital 50 0 0 0 00 4 5 Original investments by owner 5 6 6 7 2 Accounts Receivable/Chu Corporation 7 5 0 00 7 8 Sales 7 5 0 00 8 9 Sold merchandise on account, Invoice 1001, 9 10 terms 2/10, n/30 10 11 11 12 4 Purchases 1 6 0 0 00 12 13 Accounts Payable/Whitson Company 1 6 0 0 00 13 14 Purchased merchandise on account, 14 15 Invoice 1125, terms 1/10, n/30 15 16 16 17 5 Freight In 1 0 0 00 17 18 Cash 1 0 0 00 18 19 Paid freight charges related to purchase of January 4 19 20 20 21 10 Sales Returns and Allowances 1 0 0 00 21 22 Accounts Receivable/Chu Corporation 1 0 0 00 22 23 Issued Credit Memorandum 101 for return of 23 24 merchandise 24 25 25 26 11 Sales Discounts ($750 - $100 = $650; $650 x 2% = $13) 1 3 00 26 27 Cash ($750 - $100 - $13) 6 3 7 00 27 28 Accounts Receivable/Chu Corporation ($750 - $100) 6 5 0 00 28 29 Received payment for invoice 1001 29 30 30 31 13 Accounts Payable/Whitson Company 1 6 0 0 00 31 32 Purchases Discounts ($1,600 x 1%) 1 6 00 32 33 Cash ($1,600 - $16) 1 5 8 4 00 33 34 Paid amount owed on Invoice 1125, 34 35 Check 100 35 36 36
CRITICAL THINKING PROBLEM 8.1 (continued) GENERAL JOURNAL PAGE 2 1 1 2 Jan. 15 Cash 5 5 0 0 00 2 3 Sales 5 5 0 0 00 3 4 Recorded cash sales, January 1 15 4 5 5 6 15 Credit Card Expense ($1,200 x 3%) 3 6 00 6 7 Cash ($1,200 - $36) 1 1 6 4 00 7 8 Sales 1 2 0 0 00 8 9 Recorded sales to customers using bank credit 9 10 cards, January 1 15 10 11 11 12 15 Wages Expense 1 4 0 0 00 12 13 Cash 1 4 0 0 00 13 14 Paid wages, Check 101 14 15 15 16 16 Equipment 1 7 5 0 00 16 17 Cash 1 7 5 0 00 17 18 Purchased equipment, Check 102 18 19 19 20 17 Equipment 2 5 0 00 20 21 Cash 2 5 0 00 21 22 Paid freight for equipment purchase of January 16, 22 23 Check 103 23 24 24 25 18 Purchases ($4,000 - $800) 3 2 0 0 00 25 26 Accounts Payable/Terri Manufacturing 3 2 0 0 00 26 27 Purchased merchandise on account, 27 28 Invoice 2078, terms 1/10, n/30 28 29 29 30 20 Accounts Receivable/Moloney Corp. 2 5 0 0 00 30 31 Sales 2 5 0 0 00 31 32 Sold merchandise on account, 32 33 Invoice 1002, terms 1/10, n/30 33 34 34
CRITICAL THINKING PROBLEM 8.1 (continued) GENERAL JOURNAL PAGE 3 1 1 2 Jan. 21 Purchases 3 0 0 0 00 2 3 Freight In 7 0 00 3 4 Accounts Payable/Schmidt Company 3 0 7 0 00 4 5 Purchased merchandise on account, 5 6 Invoice 3204, terms 1/10, n/30 6 7 7 8 27 Accounts Payable/Terri Manufacturing 3 2 0 0 00 8 9 Purchases Discounts ($3,200 x 1%) 3 2 00 9 10 Cash ($3,200 - $32) 3 1 6 8 00 10 11 Paid amount owed on Invoice 2078, 11 12 Check 104 12 13 13 14 29 Sales Discounts ($2,500 x 1%) 2 5 00 14 15 Cash ($2,500 - $25) 2 4 7 5 00 15 16 Accounts Receivable/Moloney Corp. 2 5 0 0 00 16 17 Received payment for Invoice 1002 17 18 18 19 30 Accounts Payable/Schmidt Company 3 0 7 0 00 19 20 Purchases Discounts ($3,000 x 1%) 3 0 00 20 21 Cash 3 0 4 0 00 21 22 Paid amount due on Invoice 3204, Check 105 22 23 23 24 31 Cash 6 0 0 0 00 24 25 Sales 6 0 0 0 00 25 26 Recorded cash sales, January 16 31 26 27 27 28 31 Credit Card Expense ($2,200 x 3%) 6 6 00 28 29 Cash ($2,200 - $66) 2 1 3 4 00 29 30 Sales 2 2 0 0 00 30 31 Recorded sales to customers using bank credit 31 32 cards, January 16 31 32 33 33
CRITICAL THINKING PROBLEM 8.2 1. To determine whether Passions Linen Shop was billed in error: a. Review Passions Linen Shop's purchase order file for duplicate orders to Sensuous Linen Company. If two orders were placed for the same merchandise, check the receiving reports to determine if both shipments were received. If Passions Linen Shop does not prenumber its purchase orders, two orders may have been issued for the same merchandies. If only one purchase order was placed, check the receiving reports for a duplicate shipment. b. If no duplicate purchase order or duplicate receipt of merchandise is found, ask Sensuous Linen Company to identify why they made two shipments of sheets. If Sensuous Linen Company made the second shipment in error, they will be obligated to accept return of the sheets. 2. To prevent this situation from occuring again: a. Prenumber all purchase order forms and periodically check to be sure that all forms can be accounted for. b. Require all purchase orders to have proper authorization before they are issued. Alexander can authorize all purchase orders, or she can designate appropriate personnel to handle this function. c. Require all shipments of merchandise received by the shop to be compared to the corresponding purchase order and the invoice received from the supplier. Any shipment for which there is no purchase order should d. Require b ithe purchase d i diorder l and corresponding receiving report to be attached to the invoice before it is presented for payment. Alexander can establish internal control procedures to reduce the possibility of issuing duplicate purchase orders, but she cannot prevent suppliers from making duplicate shipments in error. If the appropriate documentation accompanies invoices, though, she will know that the error is not Passions Linen Shop's.
SOLUTIONS TO BUSINESS CONNECTIONS Managerial Focus: 1. Maintenance of good credit reputation, taking advantage of cash discounts. 2. Allows a business to buy on credit, using resources more effectively. 3. It is important to establish a good credit rating for future cash needs. Additionally, cash could be used for other purposes. 4. Protect against fraud and excessive investment in merchandise. 5. Ensure authorized-only purchases, verifies receipt of goods and accuracy of invoices, distributes tasks. 6. Creates a storage problem, risks obsolescence of the merchandise, and ties up funds. Ethical Dilemma: Anait s actions are not ethical. If she cannot get a raise from this company, she should find a new job. When she performs the unethical action of getting money from a fictitious vendor she is stealing dollar for dollar from her company. Her money comes out of net income for this company. When Anait finds how easy it is to perpetrate this fraud, she will create more vendors and more invoices. To prevent these actions, the controller should require each new vendor to receive his/her approval. The procedure to only view the checks over $100 can still be maintained with this one approval process. Financial Statement Analysis: 1. 2010: 66.1%. 2009: 66.3% 2. Answers will vary. Students may suggest price changes on merchandise from suppliers, discounts, or shipping costs variances. Analyze Online: Answers will vary depending on the year. Teamwork: The most advantageous would be net 45 days to pay the vendors, with customers on terms of 2/10 net 30. Your customers would then be paying you before you need to pay vendors. Internet Connection: Your Company address and phone number and the vendor s name and address. The amount of the check or purchase order. Reference for the purchase order number of purchase requisition.
Part A True-False 1. TRUE 8. FALSE 15. FALSE 2. TRUE 9. TRUE 16. TRUE 3. FALSE 10. TRUE 17. FALSE 4. FALSE 11. FALSE 18. FALSE 5. TRUE 12. FALSE 19. TRUE 6. TRUE 13. FALSE 20. TRUE 7. FALSE 14. TRUE SOLUTIONS TO PRACTICE TEST Part B Exercises 1. $2,100.00 2. $2,475.00 3. $3,600.00 4. $2,160.00 5. $2,773.50