Chapter 12, Problem 8SPA

1.

To determine

Prepare the transaction in the sales journal, cash receipts journal and general journal and verify the total column and rule the column.

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.

Prepare the given transaction in a sales journal and verify the total column and rule the column:

Table (1)

Working note 1:

Calculate the amount of accounts receivable (debit) on dated 1^st March:

$\begin{array}{c}\begin{array}{l}\text{Accounts receivable }\\ \left(\text{debit}\right){\text{ on dated 1}}^{\text{st}}\text{March}\end{array}\}=\left(\text{Sales + 8\% on sales tax}\right)\\ =\left[\$1,800+\left(8\%\times \$1,800\right)\right]\\ =\left[\$1,800+\$144\right]\\ =\$1,944\end{array}$

Working note 2:

Calculate the amount of accounts receivable (debit) on dated 3^rd March:

$\begin{array}{c}\begin{array}{l}\text{Accounts receivable }\\ \left(\text{debit}\right){\text{ on dated 3}}^{\text{rd}}\text{March}\end{array}\}=\left(\text{Sales + 8\% on sales tax}\right)\\ =\left[\$2,240+\left(8\%\times \$2,240\right)\right]\\ =\left[\$2,240+\$179.20\right]\\ =\$2,419.20\end{array}$

Working note 3:

Calculate the amount of accounts receivable (debit) on dated 11^th March:

$\begin{array}{c}\begin{array}{l}\text{Accounts receivable }\\ \left(\text{debit}\right){\text{ on dated 11}}^{\text{th}}\text{March}\end{array}\}=\left(\text{Sales + 8\% on sales tax}\right)\\ =\left[\$1,210+\left(8\%\times \$1,210\right)\right]\\ =\left[\$1,210+\$96.80\right]\\ =\$1,306.80\end{array}$

Working note 4:

Calculate the amount of accounts receivable (debit) on dated 18^th March:

$\begin{array}{c}\begin{array}{l}\text{Accounts receivable }\\ \left(\text{debit}\right){\text{ on dated 18}}^{\text{th}}\text{March}\end{array}\}=\left(\text{Sales + 8\% on sales tax}\right)\\ =\left[\$2,620+\left(8\%\times \$2,620\right)\right]\\ =\left[\$2,620+\$209.60\right]\\ =\$2,829.60\end{array}$

Working note 5:

Calculate the amount of accounts receivable (debit) on dated 25^th March:

$\begin{array}{c}\begin{array}{l}\text{Accounts receivable }\\ \left(\text{debit}\right){\text{ on dated 25}}^{\text{th}}\text{March}\end{array}\}=\left(\text{Sales + 8\% on sales tax}\right)\\ =\left[\$1,915+\left(8\%\times \$1,915\right)\right]\\ =\left[\$1,915+\$153.20\right]\\ =\$2,068.20\end{array}$

Working note 6:

Calculate the amount of accounts receivable (debit) on dated 27^th March:

$\begin{array}{c}\begin{array}{l}\text{Accounts receivable }\\ \left(\text{debit}\right){\text{ on dated 27}}^{\text{th}}\text{March}\end{array}\}=\left(\text{Sales + 8\% on sales tax}\right)\\ =\left[\$2,016+\left(8\%\times \$2,016\right)\right]\\ =\left[\$2,016+\$161.28\right]\\ =\$2,177.28\end{array}$

Verification of total debit and credit column:

$\begin{array}{l}\text{Total Debit = Total Credit}\\ \$12,745.08=\left(\$11,801.00+\$944.08\right)\end{array}$

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.

The following are the some examples of transactions that would be recorded in the Other Accounts credit column of the cash receipts journal:

• • Cash received as interest on notes payable
• • Interest revenue received from debtors
• • Cash receipts from bank loans
• • Cash receipts for capital investments

Prepare the given transactions in the cash receipts journal and verify the total column and rule the column:

Table (2)

Working note 1:

Calculate the amount of cash on dated 7^th March:

$\begin{array}{c}\begin{array}{l}\text{Cash}\left(\text{debit}\right)\text{on}\\ {\text{ dated 1}}^{\text{st}}\text{March}\end{array}\}=\left(\text{Cash sales + 8\% on sales tax}\right)\\ =\left[\$3,160+\left(8\%\times \$3,160\right)\right]\\ =\left[\$3,160+\$252.8\right]\\ =\$3,412.8\end{array}$

Working note 2:

Calculate the amount of cash on dated 14^th March:

$\begin{array}{c}\begin{array}{l}\text{Cash}\left(\text{debit}\right)\text{on}\\ {\text{ dated 14}}^{\text{th}}\text{March}\end{array}\}=\left(\text{Cash sales + 8\% on sales tax}\right)\\ =\left[\$4,200+\left(8\%\times \$4,200\right)\right]\\ =\left[\$4,200+\$336\right]\\ =\$4,536\end{array}$

Working note 3:

Calculate the amount of cash on dated 21^st March:

$\begin{array}{c}\begin{array}{l}\text{Cash}\left(\text{debit}\right)\text{on}\\ {\text{ dated 21}}^{\text{st}}\text{March}\end{array}\}=\left(\text{Cash sales + 8\% on sales tax}\right)\\ =\left[\$2,400+\left(8\%\times \$2,400\right)\right]\\ =\left[\$2,400+\$192\right]\\ =\$2,592\end{array}$

Working note 4:

Calculate the amount of cash on dated 28^th March:

$\begin{array}{c}\begin{array}{l}\text{Cash}\left(\text{debit}\right)\text{on}\\ {\text{ dated 28}}^{\text{th}}\text{March}\end{array}\}=\left(\text{Cash sales + 8\% on sales tax}\right)\\ =\left[\$3,500+\left(8\%\times \$3,500\right)\right]\\ =\left[\$3,500+\$280\right]\\ =\$3,780\end{array}$

Verification of total debit and credit column:

$\begin{array}{l}\text{Total Debit = Total Credit}\\ \$19,910.88=\left(\begin{array}{l}\$5,590.08+\$13,260.00\\ +\$1,060.80\end{array}\right)\end{array}$

Use the general journal to record the sales returns and allowances:

General Journal: It is a book where all the monetary transactions are recorded in the form of journal entries on the date of their occurrence in a chronological order.

Transaction on March 5:

General Journal
Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
20--
March	5	Sales Returns and Allowances		401.1	30.00
		Sales Tax Payable		231	2.40
			Accounts Receivable, A &Company	122/✓		32.40
		(Record merchandise returned)

Table (3)

Description:

• ■ Sales Returns and Allowances is a contra-revenue account, and contra-revenue accounts decrease the equity value, and a decrease in equity is debited.
• ■ Sales Tax Payable is a liability account. Since the payable decreased due to returns, the liability decreased, and a decrease in liability is debited.
• ■ Accounts Receivable, A &Company is an asset account. Since inventory is returned, amount to be received has decreased, asset account is decreased, and a decrease in asset is credited.

Working Note:

Compute sales tax payable amount.

$\begin{array}{c}\text{Sales tax payable = Sales returns×Sales tax percentage}\\ \text{= \$30×8\%}\\ \text{= \$2}\text{.40}\end{array}$

Transaction on March 16:

General Journal
Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
20--
March	16	Sales Returns and Allowances		401.1	44.00
		Sales Tax Payable		231	3.52
			Accounts Receivable, BB	122/✓		47.52
		(Record merchandise returned)

Table (4)

Description:

• ■ Sales Returns and Allowances is a contra-revenue account, and contra-revenue accounts decrease the equity value, and a decrease in equity is debited.
• ■ Sales Tax Payable is a liability account. Since the payable decreased due to returns, the liability decreased, and a decrease in liability is debited.
• ■ Accounts Receivable, BB is an asset account. Since inventory is returned, amount to be received has decreased, asset account is decreased, and a decrease in asset is credited.

Working Note 1:

Compute sales tax payable amount.

$\begin{array}{c}\text{Sales tax payable = Sales returns×Sales tax percentage}\\ \text{= \$44×8\%}\\ \text{= \$3}\text{.52}\end{array}$

Working note 2:

Compute accounts receivable amount.

$\begin{array}{c}\begin{array}{l}\text{Accounts receivable, }\\ \text{Bakery E}\end{array}\}\text{ = Sales returns+Sales tax payable}\\ \text{= \$44}\text{.00+\$3}\text{.52}\\ \text{= \$47}\text{.52}\end{array}$

2.

To determine

Post the prepared journals to the general ledger, and the accounts receivable ledger accounts.

Explanation of Solution

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

Post the prepared journals to the general ledger:

ACCOUNT    Cash                                                                       ACCOUNT NO. 101
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
20--
March	1	Balance	✓			9,741.00
	31		CR9	19,910.88		29,651.88

Table (5)

ACCOUNT    Accounts Receivable                                             ACCOUNT NO. 122
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
20--
March	1	Balance	✓			1,058.25
	5		J5		32.40	1,025.85
	16		J5		47.52	978.33
	31		S6	12,745.08		13,723.41
	31		CR9		5,590.08	8,133.33

Table (6)

ACCOUNT    Sales Tax Payable                                                 ACCOUNT NO. 231
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
20--
March	5		J5	2.40		2.40
	16		J5	3.52		5.92
	31		S6		944.08		938.16
	31		CR9		1,060.80		1,998.96

Table (7)

ACCOUNT    Sales                                                                         ACCOUNT NO. 401
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
20--
March	31		S6		11,801.00		11,801.00
	31		CR9		13,260.00		25,061.00

Table (8)

ACCOUNT    Sales Returns and Allowances                            ACCOUNT NO. 401.1
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
20--
March	5		J5	30.00		30.00
	16		J5	44.00		74.00

Table (9)

Post the journals to the accounts receivable ledger:

NAME          Corporation A & Company
ADDRESS 1424 J Creek Road, N, In 47448-2245
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance ($)
20--
March	1		S6	1,944.00		1,944.00
	5		J5		32.40	1,911.60
	10		CR9		1,911.60	0

Table (10)

NAME          BB
ADDRESS   6422 E. B Road, B, In 47401-7756
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance ($)
20--
March	11		S6	1,306.80		1,306.80
	16		J5		47.52	1,259.28
	20		CR9		1,259.28	0
	25		S6	2,068.20		2,068.20

Table (11)

NAME          RJ Incorporation
ADDRESS  3315 l Avenue, B, in 47401-7223
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance ($)
20--
March	3		S6	2,419.20		2,419.20
	13		CR9		2,419.20	0
	18		S6	2,829.60		2,829.60

Table (12)

NAME           T Group
ADDRESS     2300 E. National Road, Cd, IN 46229-4824
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance ($)
20--
March	1	Balance	✓			1,058.25
	27		S6	2,177.28		3,235.53

Table (13)