Chapter 10, Problem 1PA

The following transactions were completed by Hammond Auto Supply during January, which is the first month of this fiscal year. Terms of sale are 2/10, n/30. The balances of the accounts as of January 1 have been recorded in the general ledger in your Working Papers or in CengageNow. Hammond Auto Supply does not track cash sales by customer. If you are using the form-based approach with QuickBooks or general ledger, select “Cash Sales” as the customer for all cash sales transactions.

Required

1. 1. Record the transactions for January using a general journal, page 1. Assume the periodic inventory method is used.*

* If using QuickBooks, record transactions using either the journal entry method or the forms-based approach as directed by your instructor.

The chart of accounts is as follows:

1. 2. Post daily all entries involving customer accounts to the accounts receivable ledger.*
2. 3. Post daily all entries involving creditor accounts to the accounts payable ledger.*
3. 4. Post daily the general journal entries to the general ledger. Write the owner’s name in the Capital and Drawing accounts.*

*If using QuickBooks or general ledger, ignore Steps 2, 3, and 4.

1. 5. Prepare a trial balance.
2. 6. Prepare a schedule of accounts receivable (A/R Aging Detail report in QuickBooks) and a schedule of accounts payable (A/P Summary Detail report in QuickBooks). Do the totals equal the balances of the related controlling accounts?

To determine

Journalize the transactions in the general journal using the periodic inventory method.

Explanation of Solution

General journal is a record of financial transaction. The transactions are recorded in the journal prior to posting them to the accounts in the general ledger.

Periodic inventory system: The method or system of recording the transactions related to inventory occasionally or periodically are referred to as periodic inventory system.

Journalize the transactions in the general journal.

GENERAL JOURNAL                                              PAGES  1
Date			Description			Post Ref.	Debit ($)		Credit ($)
20--
Jan	2		Rent Expense			627	775
				Cash		111			775
			(Record the paid month rent, Ck.No.6981)
	2		Cash			111	3,500
				Mr. H, Capital		311			3,500
			(Record the additional capital invested by the owner)
	4		Purchases			511	2,930
				Accounts Payable, V Company		212/			2,930
			(Purchased merchandise from V Company, invoice no.A691,invoice dated January 2,terms 2/10, n/30)
	4		Cash			111	980
			Sales Discount			413	20
				Accounts Receivable		113/			1,000
			(Payment of invoice less discount)
	4		Accounts Receivable Mr. P			113/	850
				Sales		411			850
			(Record the sale of merchandise to Mr. P, invoice no.6483)
	6		Cash			111	637
			Sales Discount			413	13
				Accounts Receivable, Petty, Inc.		113/			650
			(Record the payment of invoice less discount)
	7		Accounts Payable, F Company			212/	600
				Purchase Discount		513			12
				Cash		111			588
			(Record the paid invoice no.C1272, Ck.No.6982)
	7		Supplies			625	108
					Accounts Payable, D Company	212/			108
		(Record the office supply, Invoice no. 1906B,term net 30)

GENERAL JOURNAL                                         PAGES  2
	7	Accounts Receivable, Mr. E & C		113/	787
			sales	411		787
		(Record the sale of merchandise to Mr. E & C invoice no.6484)
	9	Sales Return and Allowance		412	54
			Accounts Receivable, Mr. P	113/		54
		(Record the issued credit memo no.43)
	11	Cash		111	4,863.20
			Sales	411		4,863.20
		(Record the cash sales, January 1-10)
	11	Accounts Payable, V Company		212/	2,930
			Cash	111		2,871.40
			Purchase Discount	513		58.6
		(Record the invoice paid n.A691 less discount, Ck. No. 6983)
	14	Accounts Receivable, V Company		113/	2,050
			Sales	411		2,050
		(Record the sale of merchandise to V Company, invoice no. 6485)
	18	Purchases		511	4,854
		Freight In		514	147
			Accounts Payable, Mr. C	212/		5,001
		(Record the purchase of merchandise from C Company, invoice dated January 16)
	21	Miscellaneous Expense		631	194
			Cash	111		194
		(Record the cash paid to Mr. M,Ck.No.6985)
	21	Cash		111	4,591
			Sales	411		4,591
		(Record the cash sales, January 11-20)
	23	Freight In		514	96
			Cash	111		96
		(Record the freight charge, Ck. No. 6985)

GENERAL JOURNAL                                           PAGE   3
	23	Accounts Payable, C Company		212/	376
			Purchase Return and Allowance	512		376
		(Record return on merchandise credit memo.163)
	29	Accounts Receivable, B Company		113/	1,835
			Sales	411		1,835
		(Record the sale of merchandise to B Company invoice no.6486)
	31	Cash		111	4,428
			Sales	411		4,428
		(Record cash sales on january21-31)
	31	Miscellaneous Expenses		631	53
			Cash	111		53
		(Paid to Mr. M CK.NO.6986)
	31	Salary Expenses		621	6,200
			Employees' Federal Income Tax Payable	216		872
			FICA Tax Payable	217		474.30
			Salaries Payable	215		4,853.70
		(Record the salaries for the month)
	31	Payroll Tax Expense		622	846.3
			FICA Tax Payable	217		474.30
			State Unemployment Tax Payable	218		334.8
			Federal Unemployment Tax Payable	219		49.60
		(Record the employer’s share of FICA taxes and employer's state and federal unemployment taxes for the month)
	31	Salaries Payable		215	4,853.70
			Cash	111		4,853.70
		(Record the payroll, Ck.No.6987)
	31	Mr. H, Drawing		312	1,000
			Cash	111		1,000
		(Record the withdrawal for personal use,Ck.No.6988)

Table (1)

To determine

Record the entries from customer accounts to the accounts receivable ledger.

Explanation of Solution

Account receivable: The amount of money to be received by a company for the sale of goods and services to the customers is referred to as account receivable.

T-account: The condensed form of a ledger is referred to as T-account. The left-hand side of this account is known as debit, and the right hand side is known as credit.

Entries from customer accounts to the accounts receivable ledger:

Accounts receivable ledger
Name: B company
Address:
Date		Items	Post ref.	Debit ($)	Credit ($)	Balance ($)
20--
Jan	29		3	1,835		1,835
Name: E and C company
Address:
Date		Items	Post ref.	Debit ($)	Credit ($)	Balance ($)
20--
Jan	7		2	787		787
Name: L company
Address:
Date		Items	Post ref.	Debit ($)	Credit ($)	Balance ($)
20--
Jan	4		1	850		850
	9		2		54	796
Name: P company
Address:
Date		Items	Post ref.	Debit ($)	Credit ($)	Balance ($)
20--
Jan	1	Balance				650
	6		1		650	0
Name: V company
Address:
Date		Items	Post ref.	Debit ($)	Credit ($)	Balance ($)
20--
Jan	1	Balance				1,000
	4		1		1,000	0
	14		2	2,050		2,050

Table (2)

To determine

Record the entries from customer accounts to the accounts payable ledger.

Explanation of Solution

Account payable: The amount of money to be paid by a company for the purchase of goods and services from the seller is referred to as account payable.

Entries from customer accounts to the accounts payable ledger:

Accounts payable ledger
Name: C company
Address:
Date		Items	Post ref.	Debit ($)	Credit ($)	Balance ($)
20--
Jan	18		2		5,001	5,001
	23		3	376		4,625
Name: D company
Address:
Date		Items	Post ref.	Debit ($)	Credit ($)	Balance ($)
20--
Jan	7		1		108	108
Name: F and sons
Address:
Date		Items	Post ref.	Debit ($)	Credit ($)	Balance ($)
20--
Jan	1	Balance				600
	7		1	600		0
Name: V company
Address:
Date		Items	Post ref.	Debit ($)	Credit ($)	Balance ($)
20--
Jan	4		1		2,930	2,930
	11		2	2,930		0

Table (3)

To determine

Record the journal entries to the general ledger.

Explanation of Solution

General ledger: General ledger is a record of all accounts of assets, liabilities, and stockholders’ equity, necessary to prepare financial statements.

Journal entries to the general ledger:

Account: Cash							Account No:111
Date		Item		Post ref	Debit	Credit	Balance
20___					($)	($)	Debit ($)	Credit($)
Jan	1	Balance					8,740
	2			1		775	7,965
	2			1	3,500		11,465
	4			1	980		12,445
	6			1	637		13,082
	7			1		588	12,494
	11			2	4,863.2		17,357.2
	11			2		2,871.4	14,485.8
	21			2		194	14,291.8
	21			2	4,591		18,882.8
	23			2		96	18,786.8
	31			3	4,428		23,214.8
	31			3		53	23,161.8
	31			3		4,853.7	18,308
	31			3		1,000	17,308.1
Account: Accounts receivable								Account No:113
Date		Item		Post ref	Debit	Credit	Balance
20___					($)	($)	Debit ($)	Credit($)
Jan	1	Balance					1,650
	4			1		1,000	650
	4			1	850.00		1,500
	6			1		650.00	850
	7			2	787		1,637
	9			2		54	1,583
	14			2	2,050		3,633
	29			3	1,835		5,468
Account: Merchandise inventory								Account No:114
Date		Item		Post ref	Debit	Credit	Balance
20___					($)	($)	Debit ($)	Credit($)
Jan	1	Balance					20,584
Account: Suppliers								Account No:115
Date		Item		Post ref	Debit	Credit	Balance
20___					($)	($)	Debit ($)	Credit($)
Jan	1	Balance					592
	7	Purchase		1	108		700
Account: Prepaid insurance								Account No:116
Date		Item		Post ref	Debit	Credit	Balance
20___					($)	($)	Debit ($)	Credit($)
Jan	1	Balance					390
Account: Equipment								Account No:121
Date		Item		Post ref	Debit	Credit	Balance
20___					($)	($)	Debit ($)	Credit($)
Jan	1	Balance					3,644
Account: Accounts payable								Account No:212
Date		Item		Post ref	Debit	Credit	Balance
20___					($)	($)	Debit ($)	Credit($)
Jan	1	Balance						600
	4			1		2,930		3,530
	7			1	600			2,930
	7			1		108		3,038
	11			2	2,930			108
	18			2		5,001		5,109
	23			3	376			4,733
Account: Salaries payable								Account No:215
Date		Item		Post ref	Debit	Credit	Balance
20___					($)	($)	Debit ($)	Credit($)
Jan	31			3		4,853.70		4,853.70
	31			3	4,853.70
Account: Employees federal income tax payable								Account No:216
Date		Item		Post ref	Debit	Credit	Balance
20___					($)	($)	Debit ($)	Credit($)
Jan	31			3		872		872
Account: FICA  tax payable								Account No:217
Date		Item		Post ref	Debit	Credit	Balance
20___					($)	($)	Debit ($)	Credit($)
Jan	31			3		474.30		474.30
	31			3		474.30		948.60
Account: State unemployment tax payable								Account No:218
Date		Item		Post ref	Debit	Credit	Balance
20___					($)	($)	Debit ($)	Credit($)
Jan	31			3		334.8		334.8
Account: Federal unemployment tax payable								Account No:219
Date		Item		Post ref	Debit	Credit	Balance
20___					($)	($)	Debit ($)	Credit($)
Jan	31			3		49.60		49.60
Account: Mr. H Capital								Account No:311
Date		Item		Post ref	Debit	Credit	Balance
20___					($)	($)	Debit ($)	Credit($)
Jan	1							35,000
	2			1		3,500		38,500
Account: Mr. H Drawing								Account No:312
Date		Item		Post ref	Debit	Credit	Balance
20___					($)	($)	Debit ($)	Credit($)
Jan	31			3	1,000		1,000
Account: Sales								Account No:411
Date		Item		Post ref	Debit	Credit	Balance
20___					($)	($)	Debit ($)	Credit($)
Jan	4			1		850		850
	7			2		787		1,637
	11			2		4,863.2		6,500.2
	14			2		2,050		8,550.2
	21			2		4,591		13,141.2
	29			3		1,835		14,976.2
	31			3		4,428		19,404.2
Account: Sales return and allowance								Account No:412
Date		Item		Post ref	Debit	Credit	Balance
20___					($)	($)	Debit ($)	Credit($)
Jan	9			2	54		54
Account: Sales discounts								Account No:413
Date		Item		Post ref	Debit	Credit	Balance
20___					($)	($)	Debit ($)	Credit($)
Jan	4			1	20		20
	6			1	13		33
Account: Purchases								Account No:511
Date		Item		Post ref	Debit	Credit	Balance
20___					($)	($)	Debit ($)	Credit($)
Jan	4			1	2,930		2,930
	18			2	4,854		7,784
Account: Purchases returns and allowances								Account No:512
Date		Item		Post ref	Debit	Credit	Balance
20___					($)	($)	Debit ($)	Credit($)
Jan	23			3		376		376
Account: Purchase discounts								Account No:513
Date		Item		Post ref	Debit	Credit	Balance
20___					($)	($)	Debit ($)	Credit($)
Jan	7			1		12		12
	11			2		58.6		70.6
Account: Freight in								Account No:514
Date		Item		Post ref	Debit	Credit	Balance
20___					($)	($)	Debit ($)	Credit($)
Jan	18			2	147		147
	23			2	96		243
Account: Salary expense								Account No:621
Date		Item		Post ref	Debit	Credit	Balance
20___					($)	($)	Debit ($)	Credit($)
Jan	31			3	6,200		6,200
Account: Payroll tax expense								Account No:622
Date		Item		Post ref	Debit	Credit	Balance
20___					($)	($)	Debit ($)	Credit($)
Jan	31			3	858.7		858.7
Account: Rent expense								Account No:627
Date		Item		Post ref	Debit	Credit	Balance
20___					($)	($)	Debit ($)	Credit($)
Jan	2			1	775		775
Account: Miscellaneous expense								Account No:631
Date		Item		Post ref	Debit	Credit	Balance
20___					($)	($)	Debit ($)	Credit($)
Jan	21			2	194		194
	31			3	53		247

Table (4)

To determine

Prepare a trial balance of H Company.

Explanation of Solution

Trial balance: Trial balance is a summary of all the ledger accounts balances presented in a tabular form with two column, debit and credit. It checks the mathematical accuracy of the ledger postings and helps preparing the final accounts.

Prepare a trial balance.

H company
Trail balance
January 31, 20__
Account name				Debit ($)	Credit($)
Cash				17,308.1
Accounts receivable				5,468
Merchandise inventory				20,584
Supplies				700
Prepaid insurance				390
Equipment				3,644
Accounts payable					4,733
Employee's federal income tax payable					872
FICA social security tax payable					948.6
State unemployment tax payable					334.8
Federal unemployment tax payable					49.6
Mr. J capital					38,500
Mr. J drawings				1,000
Sales					19,404.2
Sales returns and allowances				54
Sales discounts				33
Purchases				7,784
Purchases returns and allowances					376
Purchases discounts					70.6
Freight in				243
Salary expense				6,200
Payroll tax expense				858.7
Rent expense				775
Miscellaneous expense				247
				65,288.8	65,288.8

Table (5)

To determine

Prepare a schedule of accounts receivable and accounts payable.

Explanation of Solution

Schedule of accounts receivable:

H company
Schedule of Accounts Receivable
January 31, 20__
Particulars	Amount($)
B company	1,835
E and C company	787
L company	796
V company	2,050
Total accounts receivable	5,468

Table (6)

Schedule of accounts payable

H company
Schedule of Accounts Payable
January 31, 20__
Particulars	Amount($)
C company	4,625
D company	108
Total accounts payable	4,733

Table (7)