Chapter 7, Problem 6PB

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 - 15
Date	Description	Post Ref	Debit	Credit
2019
June 1	Accounts receivable	121	$ 7,200
	Sales (1)	401		$ 7,200
	(To record the sale on account to SCK; Invoice 6920; Terms n/15)
June 15	Cash (3)	101	$ 11,016
	Sales	401		$ 10,200
	Sales Tax Payable (2)	222		$ 816
	(To record the cash sales)

Table (1)

	General Journal			Page - 15
Date	Description	Post Ref	Debit	Credit
2019
June 15	Credit Card Expense (5)	521	$ 460.08
	Cash (6)	101	$ 14,875.92
	Sales	401		$ 14,200.00
	Sales Tax Payable (4)	222		$ 1,136.00
	(To record the cash sales)
June 16	Cash	101	$ 7,200
	Accounts receivable	121		$ 7,200
	(To record the receipt from SCK)
	Accounts receivable (8)	121	$ 9,720
	Sales	401		$ 9,000
	Sales Tax Payable (7)	222		$ 720
	(To record the sale on account to JC; Invoice 908; Terms n/30)
June 17	Accounts receivable	121	$ 10,800
	Sales  (9)	401		$ 10,800
	(To record the sale on account to VD; Invoice 6921; Terms n/15)
June 19	Credit Card Expense (10)	521	$ 388.80
	Cash (11)	101	$ 9,331.20
	Accounts receivable	121		$ 9,720.00
	(To record the payment received for the sales made using the credit card)
June 29	Cash	101	$ 10,800
	Accounts receivable	121		$ 10,800
	(To record the receipt for the sales done to VD; Invoice 6921)

Table (2)

	General Journal			Page - 15
Date	Description	Post Ref	Debit	Credit
2019
June 30	Cash (13)	101	$ 10,314
	Sales	401		$ 9,550
	Sales Tax Payable (12)	222		$ 764
	(To record the cash sales)
	Credit card expense (15)	521	$ 379.08
	Cash (16)	101	$ 12,256.92
	Sales	401		$ 11,700.00
	Sales Tax Payable (14)	222		$ 936.00
	(To record the sales using the credit cards)
	Accounts receivable	121	$ 19,548
	Sales	401		$ 18,100
	Sales Tax Payable (17)	222		$ 1,448
	(To record the sale on account)

Table (3)

Working Notes (1):

Calculate the value of Sales on June 1.

$\begin{array}{c}\text{Sales = \$9,000 }-\text{Trade Discount}\\ \text{= \$9,000}-\left(\text{\$9,000}\times 20\%\right)\\ =\text{\$9,000}-\$1,800\\ =\$7,200\end{array}$

Working Notes (2):

Calculate the value of Sales Tax Payable on June 15.

$\begin{array}{c}\text{Sales Tax Payable= Sales}\times 8\%\\ =\frac{\$10,200\times 8}{100}\\ =\$816\end{array}$

Working Notes (3):

Calculate the value of Cash on June 15.

$\begin{array}{c}\text{Cash = Sales}+\text{Sales Tax Payable}\\ =\$10,200+\$816\\ =\$11,016\end{array}$

Working Notes (4):

Calculate the value of Sales Tax Payable on June 15.

$\begin{array}{c}\text{Sales Tax Payable= Sales}\times 8\%\\ =\frac{\$14,200\times 8}{100}\\ =\$1,136\end{array}$

Working Notes (5):

Calculate the value of Credit Card Expense on June 15.

$\begin{array}{c}\text{Credit Card Expense = }\left(\text{Sales}+\text{Sales Tax Payable}\right)\times 3\%\\ =\left(\$14,200+\$1,136\right)\times 3\%\\ =\frac{\$15,336\times 3}{100}\\ =\$460.08\end{array}$

Working Notes (6):

Calculate the value of Cash on June 15.

$\begin{array}{c}\text{Cash = }\left(\text{Sales}+\text{Sales Tax Payable}\right)-\text{Credit Card Expense }\\ =\left(\$14,200+\$1,136\right)-\$460.08\\ =\$15,336-\$460.08\\ =\$14,875.92\end{array}$

Working Notes (7):

Calculate the value of Sales Tax Payable on June 16.

$\begin{array}{c}\text{Sales Tax Payable= Sales}\times 8\%\\ =\frac{\$9,000\times 8}{100}\\ =\$720\end{array}$

Working Notes (8):

Calculate the value of Accounts receivable on June 16.

$\begin{array}{c}\text{Accounts receivable = Sales}+\text{Sales Tax Payable}\\ =\$9,000+\$720\\ =\$9,720\end{array}$

Working Notes (9):

Calculate the value of Sales on June 17.

$\begin{array}{c}\text{Sales = \$18,000 }-\text{Trade Discount}\\ \text{= \$18,000}-\left(\text{\$18,000}\times 40\%\right)\\ =\text{\$18,000}-\$7,200\\ =\$10,800\end{array}$

Working Notes (10):

Calculate the value of Credit Card Expense on June 19.

$\begin{array}{c}\text{Credit Card Expense = Accounts receivable}\times 4\%\\ =\frac{\$9,720\times 4}{100}\\ =\$388.80\end{array}$

Working Notes (11):

Calculate the value of Cash on June 19.

$\begin{array}{c}\text{Cash = Accounts receivable}-\text{Credit Card Expense}\\ =\$9,720-\$388.80\\ =\$9,331.20\end{array}$

Working Notes (12):

Calculate the value of Sales Tax Payable on June 30.

$\begin{array}{c}\text{Sales Tax Payable= Sales}\times 8\%\\ =\frac{\$9,550\times 8}{100}\\ =\$764\end{array}$

Working Notes (13):

Calculate the value of Cash on June 30.

$\begin{array}{c}\text{Cash = Sales}+\text{Sales Tax Payable}\\ =\$9,550+\$764\\ =\$10,314\end{array}$

Working Notes (14):

Calculate the value of Sales Tax Payable on June 30.

$\begin{array}{c}\text{Sales Tax Payable= Sales}\times 8\%\\ =\frac{\$11,700\times 8}{100}\\ =\$936\end{array}$

Working Notes (15):

Calculate the value of Credit Card Expense on June 30.

$\begin{array}{c}\text{Credit Card Expense = }\left(\text{Sales}+\text{Sales Tax Payable}\right)\times 3\%\\ =\left(\$11,700+\$936\right)\times 3\%\\ =\frac{\$12,636\times 3}{100}\\ =\$379.08\end{array}$

Working Notes (16):

Calculate the value of Cash on June 30.

$\begin{array}{c}\text{Cash = }\left(\text{Sales}+\text{Sales Tax Payable}\right)-\text{Credit Card Expense }\\ =\left(\$11,700+\$936\right)-\$379.08\\ =\$12,636-\$379.08\\ =\$12,256.92\end{array}$

Working Notes (17):

Calculate the value of Sales Tax Payable on June 30.

$\begin{array}{c}\text{Sales Tax Payable = Sales}\times 8\%\\ =\frac{\$18,100\times 8}{100}\\ =\$1,448\end{array}$

1 and 3

To determine

Post the journal entries in the General Ledger and identify the entire credit card expense which was incurred in June.

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
June 1		✔			$ 30,155.00
June 15		J15	$ 11,016.00		$ 41,171.00
June 15		J15	$ 14,875.92		$ 56,046.92
June 16		J15	$ 7,200.00		$ 63,246.92
June 19		J15	$ 9,331.20		$ 72,578.12
June 29		J15	$ 10,800.00		$ 83,378.12
June 30		J15	$ 10,314.00		$ 93,692.12
June 30		J15	$ 12,256.92		$ 105,949.04
ACCOUNT: Accounts receivable					Account No.: 121
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
June 1		J15	$ 7,200.00		$ 7,200.00
June 16		J15		$ 7,200.00	$ 0.00
June 16		J15	$ 9,720.00		$ 9,720.00
June 17		J15	$ 10,800.00		$ 20,520.00
June 19		J15		$ 9,720.00	$ 10,800.00
June 29		J15		$ 10,800.00	$ 0.00
June 30		J15	$ 19,548.00		$ 19,548.00

Table (4)

GENERAL LEDGER
ACCOUNT: Sales Tax Payable					Account No.: 222
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
June 15		J15		$ 816.00		$ 816.00
June 15		J15		$ 1,136.00		$ 1,952.00
June 16		J15		$ 720.00		$ 2,672.00
June 30		J15		$ 764.00		$ 3,436.00
June 30		J15		$ 936.00		$ 4,372.00
June 30		J15		$ 1,448.00		$ 5,820.00
ACCOUNT: Sales					Account No.: 401
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
June 1		J15		$ 7,200.00		$ 7,200.00
June 15		J15		$ 10,200.00		$ 17,400.00
June 15		J15		$ 14,200.00		$ 31,600.00
June 16		J15		$ 9,000.00		$ 40,600.00
June 17		J15		$ 10,800.00		$ 51,400.00
June 30		J15		$ 9,550.00		$ 60,950.00
June 30		J15		$ 11,700.00		$ 72,650.00
June 30		J15		$ 18,100.00		$ 90,750.00
ACCOUNT: Credit Card Expense					Account No.: 521
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
June 15		J15	$ 460.08		$ 460.08
June 19		J15	$ 388.80		$ 848.88
June 30		J15	$ 379.08		$ 1,227.96

Table (5)

The Credit Card Expense account shows a debit balance of $1,227.96 at the end of the month.