Chapter 7, Problem 1CTP

2.

To determine

Journalize the given transactions.

Explanation of Solution

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit: A debit is an accounting term that refers to the left side of an account. The term debit is be denoted by (Dr). The recording amount on the left side of the account is known as debiting.

Credit: A credit is an accounting term that refers to the right side of an account. The term credit is denoted as (Cr). The recording amount on the right side of the account is known as crediting.

Rules of Debit and Credit: Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

• Debit, all the increase in the assets, the expenses and the dividends, all the decrease in liabilities, revenues and the stockholders’ equities.
• Credit, all the increase in the liabilities, the revenues, and the stockholders’ equities, and all decreases in the assets, and the expenses.

Pass the journal entries for the given transactions:

	General Journal			Page - 1
Date	Description	Post Ref	Debit	Credit
2019
March 1	Accounts receivable (2)	111	$756
	Sales			$700
	Sales Tax Payable (1)			$56
	(To record the sale on account to ME; Sales slip 101)
March 3	Accounts receivable (4)	111	$324
	Sales			$300
	Sales Tax Payable (3)			$24
	(To record the sale on account to EA; Sales slip 102)

Table (1)

	General Journal			Page - 2
Date	Description	Post Ref	Debit	Credit
2019
March 8	Sales Returns and Allowances		$ 100.00
	Sales Tax Payable (5)		$ 8.00
	Accounts receivable (6)	111		$ 108.00
	(To record the sales returns from ME for the sales made on March 1 using sales slip 101, the credit memorandum is 1)
March 10	Cash (7)		$ 648
	Accounts receivable	111		$ 648
	(To record the receipt of payment from ME)
March 12	Accounts receivable (9)	111	$486
	Sales			$450
	Sales Tax Payable (8)			$36
	(To record the sale on account to AH; Sales slip 103)
March 15	Cash (11)		$5,400
	Sales			$5,000
	Sales Tax Payable (10)			$400
	(To record the cash sales)
	Credit Card Expense (13)		$226.80
	Cash (14)		$7,333.20
	Sales			$7,000.00
	Sales Tax Payable (12)			$560.00
	(To record the credit card sales)
March 25	Accounts receivable (16)	111	$324
	Sales			$300
	Sales Tax Payable (15)			$24
	(To record the sale on account to JC; Sales slip 104)

Table (2)

	General Journal			Page - 3
Date	Description	Post Ref	Debit	Credit
2019
March 26	Accounts receivable (18)	111	$3,240
	Sales			$3,000
	Sales Tax Payable (17)			$240
	(To record the sale to customer using AE card)
March 28	Cash		$100
	Accounts receivable	111		$100
	(To record the receipt of partial payment from AH)
March 31	Cash (20)		$5,940
	Sales			$5,500
	Sales Tax Payable (19)			$440
	(To record the cash sales)
	Credit Card Expense (22)		$226.80
	Cash (23)		$7,333.20
	Sales			$7,000.00
	Sales Tax Payable (21)			$560.00
	(To record the credit card sales)
	Credit Card Expense (24)		$129.60
	Cash (25)		$3,110.40
	Accounts receivable	111		$3,240.00
	(To record the receipt of payment for the sales made on AE card)

Table (3)

Working Notes (1):

Calculate the value of Sales Tax Payable on March 1.

$\begin{array}{c}\text{Sales Tax Payable= Sales}\times 8\%\\ =\frac{\$700\times 8}{100}\\ =\$56\end{array}$

Working Notes (2):

Calculate the value of Accounts receivable on March 1.

$\begin{array}{c}\text{Accounts receivable = Sales}+\text{Sales Tax Payable}\\ =\$700+\$56\\ =\$756\end{array}$

Working Notes (3):

Calculate the value of Sales Tax Payable on March 3.

$\begin{array}{c}\text{Sales Tax Payable= Sales}\times 8\%\\ =\frac{\$300\times 8}{100}\\ =\$24\end{array}$

Working Notes (4):

Calculate the value of Accounts receivable on March 3.

$\begin{array}{c}\text{Accounts receivable = Sales}+\text{Sales Tax Payable}\\ =\$300+\$24\\ =\$324\end{array}$

Working Notes (5):

Calculate the value of Sales Tax Payable on March 8.

$\begin{array}{c}\text{Sales Tax Payable= Sales Returns and allowances}\times 8\%\\ =\frac{\$100\times 8}{100}\\ =\$8\end{array}$

Working Notes (6):

Calculate the value of Accounts receivable on March 8.

$\begin{array}{c}\text{Accounts receivable =}\left(\begin{array}{l}\text{Sales Returns and allowances}\\ +\text{Sales Tax Payable}\end{array}\right)\\ =\$100+\$8\\ =\$108\end{array}$

Working Notes (7):

Calculate the value of Cash on March 10.

$\begin{array}{c}\text{Cash = Sales}-\text{Sales Returns and allowances}\\ =\$756-\$108\\ =\$648\end{array}$

Working Notes (8):

Calculate the value of Sales Tax Payable on March 12.

$\begin{array}{c}\text{Sales Tax Payable= Sales}\times 8\%\\ =\frac{\$450\times 8}{100}\\ =\$36\end{array}$

Working Notes (9):

Calculate the value of Accounts receivable on March 12.

$\begin{array}{c}\text{Accounts receivable = Sales}+\text{Sales Tax Payable}\\ =\$450+\$36\\ =\$486\end{array}$

Working Notes (10):

Calculate the value of Sales Tax Payable on March 15.

$\begin{array}{c}\text{Sales Tax Payable= Sales}\times 8\%\\ =\frac{\$5,000\times 8}{100}\\ =\$400\end{array}$

Working Notes (11):

Calculate the value of Cash on March 15.

$\begin{array}{c}\text{Cash = Sales}+\text{Sales Tax Payable}\\ =\$5,000+\$400\\ =\$5,400\end{array}$

Working Notes (12):

Calculate the value of Sales Tax Payable on March 15.

$\begin{array}{c}\text{Sales Tax Payable= Sales}\times 8\%\\ =\frac{\$7,000\times 8}{100}\\ =\$560\end{array}$

Working Notes (13):

Calculate the value of Credit Card Expense on March 15.

$\begin{array}{c}\text{Credit Card Expense = }\left(\text{Sales}+\text{Sales Tax Payable}\right)\times 3\%\\ =\left(\$7,000+\$560\right)\times 3\%\\ =\frac{\$7,560\times 3}{100}\\ =\$226.80\end{array}$

Working Notes (14):

Calculate the value of Cash on March 15.

$\begin{array}{c}\text{Cash = }\left(\text{Sales}+\text{Sales Tax Payable}\right)-\text{Credit Card Expense }\\ =\left(\$7,000+\$560\right)-\$226.80\\ =\$7,560-\$226.80\\ =\$7333.20\end{array}$

Working Notes (15):

Calculate the value of Sales Tax Payable on March 25.

$\begin{array}{c}\text{Sales Tax Payable= Sales}\times 8\%\\ =\frac{\$300\times 8}{100}\\ =\$24\end{array}$

Working Notes (16):

Calculate the value of Accounts receivable on March 25.

$\begin{array}{c}\text{Accounts receivable = Sales}+\text{Sales Tax Payable}\\ =\$300+\$24\\ =\$324\end{array}$

Working Notes (17):

Calculate the value of Sales Tax Payable on March 26.

$\begin{array}{c}\text{Sales Tax Payable= Sales}\times 8\%\\ =\frac{\$3,000\times 8}{100}\\ =\$240\end{array}$

Working Notes (18):

Calculate the value of Accounts receivable on March 26.

$\begin{array}{c}\text{Accounts receivable = Sales}+\text{Sales Tax Payable}\\ =\$3,000+\$240\\ =\$3,240\end{array}$

Working Notes (19):

Calculate the value of Sales Tax Payable on March 31.

$\begin{array}{c}\text{Sales Tax Payable= Sales}\times 8\%\\ =\frac{\$5,500\times 8}{100}\\ =\$440\end{array}$

Working Notes (20):

Calculate the value of Cash on March 31.

$\begin{array}{c}\text{Cash = Sales}+\text{Sales Tax Payable}\\ =\$5,500+\$440\\ =\$5,940\end{array}$

Working Notes (21):

Calculate the value of Sales Tax Payable on March 31.

$\begin{array}{c}\text{Sales Tax Payable= Sales}\times 8\%\\ =\frac{\$4,000\times 8}{100}\\ =\$320\end{array}$

Working Notes (22):

Calculate the value of Credit Card Expense on March 31.

$\begin{array}{c}\text{Credit Card Expense = }\left(\text{Sales}+\text{Sales Tax Payable}\right)\times 3\%\\ =\left(\$4,000+\$320\right)\times 3\%\\ =\frac{\$4,320\times 3}{100}\\ =\$129.60\end{array}$

Working Notes (23):

Calculate the value of Cash on March 31.

$\begin{array}{c}\text{Cash = }\left(\text{Sales}+\text{Sales Tax Payable}\right)-\text{Credit Card Expense }\\ =\left(\$4,000+\$320\right)-\$129.60\\ =\$4,320-\$129.60\\ =\$4,190.40\end{array}$

Working Notes (24):

Calculate the value of Credit Card Expense on March 31.

$\begin{array}{c}\text{Credit Card Expense = }\left(\text{Accounts receivable}\right)\times 4\%\\ =\frac{\$3,240\times 4}{100}\\ =\$129.60\end{array}$

Working Notes (25):

Calculate the value of Cash on March 31.

$\begin{array}{c}\text{Cash = Accounts receivable}-\text{Credit Card Expense }\\ =\$3,240-\$129.60\\ =\$3,110.40\end{array}$

1 and 3

To determine

Post the journal entries in the General Ledger and Accounts Receivable 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. In the ledger all the entries are recorded in the account order, for which the transactions actually take place.

Post the journal entries in the General Ledger:

GENERAL LEDGER
ACCOUNT: Accounts receivable					Account No.: 111
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
March 1		J1	$756.00		$756.00
March 3		J1	$324.00		$1,080.00
March 8		J2		$108.00	$972.00
March 10		J2		$648.00	$324.00
March 12		J2	$486.00		$810.00
March 25		J2	$324.00		$1,134.00
March 26		J3	$3,240.00		$4,374.00
March 28		J3		$100.00	$4,274.00
March 31		J3		$3,240.00	$1,034.00

Table (4)

4.

To determine

Using the Schedule of Accounts Receivable compare the Accounts receivable balances with the total.

Explanation of Solution

Schedule of accounts receivable: This is the schedule which reports all the debtors of a company during the given period and the balances to be recovered from them.

Prepare the Accounts receivable Subsidiary Ledger:

ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
NAME: EA
ADDRESS:
Date	Description	Post. Ref.	Debit	Credit	Balance
2019
March 3	Sales Slip 102	J1	$324.00		$324.00
NAME: AE Card
ADDRESS:
Date	Description	Post. Ref.	Debit	Credit	Balance
2019
March 26		J3	$3,240.00		$3,240.00
March 31		J3		$3,240.00	$0.00
NAME: JC
ADDRESS:
Date	Description	Post. Ref.	Debit	Credit	Balance
2019
March 25	Sales Slip 104	J2	$324.00		$324.00
NAME: ME
ADDRESS:
Date	Description	Post. Ref.	Debit	Credit	Balance
2019
March 1	Sales Slip 101	J1	$756.00		$756.00
March 8	Credit Memorandum 1	J2		$108.00	$648.00
March 10		J2		$648.00	$0.00
NAME: AH
ADDRESS:
Date	Description	Post. Ref.	Debit	Credit	Balance
2019
March 12	Sales Slip 103	J2	$486.00		$486.00
March 28		J3		$100.00	$386.00

Table (5)

Prepare the Schedule of Accounts Receivable:

Company AXSG
Schedule of Accounts Receivable
March 31, 2019
Particulars	Amount ($)
EA	$324.00
AE	$0.00
JC	$324.00
ME	$0.00
AH	$386.00
Total accounts receivable	$1,034.00

Table (6)