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 4PB

1.

To determine

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

1.

Expert Solution
Check Mark

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 WTE in the month of October 2016 is as follows:

Financial Accounting, Chapter 5, Problem 4PB

Figure (1)

Cash payment journal

Cash payment journal of Company WTE in the month of October 2016 is as follows:

Cash payment journal

DateCheck No.Account debitedPost Ref.Other accounts Dr.Accounts payable Dr.Cash Dr.
        
Oct.161Rent expense717,000 7,000
 182Field supplies144,570 4,570
   Office supplies15650 650
 24 PS Incorporation ✓   32,60032,600
 26 MS Company ✓   9,7809,780
 28 Land 240,000 240,000
 30 A Office supply Company ✓   1,3201,320
 31 Salary expense6132,00032,000
 31   284,22043,700327,920
     (21)(11)

Table (1)

Accounts payable subsidiary ledger

Name: A Office supply Company
DateItemPost. Ref

Debit

 ($)

Credit ($)

Balance

($)

      
Oct.20 P1 1,3201,320
 28 P1 3,6704,990
 30 CP11,320 3,670

Table (2)

Name: MS Company
DateItemPost. Ref

Debit

 ($)

Credit ($)

Balance

($)

      
Oct.17 P1 9,7809,780
 26 CP19,780 -
 30 P1 12,45012,450

Table (3)

Name: PS Incorporation
DateItemPost. Ref

Debit

 ($)

Credit ($)

Balance

($)

      
Oct.16 P1 32,60032,600
 24 CP132,600 -
 30 P1 30,80030,800

Table (4)

2. and 3.

To determine

Post individual entries to the appropriate general ledger accounts.

2. and 3.

Expert Solution
Check Mark

Explanation of Solution

Prepare the general ledger for given accounts as follows:

Account:         Cash                                                              Account no. 11
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
       
Oct.31 CP1327,920  327,920

Table (5)

Account:    Field supplies                                                             Account no. 14
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
       
Oct.18 CP14,570 4,570 
 31 P147,530 52,100 

Table (6)

Account:    Office supplies                                                             Account no. 15
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
       
Oct.18 CP1650 650 
 31 P14,990 5,460 

Table (7)

Account:         Prepaid rent                                                             Account no. 16
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
       
Oct.31 J115,000  15,000

Table (8)

Account:  Field equipment                                                         Account no. 17
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
       
Oct.16 P132,600 32,600 
 31 J1 15,00017,600 

Table (9)

Account:  Office equipment                                                         Account no. 18
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
       
 31 P1 5,500 5,500

Table (10)

Account:  Land                                                                             Account no. 19
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
       
Oct.23 CP1240,000 240,000 

Table (11)

Account:  Accounts payable                                                         Account no. 21
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
       
Oct.31 P1 90,620 90,620
 31 CP143,700  46,920

Table (12)

Account:  Salary expense                                                         Account no. 61
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
       
Oct.31 CP1 32,000 32,000

Table (13)

Account:  Rent expense                                                         Account no. 71
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
       
Oct.16 CP1 7,000 7,000

Table (14)

                                                   Journal                                                      Page  01
DateDescriptionPost. RefDebit ($)Credit ($)
Oct.31Prepaid rent1615,000 
       Field equipment17 15,000
  (To record leasing of field equipment)   

Table (15)

4.

To determine

Prepare accounts payable creditor balances.

4.

Expert Solution
Check Mark

Explanation of Solution

Accounts payable creditor balance

Accounts payable creditor balance is as follows:

Company WTE
Accounts payable creditor balances
October 31, 2016
 Amount ($)
A Office supply Company3,670
MS Company12,450
PS Incorporation30,800
Total accounts receivable46,920

Table (16)

Accounts payable controlling account

Ending balance of accounts payable controlling account is as follows:

Company WTE
Accounts payable (Controlling account)
October 31, 2016
 Amount ($)
Opening balance0
Add:
Total credits (from purchase journal)90,620
90,620
Less:
Total debits (from cash payment journal)(43,700)
Total accounts payable46,920

Table (17)

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

5.

To determine

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

5.

Expert Solution
Check Mark

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 used 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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