Chapter 10, Problem 1PB

The following transactions were completed by Yang Restaurant Equipment during January, 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. Yang Restaurant Equipment 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.*
4. 5. Prepare a trial balance.
5. 6. Prepare a schedule of accounts receivable (A/R Aging Detail report in QuickBooks) and a schedule of accounts payable (A/P Aging Detail report in QuickBooks). Do the totals equal the balances of the related controlling accounts?

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

To determine

Journalize the transaction in the general journal using 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 transaction in general journal:

General journal					Page:1
Date		Description	Post ref.	Debit ($)	Credit($)
20___
Jan.	2	Rent expense	627	850
		Cash	111		850
		(Record rent paid by cash, Ck.no.6981)
	2	Cash	111	4,500
		Mr. L capital	311		4,500
		(Record additional capital invested
		by owner)
	4	Purchases	212	376
		Accounts payable, V company	512		376
		(Record purchase of merchandise from
		V company, invoice no: A694)
	4	Cash	111	980
		Sales discounts	413	20
		Accounts receivable, V company	113		1,000
		(Record received check from V company
		for $980 in payment of invoice)
	4	Accounts receivable, L company	113	755
		Sales	411		755
		(Record merchandise sold on account
		to L company)
	6	Cash	111	637
		Sales discount	413	13
		Accounts receivable, P company	113		650
		(Record received check from P company
		for $637 in payment of invoice)
	7	Accounts payable, F and S	212	600
		Purchase discounts	513		12
		Cash	111		588
		(Record issued check to F and S in
		payment of invoice no: C127)
	7	Supplies	625	93.54
		Accounts payable, D company	212		93.54
		(Record purchase of supplies on account
		from D company)
	7	Accounts receivable, E and C	113	1,115
		Sales	411		1,115
		(Record merchandise sold to E and C)

Table (1)

General journal					Page:2
Date		Description	Post ref.	Debit ($)	Credit($)
20___	9	Sales returns and allowances	412	47
Jan.		Accounts receivable	113		47
		(Record issued credit memo to E and C for return of merchandise)
	11	Cash	111	4,454.87
		Sales	411		4,454.87
		(record cash sales)
	11	Accounts payable, V company	212	2,830
		Cash	111		2,773.40
		Purchase discounts	513		56.6
		(Record issued check to V company for$2,773.40 in payment of invoice)
	14	Accounts receivable, V company	113	2,100
		Sales	411		2,100
		(Record merchandise sold to V company)
	14	Cash	11	693.84
		Sales discount	413	14.16
		Accounts receivable, L company	113		708
		(Record received check from L company for $980 in payment of invoice)
	19	Purchases	511	3,700
		Freight in	514	142
		Accounts payable, C company	212		3,842
		(Record purchase of merchandise on account from C company)
	21	Miscellaneous expense	631	245
		Cash	111		245
		(Record issued check to A.B company for
		$245 in payment of invoice)
	21	Cash	111	3,689
		Sales	411		3,689
		(Record cash sales)
	23	Accounts payable	212	87
		Purchase returns and allowances	512		87
		(Record received credit memo from C company)

Table (2)

General journal					Page:3
Date		Description	Post ref.	Debit ($)	Credit($)
20___
Jan.	29	Accounts receivable, B company	113	1,697.2
		Sales	411		1,697.2
		(Record sale of merchandise to B company)
	29	Freight in	514	64
		Cash	111		64
		(Record freight in charges)
	31	Cash	111	3,862
		Sales	411		3,862
		(Record cash sales)
	31	Miscellaneous expense	631	65
		Cash	111		65
		(Record payment of miscellaneous expense to M company)
	31	Salary expense	621	5,900
		Employees Federal Income Tax payable	216		795
		FICA Tax payable	217		451.35
		Salaries payable	215		4,653.65
		(Record salaries paid)
	31	Payroll tax expense	622	764.05
		FICA Tax payable	217		451.35
		State Unemployment Tax payable	218		265.50
		Federal Unemployment Tax payable	219		47.20
		(Record payment of payroll tax expense)
	31	Salaries payable	215	4,653.65
		Cash	111		4,653.65
		(Record payment of salaries)
	31	Mr. L , drawing	312	1,000
		Cash	111		1,000
		(Record Mr. L withdraw cash for personal use)

Table (3)

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.

Entries from customer accounts to the accounts receivable ledger:

Accounts receivable ledger
Name: B company
Address:
Date		Items	Post ref.	Debit ($)	Credit ($)	Balance ($)
20___
Jan	29		3	1,697.2		1,697.2
Name: E and C company
Address:
Date		Items	Post ref.	Debit ($)	Credit ($)	Balance ($)
20___
Jan	7		1	1,115		1,115
Name: L company
Address:
Date		Items	Post ref.	Debit ($)	Credit ($)	Balance ($)
20___
Jan	4		1	755		755
	9		2		47	708
	14		2		708	0
Name: P company
Address:
Date		Items	Post ref.	Debit ($)	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	2,100		2,100

Table (4)

To determine

Record the entries from creditor 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 creditor accounts to the accounts payable ledger:

Accounts payable ledger
Name: C company
Address:
Date		Items	Post ref.	Debit ($)	Credit ($)	Balance ($)
20___
Jan	19		2		3,842	3,842
	23		2	87		3,755
Name: D company
Address:
Date		Items	Post ref.	Debit ($)	Credit ($)	Balance ($)
20___
Jan	7		1		93.5	93.5
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		2,830	2,830
	11		2	2,830		0

Table (5)

To determine

Post the prepared general journal entries to the general ledger.

Explanation of Solution

Posting of transaction: The process of transferring the journalized transactions into the accounts of the ledger is known as posting of transaction.

Posting the transaction from general journal entries to general ledger:

General ledger
Account: Cash																Account No:111
Date				Item					Post ref		Debit		Credit		Balance
20___											($)		($)		Debit ($)		Credit($)
Jan	1			Balance											8,740
	2								1				850		7,890.00
	2								1		4,500				12,390.00
	4								1		980				13,370
	6								1		637				14,007
	7								1				588		13,419
	11								2		4,454.87				17,873.87
	11								2				2,773.40		15,100.47
	14								2		693.84				15,794.31
	21								2				245		15,549.31
	21								2		3,689				19,238.31
	29								3				64		19,174.31
	31								3		3,862				23,036.31
	31								3				65		22,971.31
	31								3				4,653.65		18,317.66
	31								3				1,000		17,317.66
Account: Accounts receivable																	Account No:113
Date				Item					Post ref		Debit		Credit		Balance
20___											($)		($)		Debit ($)		Credit($)
Jan	1			Balance											1650
	4								1				1000		650
	4								1		755				1,405
	6								1				650		755
	7								1		1,115				1,870
	9								2				47		1,823
	14								2		2,100				3,923
	14								2				708		3,215
	29								3		1,697.20				4,912.20
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								1		93.54				685.54
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				2,830				3,430
	7								1		600						2,830
	7								1				93.54				2,923.54
	11								2		2,830						93.54
	19								2				3,842				3,935.54
	23								2		87						3,848.54
Account: Salaries payable																	Account No:215
Date				Item					Post ref		Debit		Credit		Balance
20___											($)		($)		Debit ($)		Credit($)
Jan	31								3				4,653.65				4,653.65
	31								3		4,653.65						0
Account: Employees federal income tax payable																	Account No:216
Date				Item					Post ref		Debit		Credit		Balance
20___											($)		($)		Debit ($)		Credit($)
Jan	31								3				795				795
Account: FICA tax payable																	Account No:217
Date				Item				Post ref			Debit		Credit		Balance
20___											($)		($)		Debit ($)		Credit($)
Jan	31							3					451.35				451.35
	31							3					451.35				902.7
Account: State unemployment tax payable																	Account No:218
Date			Item				Post ref			Debit		Credit		Balance
20___										($)		($)		Debit ($)			Credit($)
Jan		31					3					265.5					265.5
Account: Federal unemployment tax payable																	Account No:219
Date			Item				Post ref			Debit		Credit		Balance
20___										($)		($)		Debit ($)			Credit($)
Jan		31					3					47.2					47.2
Account: Mr. Y capital																	Account No:311
Date			Item				Post ref			Debit		Credit		Balance
20___										($)		($)		Debit ($)			Credit($)
Jan		1	Balance														35,000
		2					1					4,500					39,500
Account: Mr. Y 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					755					755
		7					1					1,115					1,870
		11					2					4,454.87					6,324.87
		14					2					2,100					8,424.87
		21					2					3,689					12,113.87
		29					3					1,697.20					13,811.07
		31					3					3,862					17,673.07
Account: Sales return and allowance																	Account No:412
Date			Item				Post ref			Debit		Credit		Balance
20___										($)		($)		Debit ($)			Credit($)
Jan		9					2			47				47
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
		14					2			14.16				47.16
Account: Purchases																	Account No:511
Date			Item				Post ref			Debit		Credit		Balance
20___										($)		($)		Debit ($)			Credit($)
Jan		4					1			2,830				2,830
		19					2			3,700				6,530
Account: Purchases returns and allowances																	Account No:512
Date			Item				Post ref			Debit		Credit		Balance
20___										($)		($)		Debit ($)			Credit($)
Jan		23					2					87					87
Account: Purchase discounts																	Account No:513
Date			Item				Post ref			Debit		Credit		Balance
20___										($)		($)		Debit ($)			Credit($)
Jan		7					1					12					12.0
		11					2					56.6					68.6
Account: Freight in																	Account No:514
Date			Item				Post ref			Debit		Credit		Balance
20___										($)		($)		Debit ($)			Credit($)
Jan		19					2			142				142
		29					3			64				206
Account: Salary expense																	Account No:621
Date			Item				Post ref			Debit		Credit		Balance
20___										($)		($)		Debit ($)			Credit($)
Jan		31					3			5,900				5,900
Account: Payroll tax expense																	Account No:622
Date			Item				Post ref			Debit		Credit		Balance
20___										($)		($)		Debit ($)			Credit($)
Jan		31					3			764.05				764.05
Account: Rent expense																	Account No:627
Date			Item				Post ref			Debit		Credit		Balance
20___										($)		($)		Debit ($)			Credit($)
Jan		2					1			850				850
Account: Miscellaneous expense																	Account No:631
Date			Item				Post ref			Debit		Credit		Balance
20___										($)		($)		Debit ($)			Credit($)
Jan		21					2			245				245
		31					3			65				310

Table (6)

To determine

Prepare a trail balance for Y Restaurant.

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.

Preparing the trial balance for Y Company:

Y Restaurant
Trail balance
January 31, 20__
Account name	Debit ($)	Credit($)
Cash	17,317.6
Accounts receivable	4,912.2
Merchandise inventory	20,584
Supplies	685.5
Prepaid insurance	390
Equipment	3,644
Accounts payable		3,848.5
Employee's federal income tax payable		795
FICA tax payable		902.7
State unemployment tax payable		265.5
Federal unemployment tax payable		47.2
Mr. L capital		39,500
Mr. L drawings	1,000
Sales		17,673.07
Sales returns and allowances	47
Sales discounts	47.16
Purchases	6,530
Purchases returns and allowances		87
Purchases discounts		68.6
Freight in	206
Salary expense	5,900
Payroll tax expense	764.05
Rent expense	850
Miscellaneous expense	310
Total	63,187.61	63,187.61

Table (7)

To determine

Prepare a schedule for accounts receivable and accounts payable.

Explanation of Solution

Schedule for the accounts receivable:

Y Restaurant
Schedule of accounts receivable
January 31, 20__
Particulars	Amount($)
B company	1,697.2
E and C company	1,115
V company	2,100
Total accounts receivable	$4,912.2

Table (8)

Schedule for the accounts payable:

Y Restaurant
Schedule of accounts payable
January 31, 20__
Particulars	Amount($)
C company	3,755
D company	93.5
Total accounts payable	$3,848.5

Table (9)