Financial Accounting
Financial Accounting
14th Edition
ISBN: 9781305088436
Author: Carl Warren, Jim Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 5, Problem 4PA

AquaFresh Water Testing Service was established on April 16, 2016. AquaFresh uses field equipment and field supplies (chemicals and other supplies) to analyze water for unsafe contaminants in streams, lakes, and ponds. Transactions related to purchases and cash payments during the remainder of April are as follows:

Chapter 5, Problem 4PA, AquaFresh Water Testing Service was established on April 16, 2016. AquaFresh uses field equipment , example  1

Instructions

1.    Journalize the transactions for April. Use a purchases journal and a cash payments journal, similar to those illustrated in this chapter, and a two-column general journal. Use debit columns for Field Supplies, Office Supplies, and Other Accounts in the purchases journal. Refer to the following partial chart of accounts:

Chapter 5, Problem 4PA, AquaFresh Water Testing Service was established on April 16, 2016. AquaFresh uses field equipment , example  2

At the points indicated in the narrative of transactions, post to the following accounts in the accounts payable subsidiary ledger:

Best Office Supply Co.

Hydro Supply Co.

Pure Equipment Co.

2.    Post the individual entries (Other Accounts columns of the purchases journal and the cash payments journal and both columns of the general journal) to the appropriate general ledger accounts.

3.    Total each of the columns of the purchases journal and the cash payments journal, and post the appropriate totals to the general ledger. (Because the problem does not include transactions related to cash receipts, the cash account in the ledger will have a credit balance.)

4.    Prepare a schedule of the accounts payable creditor balances.

5.    Why might AquaFresh consider using a subsidiary ledger for the field equipment?

1.

Expert Solution
Check Mark
To determine

Prepare single column revenue journal and cash receipt journal, and post the accounts in the accounts payable subsidiary ledger.

Explanation of Solution

General Ledger: General ledger refers to the ledger that records all the transactions of the business related to the company’s assets, liabilities, owners’ equities, revenues, and expenses. Each subsidiary ledger is represented in the general ledger by summarizing the account.

Accounts payable control account and subsidiary ledger: Accounts payable account and subsidiary ledger is the ledger which is used to post the creditors transaction in one particular ledger account. It helps the business to locate the error in the creditor ledger balance. After all transactions of creditor accounts are posted, the balances in the accounts payable subsidiary ledger should be totaled, and compare with the balance in the general ledger of accounts payable. If both the balance does not agree, the error has been located and corrected.

Purchase journal: Purchase journal refers to the journal that is used to record all purchases on account. In the purchase journal, all purchase transactions are recorded only when the business purchased the goods on account. For example, the business purchased cleaning supplies on account.

Cash payments journal: Cash payments journal refers to the journal that is used to record all transaction which involves the cash payments. For example, the business paid cash to employees (salary paid to employees).

Purchase journal

Purchase journal of Company AF in the month of April, 2016 is as follows:

Financial Accounting, Chapter 5, Problem 4PA

Figure (1)

Cash payment journal

Cash payment journal of Company AF in the month of April is as follows:

Cash payment journal

DateCheck No.Account debitedPost Ref.Other accounts Dr.Accounts payable Dr.Cash Dr.
2016       
Apr.161Rent expense713,500 3,500
 192Field supplies143,340 3,340
   Office supplies15400 400
 233Land19140,000 140,000
 244HS Company ✓   5,3405,340
 265P Equipment Company ✓   21,45021,450
 306BO Supply Company ✓   510510
 307Salary expense6129,40029,400
 30   176,64027,300203,940
     (21)(11)

Table (1)

Accounts payable subsidiary ledger

Name: BO Supply Company
DateItemPost. Ref

Debit

 ($)

Credit ($)

Balance

($)

2016     
April17 P1 510510
 23 P1 6601,170
 30 CP1510 660

Table (2)

Name: HS Company
DateItemPost. Ref

Debit

 ($)

Credit ($)

Balance

($)

2016     
April16 P1 5,3405,340
 24 CP15,340 -
 30 P1 7,6507,650

Table (3)

Name: P Equipment Company
DateItemPost. Ref

Debit

 ($)

Credit ($)

Balance

($)

2016     
April16 P1 21,45021,450
 26 CP121,450 -
 30 P1 6,0406,040

Table (4)

2. and 3.

Expert Solution
Check Mark
To determine

Post individual entries to the appropriate general ledger accounts.

Explanation of Solution

Prepare the general ledger for given accounts as follows:

Account:         Cash                                                              Account no. 11
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
2016      
April30 CP1203,940  203,940

Table (5)

Account:    Field supplies                                                             Account no. 14
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
2016      
April19 CP13,340 3,340 
 30 P114,330 17,670 

Table (6)

Account:    Office supplies                                                             Account no. 15
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
2016      
April19 CP1400 400 
 30 P11,170 1,570 

Table (7)

Account:  Field equipment                                                         Account no. 17
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
2016      
April16 P121,450 21,450 
 30 P14,700 26,150 
 30 J1 12,00014,150 

Table (8)

Account:  Land                                                                             Account no. 19
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
2016      
April23 CP1140,000 140,000 
 30 J112,000 152,000 

Table (9)

Account:  Accounts payable                                                         Account no. 21
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
2016      
April30 P1 41,650 41,650
 30 CP127,300  14,350

Table (10)

Account:  Salary expense                                                         Account no. 61
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
2016      
April30 CP1 29,400 29,400

Table (11)

Account:  Rent expense                                                         Account no. 71
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
2016      
April16 CP1 3,500 3,500

Table (12)

                                                   Journal                                                      Page  01
DateDescriptionPost. RefDebit ($)Credit ($)
April30Land1912,000 
       Field equipment17 12,000
  (To record the acquisition of land in exchange for field equipment)   

Table (13)

4.

Expert Solution
Check Mark
To determine

Prepare accounts payable creditor balances.

Explanation of Solution

Accounts payable creditor balance

Accounts payable creditor balance is as follows:

Company AF
Accounts payable creditor balances
April 30
 Amount ($)
BO Supply Company660
HS Company7,650
P Equipment Company6,040
Total accounts receivable14,350

Table (14)

Accounts payable controlling account

Ending balance of accounts payable controlling account is as follows:

Company AF
Accounts payable (Controlling account)
April 30
 Amount ($)
Opening balance0
Add:
Total credits (from purchase journal)41,650
 
Less:
Total debits (from cash payment journal)(27,300)
Total accounts payable14,350

Table (15)

In this case, accounts payable subsidiary ledger is used to identify, and locate the error by way of cross check the creditor balance and accounts payable controlling account. From the above calculation, we can understand that the both balance of accounts payable is agree, hence there is no error in the recording and posing of transactions.

5.

Expert Solution
Check Mark
To determine

Discuss the reason for using subsidary ledger for the field equipment.

Explanation of Solution

A subsidiary ledger for the field equipment helps the company to track the cost of each piece of equipment, location, useful life, and other necessary data. This information is useful for safeguarding the equipment, and determining depreciation of equipment.

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Chapter 5 Solutions

Financial Accounting

Ch. 5 - The following revenue transactions occurred during...Ch. 5 - Prob. 1PEBCh. 5 - The debits and credits from two transactions are...Ch. 5 - The debits and credits from two transactions are...Ch. 5 - The following purchase transactions occurred...Ch. 5 - Prob. 3PEBCh. 5 - The debits and credits from two transactions are...Ch. 5 - Prob. 4PEBCh. 5 - McHale Company does business in two customer...Ch. 5 - Prob. 5PEBCh. 5 - Using the following revenue journal for Zeta...Ch. 5 - Based on the data presented in Exercise 5-1,...Ch. 5 - Assuming the use of a two-column (all-purpose)...Ch. 5 - Assuming the use of a two-column (all-purpose)...Ch. 5 - Prob. 5ECh. 5 - Global Services Company had the following...Ch. 5 - The revenue journal for Sapling Consulting Inc....Ch. 5 - The revenue and cash receipts journals for Mirage...Ch. 5 - Transactions related to revenue and cash receipts...Ch. 5 - Lasting Summer Inc. has 2,510 in the October 1...Ch. 5 - Prob. 11ECh. 5 - Using the following cash payments journal,...Ch. 5 - Prob. 13ECh. 5 - Prob. 14ECh. 5 - The purchases journal for Newmark Exterior...Ch. 5 - Prob. 16ECh. 5 - Prob. 17ECh. 5 - Prob. 18ECh. 5 - After Bunker Hill Assay Services Inc. had...Ch. 5 - Prob. 20ECh. 5 - Prob. 21ECh. 5 - Most computerized accounting systems use...Ch. 5 - Prob. 23ECh. 5 - For each of the following companies, determine...Ch. 5 - Starbucks Corporation reported the following...Ch. 5 - Prob. 26ECh. 5 - Prob. 27ECh. 5 - Sage Learning Centers was established on July 20,...Ch. 5 - Transactions related to revenue and cash receipts...Ch. 5 - Sterling Forest Landscaping designs and installs...Ch. 5 - AquaFresh Water Testing Service was established on...Ch. 5 - The transactions completed by Revere Courier...Ch. 5 - Guardian Security Services was established on...Ch. 5 - Transactions related to revenue and cash receipts...Ch. 5 - Prob. 3PBCh. 5 - Prob. 4PBCh. 5 - The transactions completed by AM Express Company...Ch. 5 - Ethics in Action Netbooks Inc. provides accounting...Ch. 5 - The following conversation took place between...Ch. 5 - A subsidiary ledger is used for accounts...Ch. 5 - For the past few years, your client, Omni Care,...Ch. 5 - Prob. 5CP
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