Chapter 10, Problem 4PB

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.

Jan. 2    Issued Ck. No. 6981 to Tri-County Management Company for monthly rent, $850.

2    L. Yang, the owner, invested an additional $4,500 in the business.

4    Bought merchandise on account from Valentine and Company, invoice no. A694, $2,830; terms 2/10, n/30; dated January 2.

4    Received check from Velez Appliance for $980 in payment of invoice for $1,000 less discount.

4    Sold merchandise on account to L. Parrish, invoice no. 6483, $755.

6    Received check from Peck, Inc., $637, in payment of $650 invoice less discount.

7    Issued Ck. No. 6982, $588, to Frost and Son, in payment of invoice no. C127 for $600 less discount.

7    Bought supplies on account from Dudley Office Supply, invoice no. 190B, $93.54; terms net 30 days.

7    Sold merchandise on account to Ewing and Charles, invoice no. 6484, $1,115.

9    Issued credit memo no. 43 to L. Parrish, $47, for merchandise returned.

11    Cash sales for January 1 through January 10, $4,454.87.

11    Issued Ck. No. 6983, $2,773.40, to Valentine and Company, in payment of $2,830 invoice less discount.

14    Sold merchandise on account to Velez Appliance, invoice no. 6485, $2,100.

14    Received check from L. Parrish, $693.84, in payment of $755 invoice, less return of $47 and less discount.

Jan. 19    Bought merchandise on account from Crawford Products, invoice no. 7281, $3,700; terms 2/10, n/60; dated January 16; FOB shipping point, freight prepaid and added to invoice, $142 (total $3,842).

21    Issued Ck. No. 6984, $245, to A. Bautista for miscellaneous expenses not recorded previously.

21    Cash sales for January 11 through January 20, $3,689.

23    Received credit memo no. 163, $87, from Crawford Products for merchandise returned.

29    Sold merchandise on account to Bradford Supply, invoice no. 6486, $1,697.20.

29    Issued Ck. No. 6985 to Western Freight, $64, for freight charges on merchandise purchased January 4.

31    Cash sales for January 21 through January 31, $3,862.

31    Issued Ck. No. 6986, $65, to M. Pineda for miscellaneous expenses not recorded previously.

31    Recorded payroll entry from the payroll register: total salaries, $5,899.95; employees’ federal income tax withheld, $795; FICA Social Security tax withheld, $365.80, FICA Medicare tax withheld, $85.50.

31    Recorded the payroll taxes: FICA Social Security tax, $365.80; FICA Medicare tax, $85.50; state unemployment tax, $318.60; federal unemployment tax, $35.40.

31    Issued Ck. No. 6987, $4,653.65, for salaries for the month.

31    L. Yang, the owner, withdrew $1,000 for personal use, Ck. No. 6988.

Required

1. 1. Record the transactions for January using a sales journal, page 91; a purchases journal, page 74; a cash receipts journal, page 56; a cash payments journal, page 63; and a general journal, page 119. Assume the periodic inventory method is used.

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 those entries involving the Other Accounts columns and the general journal to the general ledger. Write the owner’s name in the Capital and Drawing accounts.
4. 5. Add the columns of the special journals and prove the equality of the debit and credit totals.
5. 6. Post the appropriate totals of the special journals to the general ledger.
6. 7. Prepare a trial balance.
7. 8. Prepare a schedule of accounts receivable and a schedule of accounts payable. Do the totals equal the balances of the related controlling accounts?

To determine

Journalize the transactions using types of journals.

Explanation of Solution

Sales Journal: Sales journal is one form of special journal book, which records all the sales transactions that are sold to customers on credit. In a single column sales journal, debit aspect of accounts receivable and credit aspect of inventory are recorded, and then posted to individual subsidiary customer account.

Purchase Journal: Purchase journal records all the merchandise purchase on credit. In a single column purchase journal, debit aspect of inventory and credit aspect of accounts payable are recorded, and then posted to individual subsidiary supplier account.

Cash Receipts Journal:  It is a special book where only cash receipts transactions that are received from customers, merchandise sales and service made in cash and collection of accounts receivable are recorded.

Cash payments journal: Cash payments journal refers to the journal that is used to record the all transaction which is involve the cash payments. For example, the business paid cash to employees (salary paid to employees). Cash payments journal is used to record merchandise purchases made in cash and payments of accounts payable. It also records all other cash payments to various purposes. To include all these transactions, companies use multi-column cash payments journal.

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.

Journalize the transactions using the types of journals.

• Sales Journal

Sales Journal					Page no: 91
Date		Invoice No.	Customer Name	Post Ref.	Accounts Receivable Dr.
					Sales Cr.($)
20__
Jan.	4	6483	Mr. P	✓	755
	7	6484	Mr. E&C	✓	1,115
	14	6485	Mr. V	✓	2,100
	29	6486	Mr. B	✓	1,697
	31		Total		$5,667
					(113) (411)

Table (1)

• Purchase Journal

Purchase Journal									Page no:74
Date		Customer name	Invoice no.	Invoice date	Terms.	Post Ref.	Accounts Payable	Freight in	Purchases
							Credit ($)	Debit ($)	Debit ($)
20__
Jan.	4	V Company	A691	2-Jan	2/10,n/30	✓	2,830		2,830
	18	C Company	7281D	16-Jan	2/10,n/60	✓	3,842	142	3,700
	31	Totals					6,672	142	6,530
							(212)	(514)	(511)

Table (2)

• Cash receipts journal

Cash Receipts Journal								Page:56
Date		Accounts Credited	Post ref.	Cash	Sales Discount	Accounts Receivable	Sales	Other Accounts
				debit($)	debit($)	credit($)	credit($)	Credit($)
20__
Jan	2	Mr. Y, Capital	311	4,500				4,500
	4	V company		980	20	1,000
	6	P company		637	13	650
	11			4,455			4,455
	14	Mr. P		693	14.16	708
	21			3,689			3,689
	31			3,862			3,862
	31	Totals		18,816.71	47.16	2,358	12,005.87	4,500
				(111)	(413)	(113)	(411)	(X)

Table (3)

• Cash payment journal

Cash payments journal								Page:63
Date		CK no	Account Debited	Post ref.	Other accounts	Accounts payable	Purchases discounts	Cash
					debit($)	debit($)	credit($)	credit($)
20__
Jan	2	6981	Rent expense	627	850			850
	7	6982	F company	✓		600	12	588
	11	6983	V Company	✓		2,830	57	2,773.4
	21	6984	Miscellaneous expense	631	245			245
	29	6985	Freight in	514	64			64
	31	6986	Miscellaneous expense	631	65			65
	31	6987	Salaries payable	215	4,653			4,653.65
	31	6988	Mr. Y drawing	312	1,000			1,000
	31		Totals		6,887.65	3,430	68.6	10,239.05
					(X)	(212)	(513)	(111)

Table (4)

• General journal

General journal					Page:100
Date		Description	Post ref.	Debit ($)	Credit($)
20___
Jan.	7	Supplies	115	93.54
		Accounts payable, D company	212/		93.54
		(Record purchase of supplies from D company
		invoice no. 1906B, terms net 30)
	9	Sales returns and allowances	412	47
		Accounts receivable, Mr. L	113/		47
		(Record issued credit memo no.43)
	23	Accounts payable, C company	212/	87
		Purchase returns and allowances	512		87
		(Received credit memo for return of
		merchandise memo no:163)
	31	Salaries expense	621	5,899.95
		Employee's federal income tax payable	216		795
		FICA social security tax payable	217		365
		FCIA Medicare tax payable	218		85
		Salaries payable	215		4,653.65
		(Record salaries paid for the month)
	31	Payroll tax expense	622	805.3
		FICA social security tax payable	217		365.8
		Medicare tax payable	218		85.5
		State unemployment tax payable	219		318.6
		Federal unemployment tax payable	220		35.4
		( Record employer's share of FCIA taxes and
		employer's state and federal unemployment
		taxes for the month)

Table (5)

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.

Accounts Receivable Ledger
Name: B company
Address:
Date		Items	Post ref.	Debit ($)	Credit ($)	Balance ($)
20___
Jan	29		S91	1,697		1,697.2
Name: E and C company
Address:
Date		Items	Post ref.	Debit ($)	Credit ($)	Balance ($)
20___
Jan	7		S91	1,115		1,115
Name: Mr. P
Address:
Date		Items	Post ref.	Debit ($)	Credit ($)	Balance ($)
20___
Jan	4		S91	755		755
	9		J119		47	708
	14		CR56		708
Name: P company
Address:
Date		Items	Post ref.	Debit ($)	Credit ($)	Balance ($)
20___
Jan	1	Balance	✓			650
	6		CR38		650	0
Name: V company
Address:
Date		Items	Post ref.	Debit ($)	Credit ($)	Balance ($)
20___
Jan	1	Balance	✓			1,000
	4		CR56		1,000	0
	14		S91	2,100		2,100

Table (6)

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.

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

Accounts payable ledger
Name: C company
Address:
Date		Items	Post ref.	Debit ($)	Credit ($)	Balance ($)
20___
Jan	19		P74		3,842	3,842
	23		J119	87		3,755
Name: D company
Address:
Date		Items	Post ref.	Debit ($)	Credit ($)	Balance ($)
20___
Jan	7		J119		93.54	93.54
Name: F and sons
Address:
Date		Items	Post ref.	Debit ($)	Credit ($)	Balance ($)
20___
Jan	1	Balance				600
	7		CP63	600		0
Name: V company
Address:
Date		Items	Post ref.	Debit ($)	Credit ($)	Balance ($)
20___
Jan	4		P74		2,830	2,830
	11		CP63	2,830		0

Table (7)

To determine

Post the prepared journals and other accounts column to 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.

Post the prepared journals to the general ledger:

General ledger
Account: Cash							Account No:111
Date		Item	Post ref	Debit	Credit	Balance
20___				($)	($)	Debit ($)	Credit($)
Jan	1	Balance	✓			8,740
	31		CR56	18,816.71		27,556.71
	31		CP63		10,239.05	17,317.66
Account: Accounts receivable							Account No:113
Date		Item	Post ref	Debit	Credit	Balance
20___				($)	($)	Debit ($)	Credit($)
Jan	1	Balance	✓			1,650
	9		J119		47	1,603
	31		S91	5,667.20		7,270.2
	31		CR56		2,358.00	4,912
Account: Merchandise inventory							Account No:114
Date		Item	Post ref	Debit	Credit	Balance
20___				($)	($)	Debit ($)	Credit($)
Jan	1	Balance	✓			20,584
Account: Supplies							Account No:115
Date		Item	Post ref	Debit	Credit	Balance
20___				($)	($)	Debit ($)	Credit($)
Jan	1	Balance	✓			592
	7		J119	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	31	Balance	✓				600
	7		J119		93.54		693.54
	23		J119	87			606.54
	31		P74		6,672		7,278.54
	31		CP63	3,430			3,848.54
Account: Salaries payable							Account No:215
Date		Item	Post ref	Debit	Credit	Balance
20___				($)	($)	Debit ($)	Credit($)
Jan	31		J119		4,653.65		4,653.65
	31		CP63	4,653.65
Account: Employees federal income tax payable							Account No:216
Date		Item	Post ref	Debit	Credit	Balance
20___				($)	($)	Debit ($)	Credit($)
Jan	31		J119		795		795
Account: FICA social security tax payable							Account No:217
Date		Item	Post ref	Debit	Credit	Balance
20___				($)	($)	Debit ($)	Credit($)
Jan	31		J119		365.8		365.8
	31		J119		365.8		731.6
Account: FICA Medicare payable							Account No:218
Date		Item	Post ref	Debit	Credit	Balance
20___				($)	($)	Debit ($)	Credit($)
Jan	31		J119		85.5		85.5
	31		J119		85.5		171
Account: State Unemployment tax payable							Account No:219
Date		Item	Post ref	Debit	Credit	Balance
20___				($)	($)	Debit ($)	Credit($)
Jan	31		J119		318.6		318.6
Account: Federal unemployment tax payable							Account No:220
Date		Item	Post ref	Debit	Credit	Balance
20___				($)	($)	Debit ($)	Credit($)
Jan	31		J119		35.4		35.4
Account: Mr. Y Capital							Account No:311
Date		Item	Post ref	Debit	Credit	Balance
20___				($)	($)	Debit ($)	Credit($)
Jan	1	Balance	✓				35,000
	2		CR56		4,500		39,500
Account: Mr. Y Drawing							Account No:312
Date		Item	Post ref	Debit	Credit	Balance
20___				($)	($)	Debit ($)	Credit($)
Jan	31		CP63	1,000		1,000
Account: Sales							Account No:411
Date		Item	Post ref	Debit	Credit	Balance
20___				($)	($)	Debit ($)	Credit($)
Jan	31		S91		5,667		5,667.2
	31		CR56		12,005.9		17,673.07
Account: Sales return and allowance							Account No:412
Date		Item	Post ref	Debit	Credit	Balance
20___				($)	($)	Debit ($)	Credit($)
Jan	9		J119	47		47
Account: Sales discounts							Account No:413
Date		Item	Post ref	Debit	Credit	Balance
20___				($)	($)	Debit ($)	Credit($)
Jan	31		CR56	47		47
Account: Purchases							Account No:511
Date		Item	Post ref	Debit	Credit	Balance
20___				($)	($)	Debit ($)	Credit($)
Jan	31		P74	6,530		6,530
Account: Purchases returns and allowances							Account No:512
Date		Item	Post ref	Debit	Credit	Balance
20___				($)	($)	Debit ($)	Credit($)
Jan	23		J119		87		87
Account: Purchase discounts							Account No:513
Date		Item	Post ref	Debit	Credit	Balance
20___				($)	($)	Debit ($)	Credit($)
Jan	31		CP63		68.6		68.6
Account: Freight in							Account No:514
Date		Item	Post ref	Debit	Credit	Balance
20___				($)	($)	Debit ($)	Credit($)
Jan	29		CP63	64		64
	31		P74	142		206
Account: Salary expense							Account No:621
Date		Item	Post ref	Debit	Credit	Balance
20___				($)	($)	Debit ($)	Credit($)
Jan	31		J119	5,899.95		5,899.95
Account: Payroll tax expense							Account No:622
Date		Item	Post ref	Debit	Credit	Balance
20___				($)	($)	Debit ($)	Credit($)
Jan	31		J119	805.3		805.3
Account: Rent expense							Account No:627
Date		Item	Post ref	Debit	Credit	Balance
20___				($)	($)	Debit ($)	Credit($)
Jan	2		CP63	850		850
Account: Miscellaneous expense							Account No:631
Date		Item	Post ref	Debit	Credit	Balance
20___				($)	($)	Debit ($)	Credit($)
Jan	21		CP63	245		245
	31		CP63	65		310

Table (8)

To determine

Report the equality of debit and credit totals in special journal column.

Explanation of Solution

Debit and credit rules:

• Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
• Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Equality of debit and credit column in purchase journal:

EQUALITY OF DEBITS AND CREDITS
	DEBITS ($)	CREDITS ($)
	142	6,672
	6,530
	6,672	6,672

Table (9)

Equality of debit and credit column in Cash receipt journal:

EQUALITY OF DEBITS AND CREDITS
	DEBITS ($)	CREDITS ($)
	47.16	4,500
	18,816.71	2,358
		12,005.87
	18,816.87	18,863.87

Table (10)

Equality of debit and credit column in Cash payment journal:

EQUALITY OF DEBITS AND CREDITS
	DEBITS ($)	CREDITS ($)
	6,877.65	68.6
	3,430.00	10,239.05
	10,307.65	10,307.65

Table (11)

To determine

Post the appropriate special journal 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.

To determine

Prepare a trail balance of Y Company.

Explanation of Solution

Prepare a trail balance of Y Company.

Y company
Trail balance
January 31, 20__
Account Name	Debit ($)	Credit($)
Cash	17,317.66
Accounts receivable	4,912.2
Merchandise inventory	20,584
Supplies	685.54
Prepaid insurance	390
Equipment	3,644
Accounts payable		3,848.54
Employee's federal income tax payable		795
FICA social security tax payable		731.6
FICA Medicare tax payable		171
State unemployment tax payable		318.6
Federal unemployment tax payable		35.4
Mr. Y Capital		39,500
Mr. Y 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	5,899.95
Payroll tax expense	805.3
Rent expense	850
Miscellaneous expense	310
	63,228.81	63,228.81

Table (12)

To determine

Prepare a schedule for accounts receivable and accounts payable.

Explanation of Solution

Schedule for the accounts receivable:

Y company
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	4912.2

Table (13)

H company
Schedule of accounts payable
January 31, 20__
Particulars	Amount($)
C company	3,755
D company	93.54
Total accounts payable	3848.54

Table (14)