Chapter 7, Problem 3PB

INSTRUCTIONS

1. 1. Open the general ledger accounts and accounts receivable ledger accounts indicated below.
2. 2. Post the entries from the general journal in Problem 7.2B to the appropriate accounts in the general ledger and in the accounts receivable ledger.
3. 3. Prepare a schedule of accounts receivable. Compare the balance of the Accounts Receivable control account with the total of the schedule.

GENERAL LEDGER ACCOUNTS

ACCOUNTS RECEIVABLE LEDGER ACCOUNTS

Analyze: Damaged or defective goods decreased sales by what dollar amount? By what percentage?

Problem 7.2B

Appliances for Less began operations November 1, 2019. The firm sells its merchandise for cash and on open account. Sales are subject to a 6 percent sales tax. During November, Appliances for Less engaged in the following transactions:

INSTRUCTIONS

Record the transactions in a general journal. Use 1 as the journal page number.

Analyze: What is the total amount due from Bob Huffington for the November 29 sale?

To determine

Prepare the general ledger for Company AL.

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: Cash					Account No.: 101
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
November 15		J2	$ 10,653.00		$ 10,653.00
November 18		J2	$ 320.00		$ 10,973.00
November 20		J3	$ 773.80		$ 11,746.80
November 28		J3	$ 434.60		$ 12,181.40
November 30		J3	$ 10,971.00		$ 23,152.40
ACCOUNT: Accounts receivable					Account No.: 111
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
November 1		J1	$ 583.00		$ 583.00
November 2		J1	$ 874.50		$ 1,457.50
November 7		J2	$ 434.60		$ 1,892.10
November 12		J2		$ 100.70	$ 1,791.40
November 16		J2	$ 583.00		$ 2,374.40
November 17		J2	$ 1,457.50		$ 3,831.90
November 18		J2		$ 320.00	$ 3,511.90
November 20		J3		$ 773.80	$ 2,738.10
November 24		J3		$ 127.20	$ 2,610.90
November 28		J3		$ 434.60	$ 2,176.30
November 29		J3	$ 715.50		$ 2,891.80

Table (1)

GENERAL LEDGER
ACCOUNT: Sales Tax Payable					Account No.: 221
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
November 1		J1		$ 33.00		$ 33.00
November 2		J1		$ 49.50		$ 82.50
November 7		J2		$ 24.60		$ 107.10
November 12		J2	$ 5.70			$ 101.40
November 15		J2		$ 603.00		$ 704.40
November 16		J2		$ 33.00		$ 737.40
November 17		J2		$ 82.50		$ 819.90
November 24		J3	$ 7.20			$ 812.70
November 29		J3		$ 40.50		$ 853.20
November 30		J3		$ 621.00		$ 1,474.20
ACCOUNT: Sales					Account No.: 401
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
November 1		J1		$ 550.00		$ 550.00
November 2		J1		$ 825.00		$ 1,375.00
November 7		J2		$ 410.00		$ 1,785.00
November 15		J2		$ 10,020.00		$ 11,805.00
November 16		J2		$ 550.00		$ 12,355.00
November 17		J2		$ 1,375.00		$ 13,730.00
November 29		J3		$ 675.00		$ 14,405.00
November 30		J3		$ 10,350.00		$ 24,755.00
ACCOUNT: Sales Returns and Allowances					Account No.: 421
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
November 12		J2	$ 95.00		$ 95.00
November 24		J3	$ 120.00		$ 215.00

Table (2)

Reference Notes:

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
November 1	Accounts receivable (2)	111	$ 583
	Sales	401		$ 550
	Sales Tax Payable (1)	221		$ 33
	(To record the sale on account to AC; Sales slip 101)
November 2	Accounts receivable (4)	111	$ 874.50
	Sales	401		$ 825.00
	Sales Tax Payable (3)	221		$ 49.50
	(To record the sale on account to JP; Sales slip 102)

Table (3)

	General Journal			Page - 2
Date	Description	Post Ref	Debit	Credit
2019
November 7	Accounts receivable (6)	111	$ 434.60
	Sales	401		$ 410.00
	Sales Tax Payable (5)	221		$ 24.60
	(To record the sale on account to BH; Sales slip 103)
November 12	Sales Returns and Allowances	421	$ 95.00
	Sales Tax Payable (7)	221	$ 5.70
	Accounts receivable (8)	111		$ 100.70
	(To record the sales returns from JP for the sales made on November 2 using sales slip 102, the credit memorandum is 101)
November 15	Cash (10)	101	$ 10,653
	Sales	401		$ 10,050
	Sales Tax Payable (9)	221		$ 603
	(To record the cash sales)
November 16	Accounts receivable (12)	111	$ 583
	Sales	401		$ 550
	Sales Tax Payable (11)	221		$ 33
	(To record the sale on account to GS; Sales slip 104)
November 17	Accounts receivable (14)	111	$ 1,457.50
	Sales	401		$ 1,375.00
	Sales Tax Payable (13)	221		$ 82.50
	(To record the sale on account to DN; Sales slip 105)
November 18	Cash	101	$ 320
	Accounts receivable	111		$ 320
	(To record the receipt of partial payment from AC)

Table (4)

	General Journal			Page - 3
Date	Description	Post Ref	Debit	Credit
2019
November 20	Cash (15)	101	$ 773.80
	Accounts receivable	111		$ 773.80
	(To record the receipt of payment from JP)
November 24	Sales Returns and Allowances	421	$ 120.00
	Sales Tax Payable (16)	221	$ 7.20
	Accounts receivable (17)	111		$ 127.20
	(To record the sales returns from DN for the sales made on November 17 using sales slip 105, the credit memorandum is 102)
November 28	Cash	101	$ 434.60
	Accounts receivable	111		$ 434.60
	(To record the receipt of payment from BH)
November 29	Accounts receivable (19)	111	$ 715.50
	Sales	401		$ 675.00
	Sales Tax Payable (18)	221		$ 40.50
	(To record the sale on account to BH; Sales slip 103)
November 30	Cash (21)	101	$ 10,971
	Sales	401		$ 10,350
	Sales Tax Payable (20)	221		$ 621
	(To record the cash sales)

Table (5)

Working Notes (1):

Calculate the value of Sales Tax Payable on November 1.

$\begin{array}{c}\text{Sales Tax Payable= Sales}\times 6\%\\ =\frac{\$550\times 6}{100}\\ =\$33\end{array}$

Working Notes (2):

Calculate the value of Accounts receivable on November 1.

$\begin{array}{c}\text{Accounts receivable = Sales}+\text{Sales Tax Payable}\\ =\$550+\$33\\ =\$583\end{array}$

Working Notes (3):

Calculate the value of Sales Tax Payable on November 2.

$\begin{array}{c}\text{Sales Tax Payable= Sales}\times 6\%\\ =\frac{\$825\times 6}{100}\\ =\$49.50\end{array}$

Working Notes (4):

Calculate the value of Accounts receivable on November 4.

$\begin{array}{c}\text{Accounts receivable = Sales}+\text{Sales Tax Payable}\\ =\$380+\$19\\ =\$399\end{array}$

Working Notes (5):

Calculate the value of Sales Tax Payable on November 12.

$\begin{array}{c}\text{Sales Tax Payable= Sales}\times 6\%\\ =\frac{\$550\times 6}{100}\\ =\$33\end{array}$

Working Notes (6):

Calculate the value of Accounts receivable on November 12.

$\begin{array}{c}\text{Accounts receivable = Sales}+\text{Sales Tax Payable}\\ =\$450+\$22.50\\ =\$472.50\end{array}$

Working Notes (7):

Calculate the value of Sales Tax Payable on November 12.

$\begin{array}{c}\text{Sales Tax Payable= Sales Returns and allowances}\times 6\%\\ =\frac{\$95\times 6}{100}\\ =\$5.70\end{array}$

Working Notes (8):

Calculate the value of Accounts receivable on November 12.

$\begin{array}{c}\text{Accounts receivable =}\left(\begin{array}{l}\text{Sales Returns and allowances}\\ +\text{Sales Tax Payable}\end{array}\right)\\ =\$95+\$5.70\\ =\$100.70\end{array}$

Working Notes (9):

Calculate the value of Sales Tax Payable on November 15.

$\begin{array}{c}\text{Sales Tax Payable= Sales}\times 6\%\\ =\frac{\$10,050\times 6}{100}\\ =\$603\end{array}$

Working Notes (10):

Calculate the value of Cash on November 15.

$\begin{array}{c}\text{Cash = Sales}+\text{Sales Tax Payable}\\ =\$10,050+\$603\\ =\$10,653\end{array}$

Working Notes (11):

Calculate the value of Sales Tax Payable on November 16.

$\begin{array}{c}\text{Sales Tax Payable= Sales}\times 6\%\\ =\frac{\$550\times 6}{100}\\ =\$33\end{array}$

Working Notes (12):

Calculate the value of Accounts receivable on November 16.

$\begin{array}{c}\text{Accounts receivable = Sales}+\text{Sales Tax Payable}\\ =\$1,020+\$51\\ =\$1,071\end{array}$

Working Notes (13):

Calculate the value of Sales Tax Payable on November 17.

$\begin{array}{c}\text{Sales Tax Payable= Sales}\times 6\%\\ =\frac{\$1,375\times 6}{100}\\ =\$82.50\end{array}$

Working Notes (14):

Calculate the value of Accounts receivable on November 17.

$\begin{array}{c}\text{Accounts receivable = Sales}+\text{Sales Tax Payable}\\ =\$1,375+\$82.50\\ =\$1,457.50\end{array}$

Working Notes (15):

Calculate the value of Cash on November 20.

$\begin{array}{c}\text{Cash = Sales}-\text{Sales Returns and allowances}\\ =\$874.50-\$100.70\\ =\$773.80\end{array}$

Working Notes (16):

Calculate the value of Sales Tax Payable on November 24.

$\begin{array}{c}\text{Sales Tax Payable= Sales Returns and allowances}\times 6\%\\ =\frac{\$120\times 6}{100}\\ =\$7.20\end{array}$

Working Notes (17):

Calculate the value of Accounts receivable on November 24.

$\begin{array}{c}\text{Accounts receivable =}\left(\begin{array}{l}\text{Sales Returns and allowances}\\ +\text{Sales Tax Payable}\end{array}\right)\\ =\$120+\$7.20\\ =\$127.20\end{array}$

Working Notes (18):

Calculate the value of Sales Tax Payable on November 29.

$\begin{array}{c}\text{Sales Tax Payable= Sales}\times 6\%\\ =\frac{\$675\times 6}{100}\\ =\$40.50\end{array}$

Working Notes (19):

Calculate the value of Accounts receivable on November 29.

$\begin{array}{c}\text{Accounts receivable = Sales}+\text{Sales Tax Payable}\\ =\$675+\$40.50\\ =\$715.50\end{array}$

Working Notes (20):

Calculate the value of Sales Tax Payable on November 30.

$\begin{array}{c}\text{Sales Tax Payable= Sales}\times 6\%\\ =\frac{\$10,350\times 6}{100}\\ =\$621\end{array}$

Working Notes (21):

Calculate the value of Cash on November 30.

$\begin{array}{c}\text{Cash = Sales}+\text{Sales Tax Payable}\\ =\$10,350+\$621\\ =\$10,971\end{array}$

To determine

Using the Schedule of Accounts Receivable compare the Accounts receivable balances with the total and identify the amount and percentage of sales decreased due to the defective goods.

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: AC
ADDRESS:
Date	Description	Post. Ref.	Debit	Credit	Balance
2019
November 1	Sales Slip 101	J1	$ 583.00		$ 583.00
November 18		J2		$ 320.00	$ 263.00
NAME: BH
ADDRESS:
Date	Description	Post. Ref.	Debit	Credit	Balance
2019
November 7	Sales Slip 103	J2	$ 434.60		$ 434.60
November 28		J3		$ 434.60	$ 0.00
November 29	Sales Slip 106	J3	$ 715.50		$ 1,150.10
NAME: DN
ADDRESS:
Date	Description	Post. Ref.	Debit	Credit	Balance
2019
November 17	Sales Slip 105	J2	$ 1,457.50		$ 1,457.50
November 24	Credit Memorandum 102	J3		$ 127.20	$ 1,330.30
NAME: JP
ADDRESS:
Date	Description	Post. Ref.	Debit	Credit	Balance
2019
November 1	Sales Slip 102	J1	$ 874.50		$ 874.50
November 12	Credit Memorandum 101	J2		$ 100.70	$ 773.80
November 20		J3		$ 773.80	$ 0.00

Table (6)

ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
NAME: GS
ADDRESS:
Date	Description	Post. Ref.	Debit	Credit	Balance
2019
November 16	Sales Slip 104	J2	$ 583.00		$ 583.00

Table (7)

Prepare the Schedule of Accounts Receivable:

Company AL
Schedule of Accounts Receivable
November 30, 2019
Particulars	Amount ($)
AC	$ 263.00
BH	$ 715.50
DN	$ 1,330.30
JP	$ 0.00
GS	$ 583.00
Total accounts receivable	$ 2,891.80

Table (8)

The amount of sales decreased due to the defective goods is $215 and the percentage of sales decreased due to the defective goods is 0.9%.

Working notes (22):

Calculate the percentage of sales:

$\begin{array}{c}\text{Sales Percentage =}\frac{\text{Defective goods cost}}{\text{Total sales}}\times 100\\ =\frac{\$215}{\$24,785}\times 100\\ \text{= 0}\text{.9\%}\end{array}$